Actuarially ascertained gratuity liability is deductible from estate value because it is a present obligation, not a contingent burden.

Gratuity liability, when scientifically or actuarially ascertained, is treated as a present discounted obligation and not a mere contingent burden. In computing the principal value of an estate for estate duty, the liability must be taken into account because a prudent purchaser would factor the existing gratuity obligation into market value. The fact that the business continues as a going concern does not change the liability's character. Accordingly, properly estimated gratuity liability is deductible in determining the estate's principal value, and the issue is resolved in favour of the assessee.

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Issues: Whether gratuity liability, when scientifically or actuarially ascertained, is deductible in computing the principal value of the estate for estate duty purposes.

Analysis: A gratuity provision based on scientific or actuarial valuation represents the present discounted value of the employer's obligation and is not a mere contingent liability. The liability is to be taken into account in valuing the estate passing on death, because a prudent purchaser would necessarily consider the existing gratuity burden while determining the market value. The Court relied on the settled principle that properly estimated gratuity liability is a present and ascertained liability and not a speculative future burden. The fact that the business may continue as a going concern does not alter the character of the liability.

Conclusion: Gratuity liability, when properly ascertained on a scientific or actuarial basis, is deductible in computing the principal value of the estate and the question was answered in favour of the assessee and against the Revenue.

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