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Issues:
1. Allowability of provision made by the assessee towards liability on account of gratuity payable to workers as a deduction while computing net wealth under the Wealth-tax Act, 1957. Analysis: The High Court of Kerala addressed a reference under section 27(1) of the Wealth-tax Act, 1957, regarding the deductibility of a provision for gratuity liability. The main question was whether the provision made by the assessee towards gratuity payable to workers constituted a "debt owed by the assessee on the valuation date." The Tribunal allowed the deduction based on an actuarial calculation, which the Wealth-tax Officer and the Appellate Assistant Commissioner had rejected. The Tribunal relied on a previous decision that highlighted the accrued liability aspect of the gratuity provision under the Kerala Industrial Employees' Payment of Gratuity Act, distinguishing it from contingent liabilities. The Tribunal emphasized that under the Kerala Gratuity Act, an employee completing 5 years of service had an absolute right to gratuity, making it an accrued liability. The court examined the provisions of the Kerala Industrial Employees' Payment of Gratuity Act, 1970, particularly section 4, which outlined the payment of gratuity to employees under various circumstances. In comparison, the court referenced the Standard Mills Co. Ltd. v. Commissioner of Wealth-tax case where the Supreme Court held that gratuity liability only arises upon the determination of employment, making it contingent and not a present debt owed by the assessee. The court reiterated the principle that for Wealth-tax Act purposes, there must be an actual debt owed on the valuation date, as established by previous Supreme Court rulings. Furthermore, the court analyzed decisions from other High Courts, such as Commissioner of Wealth-tax v. Ranganayaki Gopalan and Commissioner of Wealth-tax v. Phipson and Company Private Ltd., to distinguish between contingent liabilities and present liabilities. The court highlighted the importance of actual, ascertained liabilities for deduction under the Wealth-tax Act, emphasizing that liabilities under awards or statutes must be present and not contingent to qualify as debts owed by the assessee. Ultimately, the court concluded that the matter was settled by the Supreme Court's decision in Standard Mills Co. Ltd. v. Commissioner of Wealth-tax, ruling in favor of the revenue and against the assessee, denying the deduction for the provision made towards gratuity liability.
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