Barin Ghosh, J. - (1.) The present appeal is against an order dated February 27, 1976, passed by the learned judge whereby the rule issued in terms of prayers (a) and (b) of the writ petition was made absolute and the respondents were directed to make fresh assessment in accordance with law for the assessment year 1972-73 ignoring Circular No. 146 (see [1975] 101 ITR (St.) 46), dated September 26, 1974, In prayer (a) of the writ petition the writ petitioner had sought for a writ of certiorari seeking quashing of Circular No. 146 (F No. 228/2/73-IT (A. II) (see [1975] 101 ITR (St.) 46) dated September 26, 1974, issued by the Central Board of Direct Taxes and assessment order if any made by the assessment officer on the basis of the said circular for the assessment year 1972-73 or any subsequent assessments and in prayer (b) of the writ petition the writ petitioner had sought for a writ of prohibition for a direction upon the respondents commanding them to forbear from giving effect to and/or taking any steps in pursuance of the aforesaid Circular No. 146 (see [1975] 101 ITR (St.) 46), dated September 26, 1974, for the assessment year 1972-73 or any subsequent assessments.
(2.) The learned judge passed the order under appeal on the basis of the judgment of the Bombay High Court in the case of Tata Iron and Steel Co. Ltd. v. D. V. Bapat, ITO [1975] 101 ITR 292. In that case, although the same circular was under challenge, the concerned assessment years were 1973-74 onwards. There is no dispute that with effect from April 1, 1973, Section 40A(7) was inserted in the Income-tax Act, 1961, and the said new section, since then, is governing the field. Therefore, the judgment passed by the Bombay High Court had no bearing in relation to the very subject-matter of the writ petition, i.e., assessment year 1972-73.
(3.) In Metal Box Company of India Ltd. v. Their Workmen, the Supreme Court held that contingent liabilities discounted and valued as necessary, can be taken into account as trading expenses, if they are sufficiently certain to be capable of being valued ; and an estimated liability under a scheme of gratuity, even if it amounted to a contingent liability, if properly ascertainable and its present value is fairly discounted, is deductible from the gross receipts while preparing the profit and loss account. In view of that decision and other decisions that followed it, it became permissible for an assessee, if he so chose to provide in his profit and loss account for the estimated liability under a gratuity scheme by ascertaining its present value on accrued basis and claiming it as ascertained liability to be deducted in the computation of the profit and loss account of the previous years.;