Sethuraman, J.:— These two revision petitions have been filed under s. 54(1) of the Tamil Nadu Agrl. I.T Act, 1955, to revise the orders of the Agricultural Income-tax Appellate Tribunal, Madras, dated 22nd March, 1975, and 1st July, 1976, respectively for the assessment years 1973-74 and 1974-75. The assessee is a public limited company owning an estate measuring 1,028.65 acres in Sheveroy Hills. In the estate coffee is grown. For the assessment year 1973-74, the assessee filed a return of loss of Rs. 52,289. The assessing authority found some inadmissible deductions having been claimed and after adjusting them the loss disappeared and an income of Rs. 32,828 was assessed to tax. In computing the income, the Agrl. ITO had not allowed deduction of Rs. 1,60,233 representing the estimated claim for gratuity. The assessee, in fact, did not make the claim for a deduction of the sum of Rs. 1,60,233 at the time of the filing of the return, nor had it debited the said amount in the profit and loss account or in the profit and loss appropriation account. In the balance-sheet for the year ending on 30th June, 1973, the staff pension and gratuity reserve stood at Rs. 7,125 both at the beginning and at the end of the year. The claim for the deduction of Rs. 1,60,233 came to be made for the first time by a letter addressed to the Agrl. ITO on 15th January, 1974. Along with the letter, a revised return was filed, and as regards the claim for gratuity, the assessee's case was that it had become a statutory liability under the Payment of Gratuity Act, 1972, which came into force on 16th September, 1972, which fell during the previous year ending on 31st March, 1973. The Agrl. ITO did not allow this claim observing that the gratuity would be allowed as a deduction as and when payment was made. On appeal, the Asst. Commr. of Agrl. I.T confirmed the order of the assessing authority. The assessee took the matter on further appeal to the Tribunal, and the Tribunal, after elaborately considering the matter, came to the conclusion that neither the assessee's method of accounting nor its claim that there was a liability during the year were established and that, therefore, the claim was rightly rejected by the Agrl. ITO and the Asst. Commr. of Agrl. I. T.

2. For the assessment year 1974-75, the facts are more or less similar. The assessee claimed Rs. 11,368 as provision for gratuity liable to be allowed as deduction. The assessing authority as well as the Asst. Commr. of Agrl. I.T rejected: this claim. The Tribunal, following its earlier order, sustained the disallowance as made by the Agrl. ITO and sustained on appeal. The only further point that requires to be noticed as far as these revisions are concerned is that there is a provision for gratuity amounting to Rs. 1,50,875 in the balance-sheet as on 30th June, 1974. It may be mentioned that the company closes its books on 30th June, but for agricultural income-tax purposes has adopted the financial year ending on 31st March, as the previous year. The sum of Rs. 1,50,875 came to be credited substantially by a transfer from the general reserve to the extent of Rs. 1,49,033. It is not in dispute that this allocation was made after the two previous years under consideration.

3. On behalf of the petitioner (assessee) the submission vehemently made by Mr. Rebello was that the respective amounts were liable to be allowed as deductions under s. 5(e) of the Tamil Nadu Agrl. I.T Act, 1955. Section 5(e) of the Act runs as follows:

“5. The agricultural income of a person shall be computed after making the following deduction, namely: —…

(e) any expenditure incurred in the previous year (not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of the land.”

4. The point to be considered is whether there was any expenditure in the previous year and whether such expenditure was laid out or expended wholly and exclusively for the purpose of the land. We have already pointed out that there was no debit to the profit and loss account in the year ended 30th June, 1973, except with reference to the sum of Rs. 6,707, which finds a place in the working and the profit and loss account for that year. In the printed account for the year ended 30th June, 1974, a sum of Rs. 12,339 has been debited to the working and the profit and loss account and the note of the auditors, as far as the liability to gratuity is concerned, runs as follows:

“The accrued liability in respect of gratuity to employees up to 30-6-73 has been provided out of general reserve. The additional gratuity liability accrued during the year has been charged to the profit and loss account.”

5. The assessee's counsel contended that the accounts had been maintained only under the mercantile system of accounting and that under such a system of accounting, the liability in present, but payable in future, is liable to be allowed as deduction. It is in this context that we have to look into the findings of the Tribunal as regards the method of accounting employed by the assessee. In para. 6 of its order for the assessment year 1973-74, the Tribunal has stated as follows:

“Besides, gratuity can be dealt with in two ways, even as mentioned earlier either by debit in the year in which the death or retirement occurs or by actuarial valuation. The appellant has been following the first method.”

6. In para. 7 the finding is in the following words:

“In the appellant's case, besides the fact that provision had not been made in the year, even the provision made in the subsequent year, is not on any actuarial basis. No discount has also been made for the present value of a future payment.”

7. At the end of its order for the first year, the Tribunal pointed out as follows:

“Needless to add that the appellant itself had not made a provision as repeatedly mentioned. Even the provision made in the subsequent year is not on any actuarial or other scientific basis. Under the circumstances, there is hardly any case for us to remit the matter back as requested by the learned counsel for ascertaining the alleged liability for gratuity on actuarial basis and allowing the same in the year under consideration. We would, however, like to repeat that the view expressed in this paragraph as to the admissibility of provision for gratuity is not the basis for our decision is based upon our conclusions, in the immediately preceding paragraphs, that neither the appellant's method of accounting nor its claim that there was a liability afresh during the year are established. The appellant was bound to lose its case in either event.”

8. In the order for the next year, the Tribunal observed as follows:

“As the matter stands we have to follow our earlier decision and hold that the appellant is not entitled to change the method of accounting. In this view, the fact that the appellant had made a provision for this year does not make any difference. At any rate, as pointed out by the learned State representative, this provision is not shown to have been made on any actuarial or other scientific basis. Even on this ground the appellant stands to lose. Besides, as pointed out by us in the preceding year, the mercantile system does not rule out the payment of gratuity being debited in the year in which the payment became finally due. In any view of the matter, the appellant's claim cannot be allowed.”

9. We shall first clear up one error in the order of the Tribunal for the assessment year 1974-75. The Tribunal apparently proceeds on the view that the accounting system once adopted by the assessee cannot be changed by the assessee. The accounting system of the assessee is mercantile. The assessee may be in a position to change the method of accounting provided such a change does not distort the liability to assessment in one year or the other. In other words, the change in the method of accounting should not be with a view to gain advantage to support a claim for deduction of some expenditure, which otherwise would not be allowable as deduction or to avoid the taxation of any receipt, which would otherwise be taxable. The assessee cannot also change the method of accounting so as to get a double advantage by way of getting deduction for an expenditure already deducted. A change which is otherwise bona fide cannot be rejected out of consideration.

10. In the present case, what we find from the accounts themselves is that the assessee, while being conscious of the liability which arose as a result of the Payment of Gratuity Act having been passed by Parliament, did not want to make a provision therefor. In the accounts for the year ended 30th June, 1973, there is a note, which runs as follows;

“The future liability in respect of gratuity payable to estate workers and employees as per the Payment of Gratuity Act, 1972, as at 30-6-73 amounts to Rs. 1,50,483. As the practice of the company is to pay gratuity to workers and employees as and when such claims arise, no provision has been made in the accounts.”

11. Thus, this note by the assessee itself shows that consistently with the method of accounting employed by it, the amount could not have been claimed as deduction in the first of the two years under consideration. There is no change in the method of accounting. The method of accounting is different from the method of making, up the statutory return s [See CIT v. Sarangpur Cotton Mfg. Co., [1938] 6 ITR 36 (PC)]. The change in this case is not in the method of accounting, but in making up the return.

12. In the second year, of course, there is a provision for gratuity made in the accounts by debiting the reserve and crediting the provision account, but that was done after the years under review. The question is whether this manner of accounting would justify the assessee in claiming the amount as a deduction.

13. The Supreme Court in Kedarnath Jute Mfg. Co. Ltd. v. CIT, [1971] 82 ITR 363 explained that if the method of accounting is the mercantile system, then the deduction is permissible in the year to which the liability relates irrespective of the point of time when the liability has actually been discharged. In that case, the question was whether the sales tax liability could be allowed as deduction under s. 10(2)(xv) of the I.T Act, 1922, for the assessment year 1955-56. The Supreme Court pointed out that it was indisputable that the amount of sales tax paid or payable by the assessee was an “expenditure” within the meaning of s. 10(2)(xv). In that case one of the contentions urged on behalf of the revenue was that the assessee had not made any entry in its books. It was held that the question whether the assessee was entitled to a particular deduction or not would depend on the provision of law relating thereto, and not on the view which the assessee might take of his rights, nor could the existence or absence of entries in the books of account be decisive or conclusive in the matter. Where the nature of the liability is such that it is certain and it is merely a matter of calculation, there could be no difficulty in allowing the deduction irrespective of the absence of any entry in the books. Just as an entry in the account books made for the benefit of the assessee would not justify the allowance of a deduction, similarly the absence of an entry cannot stand in the way of arriving properly at the statutory income. This decision cannot help the assessee in the present case because the assessee has not established that there was any actuarial liability to the extent of the claim made in the present case. The amount claimed was only on the basis of guess-work for which there was no basis made out.

14. The other decision brought to our notice may now be briefly noticed. In Madho Mahesh Sugar Mills (P.) Ltd. v. Commissioner Of Income-Tax., [1973] 92 ITR 503, the Allahabad High Court dealt with the claim of an assessee in respect of a liability imposed on persons running sugar mills to provide gratuity to their workmen in accordance with the scale provided in a notification. In pursuance of the notification, the assessee set apart the sum of Rs. 1,37,811 and claimed it as deduction. During the pendency of the matter before the High Court, an actuarial calculation of the liability was made and this calculation came to Rs. 1,05,200. The High Court held that the liability to the extent of Rs. 1,05,200 was a permissible business expenditure in the assessment year concerned. The point to be noticed about this decision is that the assessee had actually debited in its accounts a sum of Rs. 1,37,811 on the basis of the notification and was allowed only the actuarial liability. In the present case, as seen from the printed accounts of the assessee, the assessee itself conceived that the amount need not be provided as a liability and that on the basis of the accounting method employed by the assessee, the amount could be debited in the accounts as and when payments were made. The amount provided has not also been actuarially arrived at. Therefore, this-decision cannot also be of assistance to the assessee.

15. The decision in Tata Iron & Steel Co. Ltd. v. D.V Bapat, ITO, [1975] 101 ITR 292 (Bom) was relied on. In that case the company kept its accounts on the mercantile system and for the assessment year 1972-73 it claimed deduction of a certain sum on the footing that the said amount represented its gratuity liability on an actuarial valuation. This contention was accepted by the ITO, on the basis of a circular of the Board. But, subsequently, in the light of another circular issued by the CBDT, the ITO proposed to reopen the assessment and at that stage the matter was brought before the High Court. The High Court held that the estimated liability as calculated actuarially could be allowed as deduction and has discussed several Supreme Court's decisions on this point. The point to be noticed about this decision is that there was an actuarial ascertainment of the liability and it was not a mere provision on the basis of what the assessee conceived to be its liability without any objective basis as in the present case. That was a case where the amount had also been debited in the profit and loss account and a proper reserve created for this purpose. There is no such reserve in the present case.

16. The Kerala High Court in Commissioner Of Income-Tax, Kerala v. Kerala Nut Food Co., [1978] 111 ITR 252 dealt with the case of an assessee which maintained its accounts on the mercantile system. It debited Rs. 56,173 to its profit and loss account and credited the same to the gratuity and retrenchment compensation payable account in respect of the accounting year ending on December 31, 1970. The assessee claimed to deduct a sum of Rs. 12 lakhs as arrears of gratuity for the earlier years. The Appellate Tribunal upheld the assessee's claim of the actual debit to the profit and loss account and also the said sum of Rs. 12 lakhs. On a reference, the High Court held that the deductions were permissible in respect of the liability for gratuity arising during the relevant accounting year and that a liability that had accrued in an earlier year could not be taken into account for computing the income of subsequent years. In this judgment, the earlier decisions of the same court in CIT v. High Land Produce Co. Ltd., [1976] 102 ITR 803 and L.J Patel & Company v. Commissioner Of Income-Tax, Kerala., [1974] 97 ITR 152 (Ker) were noticed and it is not, therefore, necessary for us to consider those decisions for our present purpose. The principle that was applied by the High Court was that only the liability towards gratuity which arose during the relevant accounting year could be allowed as deduction. It was pointed out, after referring to the decision in CIT v. High Land Produce Co. Ltd., [1976] 102 ITR 803 (Ker), that the deductions were permissible in respect of the liability for gratuity arising during the relevant accounting year and that such a liability should be valued for a particular accounting year by ascertaining the present value of the contingent liability, i.e, on actuarial principles. Thus, the Kerala High Court held that the amount could not be allowed as deduction. This decision supports the Government's stand here. The Allahabad High Court in Swadeshi Cotton Mills Co. Ltd. v. ITO, [1978] 112 ITR 1038 considered the case of an assessee which debited its accounts on actuarial valuation. It was pointed out that the ITO was bound by the decision of the High Court rendered in Madho Mahesh Sugar Mills (P.) Ltd. v. Commissioner Of Income-Tax., [1973] 92 ITR 503 (All). The case of Swadeshi Cotton Mills Co. Ltd., [1978] 112 ITR 1038 (All) has not further gone into the matter apart from reiterating what was pointed out in the earlier decision in Madho Mahesh Sugar Mills (P.) Ltd. v. Commissioner Of Income-Tax., [1973] 92 ITR 503 (All).

17. One point to be noticed with reference to the decision in Swadeshi Cotton Mills Co. Ltd. v. ITO, [1978] 112 ITR 1038 (All) is that though the liability was actually ascertained, the assessee had not made any provision for the amount in its books. The Allahabad High Court held that the absence of an entry in the account books would not matter.

18. We are unable to agree with this part of the decision. In a case like this, where the amount is claimed with reference to an earlier period, one view is that which commended itself to the Kerala High Court, viz., that the liability referable to the particular year alone can be allowed as deduction. The other view is that the liability having been imposed under a particular, statute, which came to be passed in a particular year, the assessee should be in a position to claim the amount in respect of the earlier period of the service of the employees to whom the gratuity would have to be paid. In such a case if a reserve is created to cover the earlier liability which was imposed by the statute, suddenly as it were, then to the extent of the reserve so created, on the basis of an actuarial valuation, there could be a claim for deduction by the assessee. The assessee would be faced with a liability to meet for which it would have no funds. In such a case, an initial setting apart of the liability is possible and year after year the additional liability estimated actuarially could be added to the reserve and claimed as deduction. So far as the actual payments are concerned, they would not arise for consideration, as the actuarial liability is liable to be allowed year after year. The assessee cannot claim both the liability and the actual payment as acceptance of such a claim would involve double deduction. The ITO would be in a position to find out as to whether the assessee is making a double claim only in a case where the assessee maintains a reserve account and makes periodical additions to it and makes subtractions from it in accordance with the actual payment made out of it. Unless there is some kind of actuarial estimate made by the assessee coupled with a transfer to the reserve account, it would not be possible to examine the claim. Allowance of a claim oh the basis of a mere guess-work is against all canons of taxation for arriving at the real or proper income for taxation. The liability is, in essence, a contingent liability. But the actuarial calculation takes out a good portion of the contingency aspect by the present valuation of the future payment worked out on scientific basis. It is in that sense that the liability, without the money going out, would have to be allowed as a deduction. Though there are decisions which take the view that only the amount which goes out could be allowed as deduction, there are other decisions based on the basis of the system of accounting employed, which have taken the view that even a liability in respect of a future payment is allowable as a deduction, if scientifically estimated, and such amount would have to be appropriately shown in the accounts so as to permit scrutiny whether there is any duplication of the claim. It is in this sense it is found that the assessee, without creating any such reserve of such actuarial calculation, cannot be granted the deduction. The assessee's claim for the two assessment years would thus have to fail. The assessee would be eligible for deduction of the actual payment made during these years. We may also add that even in a mercantile system of accounting it is not axiomatic that an actuarial liability alone, duly accounted by the creation of a reserve or otherwise, is capable of deduction. Even in this system any assessee may claim the actual amounts paid.

19. The learned counsel for the assessee wanted an opportunity to make an actuarial valuation and for this purpose he wanted the matter to be sent back to the Appellate Tribunal. It is not possible to accept this contention. Nothing prevented the assessee from making an actuarial estimate in time. In the absence of a proper explanation why this could not be done, we do not consider that this is a fit case in which the remand can be made. The learned counsel for the assessee prays for leave to appeal to the Supreme Court in accordance with the provisions of art. 134A of the Constitution. We are not satisfied that this is a fit case for the grant of leave, as the decision rejecting the assessee's claim is based on the facts here. The discussion of the cases cited brings out how the claim is not admissible even on the basis of principles enunciated in decisions cited before us, because of the absence of an actuarial estimate and the creation of an account for this purpose.

20. The tax case revisions are dismissed with costs. Counsel's fee Rs. 250 one set. Leave to appeal to the Supreme Court is also refused.