Judgment:
G.T. Nanavati, J.
1. The Income-tax appellate Tribunal, Ahmedabad, has referred the following question to this court under section 256(1) of the Income-tax Act, 1961 :
'Whether, on the facts and in the circumstances of the case, the assessee is entitled to the deduction of gratuity amount of Rs. 11,03,902 ?'
2. The assessee made a provision for gratuity of Rs. 11,09,788 as per the actuarial valuation during the previous year relevant to the assessment year 1973-74. The assessee's relevant accounting period ended on December 31, 1972. It made a claim for deduction of this amount. The Income-tax Officer rejected the same as he found that all the necessary conditions laid down by section 40A(7) were not till then fulfilled. He, however, observed in his order that deduction of the amount as per the Act and the Rules would be allowed under section 155(13) when all the necessary conditions are fulfilled. The assessee had created a gratuity fund and had applied for its approval before January 1, 1976. It appears that the approval was granted in 1977 and, therefore, again the Income-tax Officer was moved and an order under section 155(13) came to be passed on September 29, 1977. The Income-tax Officer this time found that the increased liability during the relevant year was approximately Rs. 5,60,000. He, therefore, granted relief to that extent and did not accept the claim of the assessee that the full amount of Rs. 11,09,788 was deductible. Therefore, the assessee preferred an appeal to the Appellate Assistant Commissioner. The appeal was allowed and the Tribunal also confirmed the view taken by the Appellate Assistant Commissioner. The Revenue, therefore, moved the Tribunal for referring the abovesaid question to this court.
3. What was submitted on behalf of the Revenue was that only Rs. 5,60,000 was really deductible and not the whole amount of Rs. 11,09,788. The Tribunal has, as a matter of fact, found that the assessee had made a provision for gratuity of Rs. 11,03,902 for the previous year because the liability arose in that year as a result of the coming into force of the Gratuity Act in the month of September, 1972. In view of this finding and in view of the fact that all the conditions prescribed by section 40A(7) were fulfilled, deduction of the full amount of Rs. 11,03,902 was required to be granted. I may be stated that before the Tribunal, a statement was made on behalf of the assessee that the correct figure regarding the provision for gratuity on the basis of actuarial valuation was Rs. 11,03,902 and not Rs. 11,09,788. We are of the view that the Tribunal rightly confirmed the view taken by the Appellate Assistant Commissioner and dismissed the appeal filed by the Revenue.
4. For the reasons stated above, the question is answered in the affirmative, that is, against the Revenue and in favour of the assessee. Reference is disposed of accordingly. No order as to costs.