1. These questions are referred to us for opinion in this reference, two at the instance of the Commissioner and one at the instance of the assessee. The third question which has been referred to us at the instance of the assessee has not been presed by Mr. Kaji, learned advocate appearing on behalf of the assessee, and it is, therefore, not necessary to state any facts relating to the same. So far as the other two questions are concerned, the answers to them are concluded by two decisions given by this court, one in Commissioner of Wealth-tax v. Raipur Manufacturing Co. Ltd. and the other in Wealth-tax Reference No. 3 of 1961, Commissioner of Wealth-tax v. Ajit Mills Ltd., the latter being an unreported decision given on 18th October, 1962. However, in order to understand how the questions arise, it is necessary to state briefly a few facts. The assessee is a limited company carrying on business of manufacturing textile goods and it is common ground between the parties that the accounts of the business are maintained regularly by the assessee. The assessee was assessed to wealth-tax for the assessment year 1957-58, the relevant valuation date being 31st March, 1957, and the assessment was made by the Wealth-tax Officer under section 7(2)(a) of the Wealth-tax Act. The method adopted was what is commonly known as the global method of valuation and what the Wealth-tax Officer did was to determine the net value of the assets of the business as a whole having regard to the balance-sheet of the business as on the valuation date, namely, 31st March, 1957. One of the items in dispute relates to the valuation of the fixed assets and it is, therefore, necessary to know how the fixed assets were shown in the balance-sheet and what was the claim in regard to valuation made on behalf of the assessee. On the fixed assets the revenue allowed normal depreciation, initial depreciation and extra-shift allowance in computing the assessable income of the assessee for the purpose of income-tax. Development rebate was also allowed but it is not necessary to refer to the same since no claim for deduction of the amount allowed by way of development rebate in ascertaining the net value of the fixed assets was made by the assessee. Though the revenue allowed normal depreciation, initial depreciation and extra-shift allowance to the assessee at the rates permissible under the Income-tax Act, the assessee did not depreciate the value of its fixed assets correspondingly in its books of account, but provided depreciation on a different basis and showed the value of the fixed assets after taking into account such depreciation. The result was that, on the valuation date, the written down value of the fixed assets, after taking into account normal depreciation, initial depreciation and extra-shift allowance allowed for the purpose of income-tax assessment, was Rs. 9,92,192, but in the books of account of the assessee the fixed assets were valued at Rs. 23,21,726 and the balance-sheet as at 31st March, 1957, also therefore showed the fixed assets at Rs. 23,21,726. The assessee returned its total wealth on the basis of the fixed assets being valued at Rs. 9,92,192 and the contention of the assessee was that though the balance-sheet showed the fixed assets at the value of Rs. 23,21,726, that figure was liable to be adjusted and brought in line with the written down value of the fixed assets according to the income-tax records. The contention was rejected by the Wealth-tax Officer who took the view that, for the purpose of computing the total wealth of the assessee under section 7(2)(a), the value of the fixed assets was liable to be taken as Rs. 23,21,726, being the figure appearing in the balance-sheet of the assessee. The assessee also claimed deduction of an amount of Rs. 4,11,570, being the estimated value of the liability for gratuity payable by the assessee to its clerks, technicians and workers on the basis of two agreements dated 22nd June, 1949, and 2nd July, 1952, and the award of the Industrial Tribunal dated 16th September, 1957. This deduction was also disallowed by the Wealth-tax Officer on the ground that the provision for gratuity was not made in the books of account of the assessee and, moreover, the major portion of the provision was relating to gratuity payable to the employees in the event of certain contingencies and the amount claimed could not, therefore, be regarded as a debt owing by the assessee on the valuation date. The assessee thereupon carried the matter in appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner also took the view that the depreciated value of the fixed assets as shown in the balance-sheet of the assessee was the right value to be taken into account for the purpose of computation of the total wealth of the assessee and, so far as the claim for deduction in respect of the amount by way of gratuity was concerned, the Appellate Assistant Commissioner held that until such time as the amount payable to an employee by way of gratuity was determined and an intimation was sent to that person, no debt would come into being and it could not, therefore, be said that on the valuation date any debt with regard to gratuity was owing by the assessee to the employees. The Appellate Assistant Commissioner accordingly rejected both the contentions of the assessee. The matter was carried further by way of appeal to the Tribunal. The Tribunal held that the value of the fixed assets of the business should be taken to be the cost of the fixed assets less normal depreciation and extra-shift allowance allowed by the income-tax authorities and accordingly decided this question partly in favour of the assessee. In regard to the claim for deduction of the amount in respect of gratuity, the Tribunal took the view that, since the agreements dated 22nd June, 1949, and 2nd July, 1932, were made prior to the valuation date, there was accrued liability of the assessee in respect of gratuity on the valuation date and the assessee was entitled to treat the liability accrued under the two agreements as the liability of the business on the valuation date. The Tribunal observed that the liability created by the award dated 16th September, 1957, could not be taken into consideration in ascertaining the net wealth of the assessee on the valuation date since the award came into existence subsequent to the valuation date. Taking this view in regard to the two contentions which were urged before it, the Tribunal directed the assessment of the assessee to modified on the lines indicated by it. We are told by the assessee that, pursuant to this order of the Tribunal, the Income-tax Officer carried out the necessary modifications in the assessment of the assessee. The Commissioner was obviously dissatisfied with the view taken by the Tribunal on these two questions and he accordingly made an application for a reference and on that application the following two questions were referred to this court for its opinion :

"(1) Whether, on the facts and circumstances of the case, in ascertaining the net value of the depreciable assets of the assessee-company, adjustments could be made in accordance with section 7(2) in the balance-sheet by substituting the written down value computed under the Indian Income-tax Act for the value of the block assets as shown in the balance-sheet ?

(2) Whether the sum of Rs. 77,820, being the accrued liability to gratuity estimated by the assessee in terms of the two agreements, is a proper deduction in ascertaining the net wealth for the assessment year 1957-58 ?"

2. As we have pointed out earlier, a third question was also referred to us at the instance of the assessee; but that question does not survive for consideration in view of the statement made by Mr. Kaji on behalf of the assessee that he does not press that question.

3. Now, so far as the first question is concerned, it stands concluded by the decision given by this court in Commissioner of Wealth-tax v. Raipur Manufacturing Co. Ltd. The point which arose for decision in that case was identical with the one which forms the subject-matter of the first question. The assessee in that case had shown the value of its fixed assets in the balance-sheet at a figure which was higher than the written down value of these assets according to the income-tax records and the assessee, therefore, claimed in its assessment to wealth-tax that the value of the assets as shown in the balance-sheet should be adjusted with reference to the written down value of the assets as per income-tax records and the written down value of the assets as per income-tax records should be taken into account in computing the net wealth of the assessee. A Division Bench of this court consisting of K. T. Desai C.J., as he then was, and myself took the view that, when a Wealth-tax Officer makes an assessment under section 7(2)(a), he was to determine the net value of the assets of the business as a whole having regard to the balance-sheet of the business, but, in doing so, he was power to make such adjustments in the valuation given in the balance-sheet as the circumstances of the case may require. We held that the Wealth-tax Officer, therefore, has certainly power to make adjustments in the valuation of the fixed assets appearing in the balance-sheet of the assessee but that can be done by the Wealth-tax Officer only if the circumstances of the case require it to be done. Applying this principle, it is clear that in the present case the value of the fixed assets as shown in the balance-sheet of the assessee was not necessarily liable to be adjusted with reference to the written down value of those assets as per the income-tax records but the Wealth-tax Officer had power to make such adjustment if it was shown by the assessee that circumstances existed which required the making of such adjustment. We, however, do not find any evidence to show that the value of the fixed assets as shown in the balance-sheet was not the true value of those assets or that circumstances existed which required any adjustment to be made in the valuation as shown in the balance-sheet. It is, therefore, clear that, on the facts and in the circumstances of the case, the value of the depreciable assets as shown in the balance-sheet of the assessee was not liable to be adjusted with reference to the written down value of such assets as per the income-tax records. Mr. Kaji, however, contended that the Tribunal was in error in taking the value of the fixed assets of the assessee as Rs. 23,21,726 for there was a note in the balance-sheet that there was depreciation to the extent of Rs. 1,91,805 which had not been taken into account in arriving at the figure of Rs. 23,21,726 appearing on the assets side of the balance-sheet. The argument was that, even according to the balance-sheet of the assessee, the value of the fixed assets was not Rs. 23,21,726 but, reading the balance-sheet as a whole, it was Rs. 23,21,726 less Rs. 1,91,805. Whatever be the force of this contention, we do not think we can permit Mr. Kaji to raise it before us since it is not covered by the question which has been referred to us for our opinion. As a matter of fact this contention was not raised before the revenue authorities and before the Tribunal and it cannot be said to arise out of the order of the Tribunal. The only contest before the revenue authorities and before the Tribunal was whether the valuation of Rs. 23,21,726 appearing on the assets side of the balance-sheet should be taken as the valuation for the purpose of computing the net wealth of the assessee or whether it should be substituted by the written down value of the assets computed for the purpose of the income-tax assessment of the assessee and it is this contest which is embodied in the question referred to us by the Tribunal. It was not contended before the Tribunal that even if the balance-sheet be taken as the basis and no adjustment be made in the figures appearing in the balance-sheet, the value of the fixed assets appearing from the balance-sheet read as a whole was not Rs. 23,21,726 but was less than that figure by Rs. 1,91,805. Our answer to the first question must, therefore, be in the negative.

4. That takes us to the second question and that relates to the amount claimed by the assessee in respect of gratuity payable by the assessee to the clerks and the technicians in the employment of the assessee. The amount claimed in respect of gratuity payable to the workers under the award dated 16th September, 1957, having been disallowed by the Tribunal, no question arises in regard to it. he only question which survives now is in regard to the amount relating to gratuity payable by the assessee to the clerks under the agreement dated 22nd June, 1949, and to the technicians under the agreement dated 2nd July, 1952. The assessee estimated the liability for payment of gratuity to the clerks and technicians as on the valuation date at Rs. 66,000 and Rs. 11,820 respectively and the total claim for deduction on this account, therefore, amounted to Rs. 77,820, which is the amount referred to in the second question. Now it is clear that the amount claimed by the assessee by way of deduction in respect of gratuity payable to the clerks and technicians under these two agreements could not be said to be a debt owing by the assessee on the valuation date but was payable only on fulfilment of contingencies set out in those agreements. The Wealth-tax Officer and the Appellate Assistant Commissioner were, therefore, certainly right in taking the view that the amount claimed by the assessee did not constitute a debt owing by the assessee on the valuation date. But that would not conclude the matter against the assessee. As we have pointed out in Commissioner of Wealth-tax v. Ajit Mills Ltd., even a contingent liability can be taken into account while computing the net wealth of the assessee under section 7(2)(a). The contingent liability would have to be estimated and the estimated value of the contingent liability would be a permissible deduction in computing the net wealth of the assessee. The Wealth-tax Officer and the Appellate Assistant Commissioner overlooked this aspect of the question and did not, therefore, have any occasion to examine whether the estimate of the liability for payment of gratuity as on the valuation date made by the assessee was correct or not. When the matter came before the Tribunal, the Tribunal took the view and we will here quote its own words :

"...... We think that the assessee is entitled to treat the liability created under the first awards as the liability of the business as on the valuation date. Any liability created by the award dated 16th September, 1957, however, cannot be taken into consideration in ascertaining the net wealth as on 31st March, 1957."

5. The Tribunal proceeded on the basis that an accrued liability for payment of gratuity existed on the valuation date under the two agreements dated 22nd June, 1949, and 2nd July, 1952, and that such liability should be taken into account as a liability of the business on the valuation date. The Tribunal laid down this principle and directed the assessment of the assessee to be modified in accordance with this principle. Now there can be no doubt that the principle laid down by the Tribunal was not a correct principle. There was in fact no accrued liability under the two agreements on the valuation date and the liability which existed on the valuation date under the two agreements was a contingent liability under the two agreements on the valuation date and the liability which existed on the valuation date under the two agreements was a contingent liability as pointed out by us in our judgment in Commissioner of Wealth-tax Officer v. Ajit Mills Ltd., where one of the agreements which came up for consideration was the same agreement, namely, the agreement dated 22nd June, 1949. The amount which was deductible was, therefore, the estimated value of the contingent liability under the two agreements as on the valuation date. The assessee claimed that the estimated value was Rs. 77,820 but this estimated value was not accepted by the Tribunal as is clear from the fact that the Tribunal directed the assessment of the assessee to be modified in accordance with the principle laid down by it and did not itself grant relief to the assessee on the basis that Rs. 77,820 was deductible in computing the net wealth of the assessee. It is equally true that the Tribunal did not reject the estimated value of the contingent liability claimed by the assessee, since if the Tribunal had rejected it, there would have been no question of directing modification of the assessment of the assessee in accordance with the principle laid down by the Tribunal. All that the Tribunal did was to lay down what it thought was the correct principle and since the revenue authorities had not examined the question in the light of that principle, the Tribunal directed the revenue authorities to modify the assessment of the assessee by applying that principle which should have been laid down by the Tribunal was that the estimated value of the contingent liability of the assessee to pay gratuity to the clerks and technicians under the two agreements dated 22nd June, 1949, and 2nd July, 1952, as on the valuation date should be deducted in computing the net wealth of the assessee. The learned Advocate-General appearing on behalf of the revenue contended, relying on the decision in Commissioner of Wealth-tax v. Ajit Mills Ltd., that since no provision was made in the balance-sheet in regard to the contingent liability for payment of gratuity and there was nothing to show that any adjustment was required to be made in the balance-sheet by deducting the estimated value of the contingent liability, we should hold that the amount claimed by the assessee was not liable to be deducted in determining the net wealth of the assessee. But it must be remembered that in that case it was admitted by the assessee that it was not possible to put any value on the contingent liability in regard to payment of gratuity and it was in the context of that statement that we took the view that, on the facts and circumstances of that case, the assessee was not entitled to deduction of the amount claimed. In the present case however, such is not the position and what we must, therefore, do is to lay down the correct principle in substitution of the wrong principle laid down by the Tribunal and to leave it to the Tribunal to give effect to it. The question as framed by the Tribunal does not bring out the real controversy between the parties and it is, therefore, necessary to reframe the question. We will reframe the question in the following terms :

"Whether the liability in respect of gratuity under the two agreements dated 22nd June, 1949, and 2nd July, 1952, is an allowable deduction in computing the net wealth of the assessee under section 7(2)(a) of the Wealth-tax Act ?"

6. The question will be answered in accordance with our judgment. Each party will bear and pay its own costs of the reference.