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Commissioner of Income-tax Vs. Laxmi Sugar and Oil Mills Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 428 of 1975
Judge
Reported in[1978]114ITR684(All)
ActsIncome Tax Act, 1961 - Sections 37(1) and 40
AppellantCommissioner of Income-tax
RespondentLaxmi Sugar and Oil Mills Ltd.
Appellant AdvocateAshok Gupta, Adv.
Respondent AdvocateBharatji Agarwal, Adv.
Excerpt:
- .....assistant commissioner to determine the discounted value of the assessee's. liability to pay gratuity based on actuarial valuation for the assessment years 1965-66 and 1966-67 and treat the same as a permissible deduction under section 37(1) read with section 40(a)(iv) of the income-tax act, 1961, even though the funds had not been approved by the commissioner of income-tax and the case was not covered by section 36(1)(v) of the act? 2. whether, on the facts and in the circumstances of the case, the assessee's claim for deduction of its contribution to the employees' gratuity funds amounting to rs. 35,870, rs. 33,454 and rs. 37,290 for the assessment years 1967-68, 1968-69 and 1969-70, respectively, was admissible under section 37(1) of the income-tax act, 1961, even though the.....
Judgment:

Satish Chandra, C.J.

1. The Tribunal has referred to us the following two questions:

'1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in directing the Appellate Assistant Commissioner to determine the discounted value of the assessee's. liability to pay gratuity based on actuarial valuation for the assessment years 1965-66 and 1966-67 and treat the same as a permissible deduction under Section 37(1) read with Section 40(a)(iv) of the Income-tax Act, 1961, even though the funds had not been approved by the Commissioner of Income-tax and the case was not covered by Section 36(1)(v) of the Act?

2. Whether, on the facts and in the circumstances of the case, the assessee's claim for deduction of its contribution to the employees' gratuity funds amounting to Rs. 35,870, Rs. 33,454 and Rs. 37,290 for the assessment years 1967-68, 1968-69 and 1969-70, respectively, was admissible under Section 37(1) of the Income-tax Act, 1961, even though the fund had not been approved by the Commissioner of Income-tax as required under Section 36(1)(v) of the Act?'

2. In Madho Mahesh Sugar Mills Pvt. Ltd. v. Commissioner of Income-tax [1973] 92 ITR 503, this court held that where an assessee. maintains his accounts on the mercantile system, a liability already accrued, though to be discharged at a future date, would be a proper deduction while working out the profits and gains of his business, regard being had to the accepted principles of commercial practice and accountancy. The estimated liability of an assessee for payment of gratuity to its workers based on actuarial valuation is a permissible deduction. Such a liability is an ascertainable liability in praeseti though payable in; future.

3. This decision is directly applicable to the present case. In view of this decision, we answer the question referred to us in favour of the assessee and against the department The assessee will be entitled to costs which are assessed at Rs. 200.


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