Deduction for gratuity provision allowed where section 40A(7)(b) conditions were satisfied and payment requirements were met.

A provision for gratuity is deductible only when the statutory conditions in section 40A(7)(b) of the Income-tax Act are satisfied. The text states that the assessee's claim was examined on the basis that the gratuity fund had been recognised retrospectively and that the required amounts had been paid to the trustees within the time and in the manner shown by the record. On that footing, compliance with section 40A(7)(b) was found and the deduction was held allowable to the assessee. The reference was answered only on the first question in the assessee's favour, and the second question was left unanswered.

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Issues: Whether the assessee was entitled to deduction of the provision made for gratuity under section 40A(7)(b) of the Income-tax Act, 1961.

Analysis: The assessee's claim was examined on the footing that the gratuity fund had been recognised retrospectively and that the amounts required to be paid to the trustees had been paid in the manner and within the time indicated by the record. The only question considered was whether the conditions prescribed by section 40A(7)(b) stood satisfied so as to permit deduction of the provision for gratuity.

Conclusion: The conditions under section 40A(7)(b) were held to have been complied with, and the deduction was held allowable in favour of the assessee.

Final Conclusion: The reference was answered only on the first question in favour of the assessee, while the second question was left unanswered.

Ratio Decidendi: A provision for gratuity is deductible where the statutory conditions governing such allowance are satisfied.

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