Gratuity fund deduction limited to current-year liability; past-year amounts cannot be claimed merely on payment.

Deduction for contribution to a gratuity fund is limited to the incremental liability accruing in the relevant previous year; amounts attributable to earlier years cannot be claimed in full merely because payment was made during the year. On the facts, the contribution was allowed without a year-wise break-up showing that the entire sum related to the assessment year in question, so the full deduction was disallowed. Only the liability arising in the relevant previous year could be deducted, and the answer to the referred question was against the assessee.

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Issues: Whether the assessee was entitled to deduction in full for contribution made to the gratuity fund, when the amount included liability relatable to earlier years as well as the relevant previous year.

Analysis: Deduction for contribution to a gratuity fund is confined to the incremental liability that accrues for the relevant previous year. Amounts attributable to past years cannot be claimed in the year of contribution merely because the payment was made in that year. The contribution had been allowed without establishing the year-wise break-up or showing that the entire sum represented liability of the assessment year in question.

Conclusion: The full deduction was not allowable; only the incremental liability accruing in the relevant previous year could be deducted, and the answer to the referred question was against the assessee.

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