Accrued gratuity liability is deductible when statutory conditions are met, even before actual payment.

An accrued and ascertained liability for gratuity was held deductible under the governing agricultural income-tax provision, and the deduction was not confined to actual payment. Section 5(k) of the Karnataka Agricultural Income-tax Act was treated as analogous to section 37(1) of the Income-tax Act, while rule 5(d) was treated as corresponding to section 36(1)(v); on that basis, the Commissioner's view that gratuity could be allowed only on payment was rejected. The distinction between gratuity and provident fund liability was held immaterial in principle, and the revisional order disallowing the deduction was unsustainable.

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Issues: Whether the provision made for gratuity payable to employees was deductible under section 5(k) of the Karnataka Agricultural Income-tax Act, 1957, or whether deduction was confined to actual payment under rule 5(d) of the Karnataka Agricultural Income-tax Rules.

Analysis: Section 5(k) of the Act was treated as analogous to section 37(1) of the Income-tax Act, 1961, while rule 5(d) was treated as similar to section 36(1)(v) of that Act. The Commissioner's view that rule 5(d) alone governed gratuity and that only actual payment could be allowed was rejected. The Court applied the principle that an accrued liability is a permissible deduction where the statutory requirements are satisfied, and held that the distinction between gratuity and provident fund liability made no difference on principle.

Conclusion: The provision for gratuity was allowable as a deduction, and the revisional order disallowing it was unsustainable.

Ratio Decidendi: An accrued and ascertained liability for gratuity is deductible where the governing deduction provision is satisfied, and a provision is not disallowed merely because payment has not yet been made.

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