1978 (12) TMI 44 - HC - Income Tax

Summary

Issues:
1. Allowance on account of liability for gratuity payable to workmen.
2. Tribunal's refusal to permit the assessee to raise a claim based on an actuarial report.
3. Interpretation of the claim for deduction of liability for gratuity based on different grounds before different authorities.
4. Applicability of the decision in CIT v. Mahalakshmi Textile Mills (P.) Ltd. [1967] 66 ITR 710.

Analysis:
1. The assessee claimed an allowance for gratuity liability under the Industrial Disputes Act and the Sugar Industries Workmen Gratuity Scheme. The claim was initially rejected by the ITO due to lack of details. The AAC did not consider this plea, and the Tribunal later disallowed the claim based on the actuarial report submitted by the assessee. The Tribunal held that the actuarial report needed to be assessed in light of the gratuity scheme and provisions of the Act, and since no provision was made in the accounts, the claim was refused.

2. The Tribunal, upon a reference by the High Court, was questioned on whether it erred in not allowing the assessee to raise and argue the claim for deduction of the gratuity liability based on the actuarial report. The High Court noted that the assessee had not originally based the claim on the actuarial report before the ITO or the AAC. However, after a previous court decision highlighted the importance of actuarial calculation for gratuity liability, the assessee submitted the actuarial report to the Tribunal, seeking a deduction of Rs. 72,399.

3. The High Court emphasized that the assessee attempted to change the ground for the claim from the Wage Board Award to the actuarial valuation report. While the original ground was not pursued before the lower authorities, the High Court cited the decision in CIT v. Mahalakshmi Textile Mills (P.) Ltd. [1967] 66 ITR 710, stating that the Tribunal is not restricted to the issues raised before the departmental authorities. Therefore, the assessee was justified in changing the ground for the claim before the Tribunal, and the Tribunal should have entertained and decided on the claim based on the actuarial report.

4. Ultimately, the High Court ruled in favor of the assessee, stating that the claim for gratuity could be sustained on a different ground than originally presented. The High Court answered the question referred to them in the affirmative, in favor of the assessee, and awarded costs to the assessee amounting to Rs. 200.