Sree Akilandeswari Mills Private ... vs The Deputy Commissioner, Income Tax, ... on 28 January, 2005
It is not possible to accept the submission that the assessee was not aware or oblivious of the gratuity liability of the transferor company towards all its employees taken over by the assessee, and the liability was not one of the factors reckoned in fixing the price payable by the assessee. The liability to pay gratuity to the employees of the transferor till the date of transfer is a known liability and it is an ascertained liability. Since the assessee had the requisite knowledge of the gratuity liability of the transferor company to its employees of the unit transferred on the date of transfer , that liability would not have been ignored by the assessee as a prudent businessman in the computation of the amount payable by it to the transferor company for the transfer of the unit by the transferor company. The Karnataka High Court in Hotel Broadway Complex, Bangalore v. Commissioner of Income Tax (198 ITR 361) was considering a similar question and held as follows: