JUDGMENT

Bharucha, J.-We are concerned in these appeals, from a decision of a Division Bench of the High Court of Kerala, with the Assessment Year 1972-73, 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 circumstances of the case, the assessee is entitled to claim deduction of Rs. 4,18,107/- under Section 37 of the Income-tax Act?"

2. The assessee, an individual, carried on the business of processing cashew nuts in ten units. Four of these units were situated in Kerala. Of these four units, two were owned by the assessee and two were taken on lease. In October, 1969, the assessee faced labour problems in Kerala, consequent upon which he ordered a lock-out of the four units there. On 9th March, 1970, the assessee leased out the two units which he owned in Kerala to a private limited company whose only two shareholders were the assessee and his wife. The agreement in this behalf provided that the workmen employed in the two units would have continuity of service. At about the same time the lessee surr