Law:

Section:

Income-tax---Business expenditure--Provisions for gratuity liability on actual basis--Power of High Court under writ jurisdiction to allow such expenditure in computing assessable income--Supreme Court remanded case back for deciding whether the conditions prescribed by relevant law had been satisfied by assessee to give him entitlement to such deduction from his assessable income. Shree Sajjan Mills Ltd. v. C. I. T., (1985) 156 I T. R 585 (S C) ref. ORDER R. S. PATHAK, J.--This appeal by certificate is directed against the judgment dated February 26, 1975 of the Bombay High Court allowing a writ petition filed by the respondent in which he challenged the disallowance of a deduction claimed by him. The respondent, which maintains its accounts on the mercantile system, follows the financial year as its accounting period. Upto and including the assessment year 1971-72, the respondent claimed, and was granted, deduction in respect of its liability for gratuity to its: employees on the basis of actual payments made during each relevant accounting period. For the assessment year 1972-73, however, the respondent claimed a deduction of a sum of Ks.1, 28.09,135 on the basis that the said, amount represented its liability on account of gratuity on an acturial valuation. The claim was accepted by the Income-tax Officer pursuant to a Circular dated September 21, 1970, issued by the Central Board of Direct Taxes. For the subsequent; year 1973-74, the respondent claimed a deduction of Rs.2,77,52,991 as its gratuity liability on the basis of an acturial valuation. During the assessment proceedings before the Income-tax Officer, a Circular dated September 26, 1974, was issued by the Central Board of Direct. Taxes. That circular superseded the earlier circular and on its basis, the Income-tax Officer rejected the claim to deduction made by the respondent. A writ petition was filed in the High Court and the High, Court has granted relief inasmuch as a writ has…

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