Commissioner of Income Tax vs India Radiators Ltd.

R. Jayasimha Babu, J.—The assessee contributed a sum of Rs. 99,000 to the gratuity fund for the assessment year 1978-79. No details

regarding the manner in which that amount was calculated and whether it is the liability of that year were furnished. The Assessing Officer, after

noticing that no details had been furnished, disallowed the claim for deduction on the ground that having regard to the large sum, it could be

reasonably inferred that it includes not only the incremental liability of the year but of the earlier years as well. He, however, permitted the assessee

to furnish a break-up and observed that the amount relatable to the assessment year would be allowed thereafter. The Commissioner disagreed

with that view of the Income Tax Officer and the Commissioner''s view has been upheld by the Tribunal.

The amount that could be contributed to the gratuity fund in respect of which deduction can be claimed is the amount of the incremental liability

for that year. The incremental liability for the past years cannot be claimed as deduction in the year in which the contributions came to be made.

That was the view taken by this court in the case of Commissioner of Income Tax Vs. Pullicar Mills Ltd., .

We must, therefore, hold that the Tribunal was in error in allowing that sum of Rs. 99,000 in full. We, however, make it clear that the deduction

of the incremental liability will be to the extent of the incremental liability that had accrued in the previous year relevant to this assessment year. The

question referred to us are answered accordingly.