Accrued provident fund liability deductible when the obligation crystallises, even if quantified later.

A provision for liability under the Employees Provident Fund Act was deductible in the assessment year 1980-81 because the liability had accrued during the relevant previous year. Applying the principle in Kedarnath Jute Manufacturing Co. Ltd. v. CIT, the later ascertainment of the exact liability did not prevent deduction once the obligation had crystallised. The deduction was therefore allowable for that year.

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Issues: Whether the assessee was entitled to deduction of the provision made towards liability under the Employees Provident Fund Act in the assessment year 1980-81, on the footing that the liability had accrued during the previous year.

Analysis: The assessment year was 1980-81 and the assessee had made a provision for the liability in the relevant previous year. The Tribunal had held that the liability under the Provident Fund Act had accrued in that year. Applying the principle laid down by the Supreme Court in Kedarnath Jute Manufacturing Co. Ltd. v. CIT, the liability was deductible once it had accrued, and the later date on which the liability was ascertained did not defeat the deduction.

Conclusion: The deduction of Rs. 15,53,124 was allowable to the assessee for the assessment year 1980-81.

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