only ground in present appeal filed by assessee is that Commissioner (Appeals) erred in confirming decision of ITO that assessee was not eligible for deduction of entire initial contribution of Rs. 4,14,000 payable to trustees of approved gratuity fund created for benefit of employees. 2. In assessment proceedings, assessee claimed deduction for gratuity contribution of Rs. 4,85,000 consisting of initial contribution of Rs. 4,14,000 to gratuity fund created for purpose and annual contribution of Rs. 71,000. trust was recognised by Commissioner with effect from 1-7- 1977. Para 4(1) of Commissioner's letter to trustee of fund permitted them to make initial contribution to fund in five annual instalments commencing from year in which fund came into effect. ITO, therefore, allowed deduction only in respect of one-fifth of initial contribution amounting to Rs. 82,400 in addition to annual contribution of Rs. 71,000. claim for balance was rejected. 3. assessee appealed before Commissioner (Appeals). But having failed before him for reasons mentioned by Commissioner (Appeals) in his order, assessee is in appeal before Tribunal. 4. Reliance is placed on order of Tribunal in IT Appeal No. 2937 (Bom.) of 1979, dated 24-4-1981 and other appeals in case of ITO v. Hoechst Pharmaceuticals Ltd. [Since Reported in [1984] 7 ITD 267 (Bom.)] and vice versa. In that case Tribunal had held that where assessee had made provision for balance of contribution payable to approved gratuity fund, assessee was eligible for deduction on account of claim before arriving at taxable profits. assessee has also claimed deduction as admissible under section 36(1)(v) of Income-tax Act, 1961 ('the Act'). On behalf of revenue, reliance was placed on Calcutta High Court decision in case of Hindustan Aluminium Corpn. Ltd. v. CIT [1983] 144 ITR 474 wherein learned judges of Calcutta High Court had held that in view of provisions of section 40A(7) of Act where amount was claimed as gratuity payable to employees, but amount had not been transferred to fund and had not gone irretrievably out of coffers of assessee, such amount was not deductible. 5. We have carefully considered facts and circumstances of case and arguments on either side. undisputed facts are that assessee had set up trust in accounting period for payment of gratuity to its employees. initial amount payable to trust was Rs. 4,14,000. While recognising this trust with effect from 1-7-1977, Commissioner by his letter dated 18-8-1978 permitted assessee to pay initial contribution in five annual instalments commencing from year in which fund had come into effect. question is whether assessee was eligible for deduction of entire amount of initial contribution in determination of total income of assessee for year under consideration. 6. Under scheme of Act, where assessee claims any deduction for purpose of payment of gratuity to employees, if he has made actual payment to approved gratuity fund set up for purpose, he will be eligible for deduction under section 36(1)(v). If he does not make payment, but he merely makes provision for amount, then he has to satisfy conditions laid down under section 40A(7) before claiming deduction. Under terms of section 36(1)(v), assessee is eligible for deduction in respect of any sum paid by it as employer by way of contribution towards approved gratuity fund created by him for exclusive benefits of employees under irrevocable trust. We find that term 'paid' has been defined under section 43(2) of Act to mean actually paid or incurred according to method of accounting upon basis of which profits or gains are computed under head 'Profits and gains of business or profession'. assessee has not made actual payment to trustees of entire amount. Only one-fifth of amount has been actually paid. question is about balance, which is in dispute before us. It is for consideration whether assessee could be deemed to have paid as defined under section 43(2). In this connection, we find that some guidance is available from Delhi High Court decision in case of CIT v. Delhi Cloth and General Mills Co. Ltd. [1981] 127 ITR 11. learned judges of Delhi High Court were called upon to interpret provisions of section 10(4)(c) of Indian Income-tax Act, 1922. They were concerned with admissibility of amounts contributed to provident fund as allowable expenditure. ITO had rejected assessee's claim in that case on plea that no actual payment or transfer of amount was made and assessee- company had merely opened ledger account in name of provident fund and funds contributed by company were transferred to this account. According to ITO, this did not amount to actual payment and did not entitle assessee to deduction. Delhi High Court, however, held that under relevant trust deed assets of trust including contributions made to fund by members as well as company, accumulations or accretions to fund by way of interest or otherwise and any securities purchased with accumulations or accretions, vested in trustees of members. terms of trust deed, read with rules and regulations created liability against assessee-company in that case in respect of amounts which it had to contribute to fund every year. This liability created under terms of trust deed in context of fact that assessee- company was following mercantile system of accounting, amounted to payment or expenditure within meaning of section 10(2)(xv). In instant case also, there is trust deed, copy of which is placed before us, according to which, assessee is required to make payment to trust as per rules of trust agreed upon by assessee. liability has also been incurred. assessee is maintaining books of account on mercantile basis. Therefore, in our opinion, assessee's case is fully covered by Delhi High Court decision in case of Delhi Cloth & General Mills Co. Ltd. 7. Even assuming that assessee is not deemed to have paid amount to trust, assessee is eligible for deduction under section 40A(7)(b)(i). As stated earlier, assessee has set up gratuity fund by irrevocable trust. Irrespective of whether assessee has made actual provision or not, assessee is liable to make payment to fund. This liability amounted to provision as explained by Tribunal Special Bench in its decision dated 12-6-1981 in IT Appeal No. 1599 (Mad.) of 1977-78 in case of Soft Beverages (P.) Ltd. v. Second ITO [1982] 1 SOT 311 (Mad.). As learned members have proceeded to explain, in normal parlance provision denotes itself as something provided for. It is not uncommon that one usually asks another person whether he has made any provision for his daughter's marriage or for son's education, etc. Therefore, provision made does not refer to provision made in books of account. Normally, meaning of 'provision made' would cover for all liabilities which remain undischarged at close of previous year. Even expression 'accounts' is wider than expression 'books of account'. It is not correct to state that it is liability that gets deduction, it is expenditure which creates liability, that gets deducted. assessee had accrued liability for balance amount of initial contribution payable to fund. It has claimed amount in income-tax proceedings as provision has been made. Once provision is in respect of payment to approved fund, claim has to be allowed under section 40A(7)(b)(i). Thus, in our opinion, assessee is eligible for deduction under section 36(1)(v) proceeding on basis of our finding that assessee has made payment constructively as required under section 43(2). Even if it is held that assessee has not made payment as explained above, provision has been made as explained in Tribunal Special Bench decision in case of Soft Beverages (P.) Ltd. In circumstances, it has to be held to be admissible under section 40A(7)(b)(i). As to reliance on behalf of revenue on Calcutta High Court decision in case of Hindustan Aluminium Corpn. Ltd., in first place, it is not clear whether it was case where assessee had created approved gratuity fund. Further, case has not been examined under provisions of section 36(1)(v). Therefore, in our opinion, dictum laid down by Calcutta High Court has no application to facts of present case. 8. In result, appeal is allowed. *** LLYODS REGISTER OF SHIPPING v. INCOME TAX OFFICER