R.L.GULATI, J. - (1.) THE petitioner is a public limited company having its registered office at Kanpur and carries on business of manufacture and sale of cotton textiles. For the assessment year 1973 -74, the petitioner filed an estimate under Section 212(1) of the Income -tax Act, 1961, in Form No. 29 on 13th of September, 1972, disclosing an income of Rs. 10,000. Later on, the estimate was revised under Section 212(2) on 12th March, 1973, and income of Rs. 63,12,880 was disclosed. On this income an advance tax amounting to Rs. 36,44,078 was paid. Later, the petitioner filed a return under Section 139(1) of the Act for the assessment year 1973 -74, on September 4, 1973, declaring a loss of Rs. 1,14,35,090. In computing the loss, the following two amounts were claimed as deductions : Rs. (a) Liability for gratuity ... 1,67,34,000 (b) Unabsorbed depreciation and development rebate carried forward from the assessment years 1970 -71, 1971 -72 and 1972 -73 ... 96,94,121
(2.) THE claim for gratuity was made in accordance with the actuarial valuation report of an actuary. Section 141A(1) provides that where a return has been furnished under Section 139 and the assessee claims that the advance tax already paid by him exceeds the tax payable on the return, the Income -tax Officer may make a provisional assessment of the tax refundable to the assessee, if in the opinion of the Income -tax Officer the regular assessment of the assessee is likely to be delayed, and if no assessment has been made within six months, the Income -tax Officer is bound to make a provisional assessment of the tax refundable. As the petitioner had filed a return showing a net loss, the entire advance tax amounting to Rs. 36,44,078 became refundable. The petitioner accordingly applied to the Income -tax Officer for a provisional assessment. The Income -tax Officer appears to have referred the matter to the higher authorities for guidance and thereafter on March 5, 1974, passed an order rejecting the assessee's claim for refund of advance tax. The Income -tax Officer held that the deductions claimed by the assessee in respect of the estimated liability of Rs. 1,34,42,000 for payment of gratuity was not admissible. He recorded a similar finding in respect of the claim for set -off of unabsorbed depreciation and development rebate. According to the Income -tax Officer, since the assessments for the year to which the unabsorbed depreciation and development rebate related had not been completed, therefore, the depreciation anddevelopment rebate could not be allowed as deductions. In our opinion, the view of the Income -tax Officer on both these points is patently erroneous.
(3.) AS regards the claim in respect of the liability for payment of gratuity, the Income -tax Officer has recorded the following finding : 'The assessee who follows tbe mercantile system of accounting has charged the accounts with actual payment of gratuity for the year provided for in the accounts the accrued liability for gratuity for the year as per actuarial report, and has further claimed the estimated liability of Rs. 1,34,42,000 for payment of gratuity under its own gratuity scheme as per actuarial valuation; however, it has made no provision for the same in the accounts. In the circumstances the estimated liability of Rs. 1,34,42,000 is found to be not prima facie allowable.' ;