Ajit K.Sengupta, J. - (1.) At the instance of the Commissioner of Income-tax, West Bengal-III, two questions of law have been referred to this court under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1972-73 : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the liability of the assessee to pay gratuity to its employees, though at a future point of time, on the happening of any of the contingencies specified in the West Bengal Employees' (Payment of Compulsory Gratuity) Act, 1971, was allowable as deduction in the computation of the assessee's business income of the previous year relevant to the assessment year 1972-73, in which previous year the said Act came into force, if such liability was ascertained, according to actuarial principles, though with reference to the entire length of service of the employees and that deduction of such liability would not amount to liability of earlier years being charged to the profits of that previous year ?"
(2.) "Whether, on the facts and in the circumstances of the case and having regard to the fact that the assessee adopted the mercantile system of accounting, the Tribunal was correct in holding that the entire liability of Rs. 21,28,176 computed according to actuarial principles was allowable as a deduction in the computation of the assessee's business income of the relevant previous year, when in the accounts of that year the assessee had provided a sum of Rs. 1,47,167 only for meeting such liability ?"
(3.) In view of the decision of this court in the case of CIT v. Eastern Spinning Mills Ltd., [1980] 126 ITR 686, both the questions in this reference are answered in the affirmative and in favour of the assessee. There will be no order as to costs.;