1984 (2) TMI 12

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....d by KANIA J.-This is a reference on a case stated under section 256(1) of the Income-tax Act, 1961. The assessment years involved are 1964-65 and 1965-66, for which the respective previous years are the previous years ended October 31, 1963 and October 31, 1964, respectively. The only point for consideration in the appeal before the Income-tax Appellate Tribunal was as to whether the " Retirem....

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....ions " and not as " reserves ". The Appellate Assistant Commissioner held that the retirement gratuity provisions were " reserves " and not " provisions " and were liable to be included in the computation of the capital for the purposes of the aforesaid Companies (Profits) Surtax Act. This conclusion was upheld by the Tribunal. The question referred to us for determination is as follows: " Whet....

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....nt arises only when the employment of the employee is determined by death, incapacity, retirement or resignation event (cessation of employment) certain to happen in the service career of every employee; moreover, the amount of gratuity payable is usually dependent on the employee's wages at the time of determination of his employment and the number of years of service put in by him and the liabil....

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....of Part III of the Sixth Schedule to the Companies Act includes any expenditure contracted for and arising under a contingent liability; but if the sum so appropriated is shown to be in excess of the sum required to meet the estimated liability (discounted present value on a scientific basis) it is only the, excess that will have to be regarded as reserve under clause (7)(2) of Part III of Schedul....