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Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1972-73 - Assessee, who maintained accounts according to mercantile system, claimed deduction of gratuity liability - No trust had been created by assessee within meaning of section 36(1)(v) and said amount of Rs. 1,50,729 was payable by it under an award passed by Industrial Tribunal - Whether amount in question was allowable as a deduction under section 37(1) - Held, yes FACTS The assessee, who maintained accounts according to the mercantile system, claimed deduction of gratuity liability of Rs. 1,50,729. No trust had been created by the assessee within the meaning of section 36(1)(v) and the amount of Rs. 1,50,729 was payable by it under an award passed by the Industrial Tribunal. The Tribunal held that the liability to pay the amount of Rs. 1,50,729 accrued during the relevant assessment year though actual quantification may have been done later and, hence, the said amount was deductible under section 37(1). On reference: HELD Following the decision of the Allahabad High Court in the case of Madho Mahesh Sugar Mills (P.) Ltd. v. CIT [1973] 92 ITR 503, wherein it was held that even though no trust is created by an assessee within the meaning of section 36(1)(v), yet the payment towards the gratuity liability is a permissible deduction, in the instant case, the order of the Tribunal was to be upheld. CASE REFERRED TO Madho Mahesh Sugar Mills (P.) Ltd. v. CIT [1973] 92 ITR 503 (All.). JUDGMENT Reddy, J. €“The Tribunal has stated the following question under section 256(1) of the Income-tax Act, 1961 ('the Act'): "Whether, on the facts and in the circumstances of the…

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