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TMI Blog1986 (9) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... the following questions as questions of law arising out of its order for the opinion of this court : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 13,65,116 being the actuarial valuation of the assessee's liability on account of gratuity as on March 31, 1967 in accordance with the Industrial Employment (Standing Orders) Act, 1946, and under the provisions of the Industrial Disputes Act, 1947, payable to its employees constituted an allowable deduction in the computation of the profits and gains of its business for the assessment year 1967-68 ? 2. Whether, on the facts and in the circumstances of the case, and having regard to the fact that the assessee is a sterling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the same assessee in Calcutta Electric Supply Corporation Ltd. v. Addl. CIT [1982] 136 ITR 777. Following the said decision, we answer the said question in the affirmative and in favour of the Revenue. Similarly, question No. 3 which has also been referred at the instance of the assessee is covered by a decision of this court in Riverside (Bhatpara) Electric Supply Co. Ltd. v. CIT [1977] 109 ITR 399. Following the said decision, we answer this question by stating that the written down value is to be computed in accordance with the provisions of the Act of 1961 even with reference to assets in use in the previous year prior to the April 1, 1961. The facts relevant to question No. 4 which has been referred at the instance of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eclared, the assessee as a company was bound to pay the same to the shareholders and a liability arose which had to be met by the assessee. As has been held by this court in CIT v. Tingri Tea Company Ltd. [1971] 79 ITR 294, where money was borrowed in India on an overdraft account and deposited in the United Kingdom banks for the purpose of payment of dividends to the non-resident shareholders, the said transaction was for the purpose of business of the assessee. In that view, the extra amount which had to be paid by the assessee in the instant case for the purpose of remittance of dividends must be held to be for a similar purpose, viz., for the business of the assessee and to that extent there is no reason why the same should not be consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A(7) was inserted in the Income-tax Act, 1961, in 1973 and laid down that provision made for payment of gratuity, which would become due and payable in the previous year, would be allowable as an expenditure of the previous year on accrual basis, when the mercantile system of accounting was followed by the assessee. I Learned advocate for the assessee contended in reply that in the instant case, it has been found as a fact that the liability had accrued in the previous year under the Industrial Employment (Standing Orders) Act, 1946, and also under an award passed by the Industrial Tribunal under the Industrial Disputes Act, 1947, which provided for payment of gratuity to its employees. The amount of such gratuity payable could be ascertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tled to a deduction. Following the decision in the case of Kedarnath Jute Mfg. Co. Ltd. [1971] 82 ITR 363 (SC), it was held that whether the assessee was entitled to a particular deduction or not will depend on the law applicable and not on the view which the assessee might take of its rights. The existence or absence of entries in the books of account will be neither decisive nor conclusive. It appears to us that in the instant case, the Tribunal has found as fact that the statutory liability for payment of gratuity by the assessee had arisen in the relevant previous year. The said liability had been actuarially valued and it represented a revenue expenditure. These facts are not disputed by the Revenue. Absence of a provision for meeting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis. In the accounting year involved, due to the devaluation of the Indian rupee, the assessee incurred a liability to pay an extra amount and claimed the same as a business expenditure. It was not disputed that the additional liability was in the nature of revenue. On the facts, it was held that the assessee having borrowed the money was temporarily the owner of the fund and if the assessee had to incur an additional liability in respect of the same, the same would be loss in connection with or arising out of its business. It was held that such loss was deductible as a business loss. In the facts of the instant case, the money borrowed on debentures has been found to be utilised by the assessee not for the business of the company but f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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