JUDGMENT

At the instance of the assessee, the Appellate Tribunal has stated a case and referred the following question of law for our opinion under section 256(1) of the Income Tax Act, 1961:"Whether the Tribunal was-right in law in holding that in view of the provisions of section 40A(7) of the Income Tax Act, 1961, the applicant is not entitled to the deduction of the sum of Rs.3,14,614 being the gratuity liability that has arisen under the provisions of the Payment of Gratuity Act, 1972?"The assessee is a registered firm and during the course of assessment proceedings for the assessment year 1975-76, the assessee had claimed deduction of the gratuity of a sum of Rs .3,14,614 which included actual payment as well as the provision made towards the gratuity. The Income Tax Officer in the order of assessment passed for the assessment year 1975-76 allowed the deduction for the gratuity actually paid but disallowed the sum of Rs.2,98,433 as it was not an actual payment to the employee, but it was ...