Gratuity liability deduction depends on proper valuation and proof; unsupported claims cannot be allowed in business income computation.

A gratuity liability created by a statutory notification was not treated as merely contingent, and it could be deductible in computing business income if capable of reasonable valuation. The assessee, however, had to prove the correct deductible amount with proper support. Because the claim was not backed by actuarial valuation or any recognised commercial accounting method, and the material on record did not permit a reliable computation of the discounted liability, the deduction was disallowed. The Tribunal was not required to make an independent factual inquiry to arrive at a figure the assessee had not established.

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Issues: Whether the assessee was entitled to deduction of gratuity liability in computing business income on the basis of the gratuity scheme brought into force by the statutory notification.

Analysis: The gratuity liability created by the notification under the U.P. Industrial Disputes Act was not rejected as merely contingent, because a liability brought into existence in the relevant previous year could be deductible if it was capable of reasonable valuation. However, the assessee had the burden of proving the correct deductible amount. The claim as put forward was not supported by actuarial valuation or by any recognised method of commercial accountancy. The material placed before the authorities was insufficient to enable a reliable computation of the discounted value of the liability, and the Tribunal was not bound to undertake an independent fact-finding inquiry to work out a figure that the assessee had not properly established.

Conclusion: The assessee was not entitled to the deduction claimed on the material placed before the Tribunal, and the question was answered against the assessee.

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