SATISH CHANDRA, J. - (1.) THE assessment year in question is 1972-73, the accounting period ending on January 1, 1972. During the course of the accounting period, the West Bengal Payment of Gratuity Act came into force in the year 1971, under which the assessee was liable to make pay- ment of gratuity to its employees for the past years and also make provision for payment of gratuity to its employees. It provided for a sum of Rs. 65,86,985 as its liability for this assessment year. The ITO allowed the claim to the extent of Rs. 47,83,701 and disallowed the claim for the balance of Rs. 18,03,284. The disallowed amount was referable to the past services of the current employees of the assessee- company.
(2.) ON appeal, the AAC reversed the finding of the ITO and allowed the claim, in view of the decisions of this High Court as well as of the Tribunal in other cases. The Tribunal upheld this view. At the instance of the Department, the Tribunal has referred the following question of law to this Court for our opinion : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 18,03,284 representing the liability for gratuity payable in respect of the past services was an allowable deduction in computing the total income for the asst. yr. 1972-73 ?"
(3.) THE point of law is well settled. The West Bengal Payment of Gratuity Act came into force in the year 1971 during the accounting period relevant to the asst. yr. 1972-73. In respect of this year, the assessee was liable to pay gratuity to its employees not only in respect of the services rendered by them during the course of the current year but also in respect of the services rendered by its current employees in past years. This has been held by this Court as well as by other High Courts in Madho Mahesh Sugar Mills (P.) Ltd. vs. CIT (1973) 92 ITR 503 (All), India United Mills Ltd. vs. CIT (1975) 98 ITR 426 (Bom), CIT vs. Eastern Spinning Mills Ltd. (1980) 19 CTR (Cal) 94 : (1980) 126 ITR 686 (Cal) and CIT vs. Shyam Nagar Tin Factory (P.) Ltd. (1984) 41 CTR (Cal) 58 : (1984) 150 ITR 617 (Cal). In view of these decisions, we answer the question referred to this Court in the affirmative, in favour of the assessee and against the Department.;