TMI Blog1996 (2) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court of Kerala, which answered the question referred to it in favour of the Revenue. The appellant is an individual. He was carrying on business as its sole proprietor. The accounting year of the appellant was the financial year. On October 14, 1970, the books of account of the appellant were closed and the sole proprietary concern was taken over by a partnership with effect from October 15, 1970, the appellant being one of the partners. During the accounting year 1969-70, relevant to the assessment year 1970-71, an Ordinance had been issued, known as The Kerala Industrial Employees' (Payment of Gratuity) Ordinance, which made it obligatory for employers to set aside particular amounts for payment as gratuity to their employees. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antile system of accounting. The Tribunal, however, came to the conclusion that this amount should be treated as expenditure of the year 1971-72 because, in computing the income for the period ending October 14, 1970, provision for gratuity had already been debited to the profit and loss account. The Tribunal held that the firm had taken over the entire business as a running concern and, if the appellant had not debited his business with this amount, then the credit he would have got in the books of the firm would have increased by the said amount, i.e., his capital account would have gone up to that extent. The firm had not given him this credit and, therefore, according to the Tribunal, the entries made in the books of the appellant towar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iability when he debited his profit and loss account with Rs. 56,485 towards payment of gratuity to his employees. It is clear that the liability to pay this amount arose by reason of the promulgation of the Ordinance on December 9, 1969. The liability towards payment of gratuity was not only with respect to that accounting year but also in respect of the earlier years in which the employees of the appellant had served; the liability had to be computed by the amount of 15 days' wages for every year. Both the Appellate Assistant Commissioner as well as the Tribunal came to the conclusion that the liability had accrued in the accounting year 1969-70 and not in the following accounting year, with which we are here concerned. The High Court w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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