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4. The said two circulars may now be fully set out :

"First Circular No. 47 (F.No. 9/100/69-IT(A-II), dated September 21, 1970. See A question has arisen whether the provision made by an assessee in its accounts on account of the estimated service gratuity payable to the employees can be allowed as a deduction, when no gratuity fund has been set up under Part C of the Fourth Schedule of the Income-tax Act, 1961.

The Board have decided that following the decision of the Supreme Court in the case of Metal Box Co. of India Ltd the provision of gratuity on a scientific basis (in the form of an actuarial valuation carried out every year) can be considered to represent a real liability of the employer to the employees. The Supreme Court in the case of Garment Cleaning Works (Civil Appeal No. 621 of 1960, dated 3-4-1961), decided that the employer would be required to pay gratuity even to an employee who has dismissed on account of misconduct. The Board have, therefore, come to the conclusion that the liability so ascertained cannot be considered as a contingent liability. Such provision of gratuity may be treated as an admissible deduction under section 37(1) of the Income-tax Act, 1961."

18. The learned Law Lord went on to observe (at page 748 of the report) :

"The position, therefore, was that the appellant's liability to pay a lump sum could only be avoided by some breach of contract or grave misconduct on the part of the employee concerned. It may be correct to call such a liability contingent, but I must say the contingency seems to me too remote to justify a prudent trader or, for that matter, a competent accountant, in ignoring the liability until the day for payment has arrived. Whether, if this appeal related to but one employee and one lump sum, the degree of the contingency would, nevertheless, be such as to preclude a present allowance in respect of the future liability is a question which in my opinion, does not call for decision on the facts of this case."

"These observation show that the court was of the view that though such a liability is a contingent liability and, therefore, not a 'debt' under section 2(m) of the Wealth-tax Act, it would be deductible under the Income-tax Act while computing the taxable profits. In the instant case, the question is not whether such estimated liability arising under the gratuity schemes amounts to a debt or not. The question that concerns us is whether, while working out the net profits, a trader can provide farmhouse gross receipts his liability to pay a certain sum for every additional year of service which he receives from his employees. This, in our view, he can do, if such liability is properly ascertainable and it is possible to arrive at a proper discounted present value. Even if the liability is a contingent liability, provided its discounted present value is ascertainable, it can be taken into account. Contingent liabilities decanted and valued as necessary can be taken into account as trading expenses if they are sufficiently certain to be capable of valuation and if profits cannot be properly estimated without taking them into account. Contingent rights, if capable of valuation, can similarly be taken into account as trading receipts where it is necessary to do so in order to do so order to ascertain the true profits : (see C. N. Beatti's Elements of the Law of Income and Capital Gains Taxation, 8th edition page 54)."

51. Even if the position had rested with the judgment of the Allahabad and Delhi High Courts, it is our opinion that this court would have, on the application of the principle of uniformity of construction, followed the law laid down in the above-quoted two decisions. As has been observed in a number of decision of this court, the latest of which is Commissioner of Income-tax v. Tata Sons Private Ltd. the established practice and policy is that one High Court must accept the view taken by another High Court in the interpretation of the section of a statute which is an all-India statute. It is, however, unnecessary to base our view of the position under the Indian Income-tax Act, 1922, merely on the view taken by the Allahabad and Delhi High Courts inasmuch as in India United Mills Ltd. v. Commissioner of Income-tax a similar view appears to have been taken by a Division Bench of this court also. In that case the facts were as follows : By an award given under the Bombay Industrial Relations Act, 1946, the Industrial Court had directed payment of gratuity to workmen of the assessee-company in accordance with the scale provided therein, the amount of gratuity being dependent on the wages at that time and the number of years of service put in by the workmen. In order to implement this award the assessee-company provided or set apart during the year 1951, an amount of Rs. 21,77,359 for a gratuity fund made up of Rs. 19,11,658 on account of initial contribution and Rs. 2,65,701 on account of annual contributions for the year 1951. It may be noted, however, that the assessee-company subsequently created a trust by executing a deed on February 20, 1952, to hold the funds contributed to the gratuity fund and made payments to the trustees of the fund of Rs. 20,00,000 on February 28, 1952, and Rs. 1,50,466 on March 4, 1952. Gratuity rules had been framed and in these rules there was a specific provision that certain categories of employees who has been dismissed for dishonesty or misconduct were not to be entitled to claim gratuity and any amounts contributed by the company on their account were to stand transferred to "Lapse and Forfeiture Suspense Account". The assessee-company claimed deduction of the amounts contributed to the gratuity fund while determining its profits for the assessment years 1952-53 and 1953-54. The Income-tax Officer allowed as a deduction only the amount that had been actually paid to the persons who had retired in that year. On second appeal, the Appellate Tribunal rejected the assessee-company's claim on the ground that the said expenditure was of a capital nature. The Tribunal further held that though the assessee-company was following the mercantile system of accounting, that method only permitted a deduction on account of liabilities which were actual and present during the current year and which could be ascertained with a fair degree of precision and in the instant case the liability was not present and actual and that it was not possible to ascertain it with a fair degree of precision. According to the Tribunal, it was in the nature of a contingent liability and, therefore, the deduction claimed could not be allowed. On a reference to the High Court, after citing Madho Mahesh Sugar Mill's case and referring to the decision of the Supreme Court in Metal Box Company's case it was held the the liability for payment of such gratuity ascertained by actuarial calculations, in which all contingencies are taken into consideration, is a liability in present and capable of ascertainment and, therefore, the amount set apart was a permissible business expenditure in the assessment year concerned. Applying what was laid down in the above two decisions the High Court answered the question in favour of the assessee-company, observing that the setting apart of the two sums would have to be allowed as business expenditure provided it could be said that the amount claimed as a deduction had been arrived at by adopting a scientific method of determining the present value of the said Liability had been contended by the revenue before the High Court in India United Mill's case that in the case which was before the High Court for consideration the estimate of the liability had not been properly arrived at. According to the High Court, it was unnecessary to decide this particular issue in view of the creation of the trust inasmuch as the amount had been actually paid over by the assessee-company to the trustees and, therefore, this was a case of actual expenditure and not merely a provision on account of the liability. Mr. Joshi had urged before us that in India United Mill's case the facts disclosed an actual irretrievable parting of the amounts by the assessee-company, and he submitted that this was the basis why the question were answered in favour of the assessee-company. With respect to his sub-mission, it proceeds upon an erroneous appreciation of what that judgment discloses. This aspect of the matter assumed importance before the High Court only because of the limited contention raised by the revenue that the provision was not scientifically estimated. The High Court applied the observations of the Supreme Court in Metal Box Company's case and of the Allahabad High Court in Madho Mahesh Sugar Mill's case on the earlier aspect of the question viz., whether such liability was contingent or could be said to exist in present, and on this aspect of the question the fact that it had irretrievably parted with the amount was not of any relevance.