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TMI Blog1991 (3) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... enue expenditure in the assessment of the assessee for the accounting period relevant to the assessment year 1973-74 ? " The assessee is a company. The assessment year involved is 1973-74 for which the previous year ended on December 31, 1972. The Payment of Gratuity Act, 1972, came into force some time in October, 1972. According to the assessee, it became liable to pay gratuity to its employees under the statute for the first time during the previous year. It made a provision of Rs. 8,65,000 in respect of its gratuity liability. The break-up of the amount was Rs. 3,31,000 as the gratuity liability of the previous year and the remaining sum of Rs. 5,34,000 as liability of the past years. The assessee claimed the aforesaid provision as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity during the previous year, Dr. Balasubramanian, learned counsel for the Department, placed reliance on the Supreme Court decision in the case of Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585, for the proposition that the assessee's claim is also hit by the aforesaid provisions of section 40A(7). In the alternative, he contended that the issue not having been examined by the departmental authorities as well as the Tribunal from the point of view of section 40A(7), the matter must go back to the Tribunal for adjudication according to law. Dr. Balasubramanian also contended that, after the insertion of section 40A(7), the gratuity liability, even if it is held to have accrued during the previous year, could not be allowed under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t should have called upon the Tribunal to submit to it a further statement of the case. The question whether the contracts for sale were entered into in British India or at Indore was not a question of fact to be determined by the Tribunal. It was a question of law to be determined by the High Court on a true construction of the correspondence, documents and the conduct of the parties. The learned Attorney-General frankly conceded that he could not support that part of the order passed by the High Court and agreed that a further statement of the case should have been called for by the High Court in regard to questions 1 and 2, " On the basis of the above observations, his submission is that the High Court could, in cases where facts for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt, in reference proceedings, to direct the Tribunal to examine a question after making further investigation. However, inviting our attention again to another Supreme Court decision in the case of Union of India v. Raghubir Singh [1989] 178 ITR 548, he stated that the decision in Keshav Mills Co. Ltd.'s case [1965] 56 ITR 365 (SC) being a decision by seven judges and that case not having been noticed in the above three decisions, it is only appropriate that this court should follow the law laid down by the Supreme Court in Keshav Mills Co. Ltd.'s case [1965] 56 ITR 365. We have considered the rival contentions carefully. It is not in serious dispute that the liability in respect of gratuity has, both in respect of the year under referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to dispose of the case conformably to such judgment. The proper question, in our opinion, is : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amount of Rs. 5,34,000 (being the difference between Rs. 8,65,000 and Rs. 3,31,000) also accrued as a liability during the previous year under the Payment of Gratuity Act, 1972 ?" We reframe the question accordingly. As stated by us above, there is not much dispute between the parties that so far as the liability is concerned, the statute having come into force during the previous year itself, it has to be held that the entire liability including the aforesaid amount of Rs. 5,34,000 accrued during the previous year. Accordingly, we answe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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