Law:

Section:

Section 37(1) of the income-tax act, 1961-Business expenditure-Assessee claimed deduction for gratuity payable for relevant accounting year ending on 30-9-1961 as also earlier accounting years under a government scheme notified to be effective from 1-11-1960-Whether impugned deduction allowable-Held, on facts, no Section 66(4) of the indian income-tax act, 1922 [corresponding to section 258 of the income-tax act, 1961]-Reference-Amendment of statement of case at instance of high court-Whether high court could direct tribunal to submit a supplementary statement and to annex therewith actuarial valuation of gratuity not supplied earlier by assessee-Held, no Facts The assessee owned two sugar mills during the assessment year 1962-63 (previous year ended 30-9-1961). It adopted mercantile system of accounting. It claimed a total deduction of Rs. 70,000 under the head "Gratuity". The ITO allowed only Rs. 8,550 representing actual payment in the previous year and disallowed the balance as an unascertained liability. Before the AAC, the assessee enlarged its claim for gratuity to Rs. 8,02,402 on the ground that the scheme of gratuity, which was recommended by the Central Wage Board and given effect to by the State Government by a notification under section 3 of the UP Industrial Disputes Act, 1947, came into force with effect from 1-11-1960 (relevant for the assessment year 1962-63). The said amount comprised Rs. 7,31,520 for the earlier years and the balance for the assessment year 1962-63. The assessee calculated the said claim taking into account the number of permanent and seasonal workmen and multiplying their average length of service by twenty half month's pay and ten quarter month's pay, respectively. The AAC rejected the entire claim of gratuity, holding (i ) that the claim for earlier years could not be allowed in the year under consideration as the assessee followed mercantile system of accounting ; (ii) that, since no such claim was made before the ITO, this could not be entertained at appeal stage ; and (iii) that its claim for the relevant previous year was not allowable as it was only a contingent liability. On further appeal, the assessee claimed the…

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