AJIT K.SENGUPTA,J. - (1.) AT the instance of the CIT ,the following question of law has been referred to this Court under s. 256(1) of the IT Act, 1961, for the assessment year 1972-73 : "Whether, on the facts and in the circumstances of the case and on a correct interpretation of law, the Tribunal was justified in holding that provision for gratuity based on actuarial valuation was an allowable deduction in computing the total income of the assessee ?"
(2.) THE facts are that the ITO found that an amount of Rs.5,32,518 has been charged to the account in respect of provision for gratuity. A certificate from the actuary was filed in support of the claim. The ITO, however, did not accept the claim on the ground that the Gratuity Act came into force only in 1972, i.e., after the assessee's accounting year had ended and there was no statutory liability to make any provision during this year. The ITO further held that the decision of the Supreme Court in the case of Bombay Dyeing and Mfg. Co. Ltd. vs. CWT (1974) 93 ITR 603 laid down that the provision for gratuity is a contingent liability. The assessee's claim was, therefore, not allowed. When the matter came before the AAC, he found that the West Bengal Employees' Payment of Compulsory Gratuity Ordinance, 1971, came into force on June 14, 1971, which was before the close of the accounting year of the assessee. The AAC, therefore, held that the liability for payment of gratuity arose in this year. The AAC referred to the decision of the Bombay High Court in the case of Tata Iron and Steel Co. Ltd. vs. Bapat (D. V.), ITO (1975) 101 ITR 292 and the unreported decision of the Calcutta High Court in the case of CIT vs. Budge Budge Amalgamated Mills Ltd. He further found that the actuarial valuation regarding the provision for gratuity came to Rs. 3,70,035. He, therefore, held that the claim of the assessee was allowable to that extent and he maintained the disallowance of the balance of Rs. 1,61,483. When the matter came before the Tribunal, it was contended on behalf of the Department that the gratuity was merely a provision and there was no present liability which could be allowed as a deduction for making the assessment for the asst. yr. 1972-73. It was further submitted that even if the liability was to be allowed, it should be only in respect of Incremental liability related to this particular year and not for all the earlier years. The Tribunal, after considering the facts of the case, upheld the order of the AAC, following the decision relied upon by him. It was further held by the Tribunal that the liability was for the whole of the amount arrived at as per actuarial valuation and not only for the incremental value, as the Ordinance had come into force in this year itself.
(3.) IT appears to us that the question in this reference is concluded by the decision of this Court in the case of CIT vs. Steel Rolling Mills of Bengal Ltd. (1987) 65 CTR (Cal) 116:(1988) 169 ITR 430. Mr. Moitra, however, appearing for the Revenue, has contended that the decision of the Supreme Court in CIT vs. Vanaz Engineering P. Ltd.(1986) 58 CTR (SC) 51 : (1986) 162 ITR 876 has resolved the issue in favour of the Revenue. The matter was sent back by the Supreme Court for reconsideration and, accordingly, he submitted that the same procedure should be adopted by us.;