849/CBDT.

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.... approved gratuity funds that have become payable during the previous year or for the purpose of making any payment on account of gratuity to employees where such provisions will continue to be eligible for deduction as hitherto. 2.With a view to mitigating hardship in cases where provision has been made by the assessee in their accounts for the previous years relating to assessment years 1973-74 to 1975-76 on the basis of their understanding of the law and the clarification given by the Board in Circular No. 47 dated 21-9-70, the new section 40A(7) has made a saving provision. Under this provision the prohibition regarding allowance of provision for gratuity will not apply in relation to such amount of the provision as does not exceed a....

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....ed by the actual payment made before the date of creation of the approved gratuity fund. 3. For the removal of doubts, it has been specifically provided that where any provision made by the assessee in his accounts for payment of gratuity to his employees has been allowed as deduction in any previous year, any sum paid out of such provision by way of contribution to an approved gratuity fund or by way of gratuity to any employee will not be allowed as deduction in computing the income of the assessee in later previous year in which the sum is so paid. 4. It will be seen that the bar on allowance of provisions made for the payment of gratuity to employees will not apply for the assessment years 1973-74 to 1975-76 only if all the condit....