COMMISSIONER OF INCOME-TAX, KERALA vs GEMINI CASHEW SALES CORPORATION, QUILON

The Supreme Court ruled that retrenchment compensation under Section 25FF of the Industrial Disputes Act, 1947, cannot be claimed as a permissible deduction under Section 10(1) or Section 10(2)(xv) of the Income-Tax Act, 1922, as the liability arises only upon the closure of the business and not during its operation. The Court held that since the liability was contingent and arose from the transfer of business, it was not a revenue nature expense. The appeal was allowed, overturning the lower court's decision.