K.RAVINDRANATHAN NAIR versus COMMISSIONER OF INCOME TAX, ERNAKULAM

Citation: [2000] SUPP. 5 S.C.R. 244 · Decided: 30-11-2000 · Supreme Court of India · Bench: S.P. BHARUCHA, DORAISWAMY RAJU, RUMA PAL · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
K. RAVINDRANATHAN NAIR 
11. 
COMMISSIONER OF INCOME TAX, ERNAKULAM 
NOVEMBER 30, 2000 
B 
[S.P. BHARUCHA, DORAISWAMY RAJU AND RUMA PAL, JJ.] 
Income Tax Act, 1961: Section 37 
Income Tax-Business Expenditure-Deduction of---AY 1972-73-
C Processing of cashew nuts in 10 units-Four of the 10 units situated in one 
State-Two out of the four units owned by assessee and the other two taken 
. on lease-Lock-out declared in four units due to labour problems-
Subsequently, settlement arrived at-Assessee agreed to pay 5 days ' wages 
for service rendered up to lock-out-Accordingly, assessee incurred certain 
D expenditure-Tribunal found that all the 10 units constituted one business 
and allowed the said expenditure as deduction-Validity of-Held : Jn the 
circumstances of the case, the expenditure incurred by the assessee is a 
business expenditure-Hence, assessee is entitled to its deduction. 
The appellant-assessee, an individual, carried on the business of 
E processing cashew nuts in ten units. Four of these units were situated in one 
State. Of these four units, the assessee owned two and two were taken on 
lease. Due to labour problems the assessee declared a lock-out in all these 
four units. Subsequently, the assessee entered into a settlement with the trade 
unions representing the workmen of the units in the State and agreed to pay 
F them for the periods of their service up to the date of the lock-8Ut, five days' 
wages for each year of service. Accordingly, the assessee incurred certain 
expenditure on this account. 
The assessee made a claim for deduction of the said sum during the 
Assessment year 1972-73 under Section 37 of the Income Tax Act, 1961. The 
G Income Tax Officer disallowed the claim. In appeal the Income Tax Appellate 
Tribunal allowed the claim. However, the High Court answered the reference 
against the assessee. Hence this appeal. 
Allowing the appeal, the Court 
H 
244 
K.R. NAIR v. C.I.T. [BHARUCHA, J.] 
245 
HELD : l. The Tribunal said that it was satisfied that all the I 0 units A 
were fully inter-linked and inter-laced so that the inevitable inference was 
that all these units were one business alone. The Tribunal went on to hold 
that the facts were sufficient to establish a nexus between the payment of five 
days' wages and the business. Since a part of the business had been affected 
by labour disputes, for the industrial health of the business as a whole, it was B 
thought just and necessary that the industrial dispute in that one part of the 
business was stopped. This was the purpose for which the payment was made 
and it was, therefore, incurred for the purposes of the business. (247-D-El 
2.1. The High Court overlooked the cardinal principal that it is the 
Tribunal which is the final fact finding authority. A decision on fact of the C 
Tribunal can be gone into by the High Court only if a question has been 
referred to it which says that the finding of the Tribunal on facts is perverse, 
in the sense that it is such as could not reasonably have been arrived at on 
the material placed before the Tribunal. In this case, there was no such 
question before the High Court. (248-B, q 
2.2. Having regard to the finding that the units in the State and the other 
units outside the State formed one business, the expenditure must be held to 
have been incurred in regard to such business. (248-F) 
2.3. Upon the facts found by the Tribunal, there is no getting away from 
D 
the fact that the expenditure incurred by the assessee was a business E 
expenditure and that the assessee was entitled to its deduction under Section 
37 of the Income Tax Act, 1961. (248-GI 
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 4475-4476 of 
1998. 
From the Judgment and Order dated 30.7.84 of the Kerala High Court 
in I. T.R. Nos. 229/79 and 74 of 1980. 
S. Ganesh, Pratap Venugopal, P.S. Sudheer and K.J. John for the 
Appellant. 
F 
. 
K.N. Shukla, S.W.A. Qadri, S.K. Dwivedi, Bipul Kumar and Ms. Sushma G 
Suri for the Respondent. 
The Judgment of the Court was delivered by 
BHARUCHA, J. We are concerned in these appeals from a decision of 
a Division Bench of the High Court ofKerala, with the Assessment Year 1972- H 
246 
SUPREME COURT REPORTS [2000) SUPP. 5 S.C.R. 
A 73, the previous year of which ended for the assessee on 30th September, 
1971. The question that was referred to the High Court and which it answered 
in the negative and against the assessee reads thus : 
"Whether on the facts and in the circ

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