Statutory gratuity liability for past service was held deductible in computing business income under binding precedent.

Statutory gratuity liability for past service under the West Bengal Employees' Payment of Compulsory Gratuity Act, 1971 was held allowable as a deduction in computing business income for the assessment year 1972-73. The Court treated the issue as governed by its earlier decision on the same point and followed that precedent, holding that a gratuity obligation arising under the statutory regime in force during the relevant period remains deductible even if referable to earlier years of service. The question was answered in the affirmative, in favour of the assessee.

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Issues: Whether the provision for gratuity liability relating to past service under the West Bengal Employees' Payment of Compulsory Gratuity Act, 1971 was allowable as a deduction in computing the assessee's business income for the assessment year 1972-73.

Analysis: The question was treated as covered by an earlier decision of the Court on the same point. The liability for gratuity, though referable to earlier years of service, arose under the statutory gratuity regime that had come into force during the relevant period, and the Court followed its prior ruling on the allowability of such deduction in computing business income.

Conclusion: The deduction was allowable. The question was answered in the affirmative and in favour of the assessee.

Ratio Decidendi: A statutory gratuity liability arising in the relevant accounting period, even if attributable to earlier years of service, is an allowable deduction in computing business income when covered by binding precedent.

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