Gratuity provision deduction: full liability was allowable once the employer's obligation had arisen under the Gratuity Act.

An assessee's gratuity provision was held deductible in full where the employer's gratuity liability had arisen after the Payment of Gratuity Act came into force, and the deduction was not confined to the smaller actuarial amount quantified for the year. The court applied the settled principle that once the liability attached, the entire provision represented the relevant deductible liability. The question was therefore answered in favour of the assessee and against the Revenue.

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Issues: Whether the assessee was entitled to deduction of the entire gratuity liability provision for the assessment year, or only to the amount quantified on actuarial basis for the relevant previous year.

Analysis: The reference was answered by applying the settled principle that the employer's liability to pay gratuity arose only after the Payment of Gratuity Act came into force. On that basis, the assessee's liability for gratuity was treated as the full amount provided for, and not restricted to the smaller sum computed on actuarial basis for the year under consideration.

Conclusion: The assessee was entitled to deduction of the entire amount of the gratuity provision, and the question was answered in the affirmative, against the Revenue.

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