Actuarially supported leave encashment and gratuity provisions may qualify as ascertained liabilities for book profit computation.

Provision for leave encashment under section 43B(f) was not finally disallowed because the Tribunal kept the issue open pending final determination in Exide Industries and directed action in line with the eventual ruling. For book profit under section 115JB, provision for gratuity and leave encashment was treated as capable of constituting an ascertained liability if supported by actuarial valuation, so the addition was not sustained as a matter of principle and was remitted for verification of the actuarial basis. The assessee thus obtained remand-type relief on both issues, with the appeal allowed for statistical purposes.

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Issues: (i) whether the disallowance of provision for leave encashment was to be sustained or kept open pending finality of the question of law in Exide Industries; (ii) whether provision for gratuity and leave encashment was required to be added back while computing book profit under section 115JB.

Issue (i): whether the disallowance of provision for leave encashment was to be sustained or kept open pending finality of the question of law in Exide Industries.

Analysis: The claim for leave encashment provision was considered in the context of section 43B(f) and the pending final disposal of the Supreme Court proceedings in Exide Industries. The Tribunal followed its earlier view in the assessee's own case and directed that the Assessing Officer should act in accordance with the eventual final decision on the question of law.

Conclusion: The issue was not finally concluded against the assessee and was restored to the Assessing Officer for action when the question of law attains finality.

Issue (ii): whether provision for gratuity and leave encashment was required to be added back while computing book profit under section 115JB.

Analysis: The provision was examined on the footing that an actuarially valued liability is an ascertained liability and cannot be treated as unascertained merely because payment is deferred. The Tribunal held that exclusion from book profit depends on verification of actuarial calculations supporting the liability.

Conclusion: The addition was not upheld as a matter of principle and the issue was remitted to the Assessing Officer for verification of the actuarial basis.

Final Conclusion: The assessee obtained remand-type relief on both issues, and the appeal succeeded only for statistical purposes.

Ratio Decidendi: A provision supported by actuarial valuation may constitute an ascertained liability for section 115JB purposes, and where the governing legal issue under section 43B(f) is pending final determination, the matter may be kept open for action in accordance with the eventual final ruling.

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