1981 (11) TMI 36

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....st assessment years, should be allowed as a deduction in computing the total income of the assessee for the assessment year 1971-72 ? " The facts bearing on this question may be briefly stated. The assessee-firm was carrying on business in the manufacture and sale of yarn. It had a number of workers on its pay-roll. There was a settlement between the workers and the assessee under which a gratuity scheme was to be formulated and then implemented. In accordance with that gratuity scheme, the assessee made a provision of Rs. 5,80,892 in its account year ended July 31, 1970. This amount was claimed as an admissible deduction in the computation of the assessee's profits for the purpose of assessment to income-tax for the year 1971-72. The IT....

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....liability actually arises and the liability remains only contingent during the year. Adopting the principle of the Supreme Court decision, we answer the question of law in the affirmative and against the Department. The second question of law, which calls for our decision in this reference is as follows: " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the provision for gratuity is an admissible business expenditure of the assessee under section 37 of the Income-tax Act, 1961, for the assessment year 1971-72 ? " This question arises on the view held by the Department that unless a liability towards gratuity is brought within the four corners of the provisions of s. 36(1)....