Gratuity deduction under mercantile accounting denied where actuarial liability was already provided for and no separate accrued liability was shown.

Under the mercantile system, gratuity liability must be assessed on an actuarial basis, and a deduction is available only for liability actually accrued or properly provided for in the accounts. The Tribunal erred by comparing valuation figures without accounting for the accepted liability carried forward from the earlier year, and there was no material showing that the amount paid during the year represented a separate liability outside the actuarial provision or that any accrued liability had been omitted from the current year valuation. On those facts, the assessee was not entitled to deduct the claimed gratuity amount.

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Issues: Whether the assessee was entitled to claim deduction of the amount paid towards gratuity to employees for the relevant assessment year.

Analysis: The assessee maintained its accounts on the mercantile system, and gratuity liability was to be determined on the basis of actuarial valuation. The Tribunal proceeded on an erroneous comparison of valuation figures and ignored the accepted liability brought forward from the earlier year. There was no material to show that the amount paid during the year represented a separate liability not already covered by the actuarial provision, or that the current year valuation had omitted any accrued liability.

Conclusion: The assessee was not entitled to deduction of the claimed gratuity amount.

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