Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1971-72 - AAC allowed assessee's claim for deduction of gratuity on basis of acturial valuation - Department filed appeal before Tribunal - No appeal or cross objection was, however, filed by assessee - Tribunal finding that there was error in actuarial valuation as future increments had also been taken into account, directed reworking of gratuity figures after excluding future increments - Thereupon, by fresh working gratuity liability was worked out at a higher figure but, ITO restricted deduction upto sum actually allowed by AAC - AAC, however, allowed additional amount calculated during fresh working - Tribunal set aside said order of AAC - Whether, since, Tribunal in its earlier order had not ordered a remit or reappraisal of entire matter, but only directed reworking of actuarial valuation after excluding future increments, higher deduction than amount originally allowed by AAC could not be claimed and allowed - Held, yes FACTS Before the ITO the assessee claimed deduction of Rs. 7.03 lakhs towards the liability to pay gratuity under the Kerala Payment of Gratuity Act. The ITO disallowed the claim. In appeal, on the basis of actuarial valuation, the assessee restricted the claim in the sum of Rs. 2,18,646. A sum of Rs. 49,566 had already been allowed as payment on cash basis. The AAC accepted the plea of the assessee and held that the claim on the basis of actuarial valuation in the sum of Rs. 2,18,646 was allowable and directed the ITO to allow the balance of Rs. 1,69,080 over and above the sum of Rs. 49,566 already allowed on cash basis. The said order was accepted by the assessee as he neither carried the matter in appeal nor filed any cross-objection in the appeal filed by the revenue. Before the Tribunal it was a common ground of revenue that the actuarial valuation furnished by the assessee was incorrect as it, took into account future increments. The Tribunal directed a reworking of the figure of the gratuity liability on actuarial valuation after excluding the future increments. Thereupon, a fresh working of the liability was furnished to the ITO,…

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