TMI Blog1978 (5) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 6,000 had been fixed as the amount of gratuity payable at the time of death or retirement of the employee. The company, however, had not created any trust or fund in this behalf. In respect of the assessment for the years prior to the assessment year 1971-72, the assessee had claimed the amounts actually paid out in each of the years as deductions and such amount had been allowed in these assessments. It had not made any provision as such for gratuity liability nor claimed any such provision as allowable deduction in the earlier years. Apparently, in the light of certain observations made by the Supreme Court in the case of Metal Box Company of India Ltd. v. Their Workmen [1969] 73 ITR 53 and a circular issued by the CBDT dated Septe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not an admissible deduction in computing the total income for the assessment year 1971-72 ? " The answer to the question as has been referred to this court, in the light of the admitted facts, it appears to us, can only be in one way and, to a great extent, the answer is to be found in the question itself. Strong reliance had been placed before the Tribunal on the decision of the Supreme Court in Metal Box Company's case [1969] 73 ITR 53. The substance of the decision in that case which arose under the Payment of Bonus Act, was whether the gratuity payable was a contingent liability or a definite ascertainable liability or a known liability which could be ascertained in a reasonable manner, though payable in future. It was held : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the later year cannot be determined and the result would be lopsided and unreal (vide National Petroleum Co. Ltd. v. CIT [1945] 13 ITR 336 (Bom), CIT v. Vanguard Insurance Co. Ltd. [1974] 97 ITR 546 (Mad)). It had been admitted that the actuarial valuation of the liability as on March 31, 1970, was Rs. 3,63,007 and that with the accretion in respect of such liability during the accounting year the figure would be Rs. 3,94,112 as on March 31, 1971. Therefore, it was plain that even on the basis of the actuarial valuation of the liability the sum of Rs. 3,63,007 was a liability incurred by the assessee from the commencement of the scheme in the year 1957 till March 31, 1970. It was not permissible for the assessee to aggregate such expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut, in the instant case, the liability was there even from the year 1957 and the assessee was aware of this liability but claimed allowance on the basis of actual payments made. The decision of the same High Court in Swadeshi Cotton Mills Co. Ltd. v. ITO [1978] 112 ITR 1038 (All) followed the decision of M.M. Mill's case [1973] 92 ITR 503 (All) and, apparently, on the basis that the facts were similar. The decision of the High Court of Bombay in India United Mills Ltd. v. CIT [1975] 98 ITR 426, relied on by the assessee, is also clearly distinguishable. The learned judges held that there was an actual payment to a fund and, therefore, an actual incurring of expenditure relevant to the assessment year 1953-54, and was allowable in the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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