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TMI Blog1984 (7) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... for gratuity is to be allowed as deduction in computing the income of the assessee for the assessment year 1971-72 ? (2) If the answer to the first question is in the affirmative, whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that the liability for gratuity that arose under the Kerala Industrial Employees' Payment of Gratuity Ordinance, 1969, and, subsequently, under the Kerala Industrial Employees' Payment of Gratuity Act, 1970, can be claimed as a deduction in the assessment year 1971-72 ? (3) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that the sum of Rs. 12,632 cannot be treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at accounting year when the statute was enacted as well as for the earlier years. In CIT v. Kerala Nut Food Co. [1978] III ITR 252, this court held that since the Kerala Industrial Employees' Payment of Gratuity Ordinance came into force in December, 1969, casting a liability upon the assessee for the first time, he was entitled to claim deduction for gratuity in respect of that year of account as well as for the earlier years. Bat, the claim for deduction in respect of the earlier years was disallowed in that case as the provision had not been made in the relevant accounting year, but only in the subsequent year. This is what this court stated (pp. 262-3): "Consequently, the obligation in respect of gratuity which arose under the Ordinan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so CIT v. Pratap Cashew Co. (P.) Ltd. [1979] 116 ITR 733 (Ker) and CIT v. Standard Furniture Co. Ltd. [1979] 116 ITR 751 (Ker) [FB]. In the present case, where the method of accounting was mercantile, it makes no difference if, for in the relevant year of account when the statute was enacted, some or all of the employees had not completed the requisite period of five years. A prudent employer ought to visualise that each of his employees is likely to complete five years in his service and would, therefore, become entitled to receive gratuity upon the happening of the event mentioned under s. 4 of the Kerala Industrial Employees' Payment of Gratuity Ordinance, 1969, or the Act of 1970, which replaced it. If the employer was not prudent eno ..... X X X X Extracts X X X X X X X X Extracts X X X X
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