TMI Blog1980 (1) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... libhit unit under the head " Gratuity ". The ITO, on the view that the amounts claimed were unascertained liabilities, allowed an amount of only Rs. 8,550 which has been actually paid, and disallowed the balance. An appeal was preferred before the AAC. In the appeal, the assessee enlarged its claim to Rs. 8,02,402. The reason for the enlargement of the claim was that the Government of India had appointed a Central Wage Board for the sugar industry in December, 1957, for the purpose of working out a wage structure and the principles governing the grant of bonus/gratuity. The report of the Board was accepted by the Government of India, and the State Governments were advised to take various steps to enforce the recommendation. The State Government accepted the recommendation after considering it at a tripartite conference, which included the representatives of the sugar mills and workers. Thereafter, a notification under s. 3 of the U. P. Industrial Disputes Act, 1947, was issued for giving effect to the recommendations of the Wage Board. The recommendations included a scheme of gratuity, the terms of which were set out in Appendix V to the notification. The scheme was to come into fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular year of account. This method had not taken into account the possibility of the death of workmen or his dismissal for misconduct. The method of calculation was found defective also on the score that it did not take into account the salary which an employee may earn at the time when the gratuity would become payable to him. On considering all these factors it found the method adopted by the assessee for calculation of the gratuity to be defective and disallowed the claim on this ground, and also on the view that the liability for gratuity was at best a contingent liability and could not be allowed. On the reference coming up before this court on the 16th March, 1968, counsel for the assessee made a statement that the actuarial valuation of the gratuity had been obtained by the assessee, and on this, the court directed the Tribunal to submit a statement of the case, and, to annex with it the report of the actuarial valuation supplied by the assessee. The Tribunal in response to this order has now submitted the supplementary statement of the case. In the supplementary statement of the case the Tribunal has stated that according to the actuarial report filed by the assessee, liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case, as a result of which some additional evidence would have to be brought on the record by the Tribunal was incorrect, they were not inclined to go behind that order as in their view that would amount to sitting in appeal over the earlier order was passed under s. 66(4). Reference was also made to another Bombay decision in the case of Petlad Turkey Red Dye Works Co. Ltd. v. CIT [1962] 45 ITR 275 in which the same view has been taken. The Bombay decision in CIT v. Keshav Mills Co. Ltd. [1962] 44 ITR 647 has been reversed by the Supreme Court on appeal in Keshav Mills Co. Ltd. v. CIT [1965] 56 ITR 365 and the case on appeal has already been noticed earlier. The other Bombay decision was also reversed by the Supreme Court on appeal in Petlad Turkey Red Dye Works Co. Ltd. v. CIT [1963] 48 ITR 92 (SC), wherein it was held that the High Court had no jurisdiction to direct additional evidence to be taken while calling for supplementary statement of the case. Thus, these decisions in so far as they lay down that once an order has been passed under s. 66(4) rightly or wrongly it cannot be reconsidered at the time when the reference comes up for hearing, cannot be taken to lay down th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention on behalf of the department that the order of 16th March, 1968, does not bind us. In this view of the matter, it is not possible to consider the actuarial report submitted by the Tribunal with the further statement of the case. Coming now to the merits of the controversy. It has been seen that the assessee had claimed an amount of Rs. 25,000 for the Kashipur unit and Rs. 45,000 for the Pilibhit unit under the head " gratuity " before the ITO. The ITO had allowed an amount of Rs. 8,850 only, being the amount actually paid. Before the AAC the claim was enlarged to Rs. 8,02,402. This amount, according to the assessee, represented the liability incurred by it for the previous years, in view of a notification issued under s. 3 of the U. P. Industrial Disputes Act, 1947, giving effect to the recommendation of the Central Wage Board for the sugar industry regarding payment of gratuity. It also included an amount of Rs. 50,995 and Rs. 29,750 for the relevant previous year relating to its Pilibhit and Kashipur factories. The amount was worked out by the assessee by taking into account the number of permanent and seasonal workmen working in the two units and multiplying the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant previous year, is not sufficient to defeat the assessee's claim. For, the liability in question was created in the relevant previous year and not at any point of time earlier. So far as the liability for payment of gratuity for the relevant previous year is concerned, provision for that could be made in the relevant previous year, for it related to the year in question. Thus, we are unable to agree with the view of the Tribunal that the claim of the assessee for the payment of gratuity would fail on the ground that it was a contingent liability. The next question is as to whether the assessee was entitled to deduction of Rs. 8,02,402 or any other sum as gratuity in the computation of its business income. Since the assessee was claiming the deduction, it stands to reason that the burden of proof that the deduction claimed by it was the correct amount in accordance with the I.T. Act was on the assessee. The assessee had not estimated its liability for gratuity on the actuarial basis, which appears to be one of the approved methods of valuing claims of this nature. It had calculated its liability on a basis which the Tribunal found did not give the correct liability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case nor has it omitted to consider the controversies raised between the parties. Counsel on behalf of the revenue, however, contended that inasmuch as the assessee had made a claim before the ITO for deduction of only an amount of Rs. 70,000 odd for gratuity, the assessee was not entitled to enlarge his claim for gratuity before the AAC or the Tribunal. It was also urged that inasmuch as the assessee stated his claim to gratuity on the method of calculation adopted by it for working out the amount claimed, it was not incumbent on the Tribunal to have calculated the gratuity allowable to the assessee by recourse to the recognized method for doing so. It is undoubtedly true that the ITO has to compute the true profits or income of an assessee in order to bring it to tax. But it must be remembered that it was the assessee who was claiming a deduction, and the onus was on him to bring all material facts on record so that the deduction claimed could be allowed. It has been seen that the liability for gratuity can be allowed as a deduction on a discounted value, and not with reference alone to the number of workmen employed by a concern and their length of service : See Metal Box C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y High Court in the case of Official Liquidator of the Sakeeria Cotton Mills Ltd. (In liquidation) v. CIT [1971] 81 ITR 528, where it was held that where the assessee had staked his claim for gratuity based on a particular method, his case for the deduction had to stand or fall by the method disclosed by him. In that case too the assessee had not disclosed relevant material for calculation of the gratuity on any other method. The decision of this court in Ascharajlal Ram Parkash [1973] 90 ITR 477 is clearly distinguishable. In that case the year in which the truck was purchased was known as also its purchase price. The purchase price of the truck and the year of the purchase being known, the amount of deduction could easily be calculated by reference to the provisions of the I.T. Act itself. Such is not the case here, as has been seen, for, before the deduction could be allowed, a number of other facts had to be brought to the notice of the authorities for allowability of the deduction. We, accordingly, answer the question in the negative, in favour of the department and against, the assessee. The department is entitled to its costs, which is assessed at Rs. 200. Counsel's fee is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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