COMMISSIONER OF INCOME TAX Vs. HINDUSTAN TIMES LIMITED

JUDGEMENT

(1.) 1. This is an application under s. 2356(2) of the I. T. ACt, 1961, by the Commissioner of Income Tax who seeks a direction to the Tribunal to state a case and refer the following questions for the decision of this court :

(2.) SO far as the first question is concerned, the relevant facts are in a very benefit compass. The assessed has debited a sum of Rs. 1,86,461 to the sales and wages account by wy of a provision for gratuity. It is common ground that this provision was made in respect of the non journalist employees of the company to whom the company has to pay gratuity in accordance with certain awards of the Industrial Tribunal, w. e. f. July 1, 1967. it is against common ground that the provision was made on the basis of an actuarial valuation, i.e., for the present value of the future liability in respect of the gratuity which the assessed would have has to meet as per the awards. the ITO disallowed the assessed's claim for deduction this amount by distinguishing the judgment of this court in the case do DElhi Flour MIlls Co. Ltd. v/s. : [1974]95ITR151(Delhi) and relying upon the decision of the Supreme Court in the case of Bombay Dyeing and Mfg. Co. Ltd. v/s. : [1974]93ITR603(SC) . However, on appeal both the AAC and the Tribunal allowed the assessed's claim. the Tribunal referred to the decision of the Bombay High Court in the case of Tata Iron and Steel Co. Ltd. v/s. D. V. : [1975]101ITR292(Bom) , of the Allahabad High Court in the case of Madho Mahesh Sugar Mills (P.) Ltd. v/s. CIT : [1973] 92 ITR 503 and of this court in the case of Delhi Floor Mills co. Ltd. : [1974]95ITR151(Delhi) , and allowed the assessed's claim. the Commissioner challenges the correctness of this conclusion.

(3.) WE are not persuaded to direct a reference on this question because the question of allowability of gratuity as a deduction where it is provided for in the books on the basis of actuarial valuation has been set at rest by the decision of the Supreme /court in the case of metal Box Company of India Ltd. v/s. : (1969)ILLJ785SC ;, 39 Comp Case 410. that was no doubt a case under the Bonus ACt but the Supreme Court has referred to decision under the I. T. ACt and it has also based it conclusion on the well -settled accountancy principle that, even in respect of a contingent liability its present value, if ascertained on scientific basis could be taken into account as trading expenses without deducting which the profits of the assessed cannot be truly ascertained. ?the observations of the Supreme court in this respect are quite clear and categorical.