Ramanujam, J.

1. The following question of law has been referred to this court for its opinion, at the instinct of the Revenue :

" Whether, on the facts and in the circumstances of the case, the sum reprinting 'incremental liability' towards gratuity of the current year was deductible from the profit of the year ?"

2. The assessee, in this case, is a private limited company manufacturing and erecting transmission towers. For the accounting year ending on June 30, 1965, corresponding to the assessment year 1966-67, it claimed deduction of a sum of Rs. 1,09,575 as provision for gratuity for two of it full time directors by name Sri C. Valdettarao and Sri G. Abbagnane. The ITO did not allow the same on the ground that gratuity fund has not been recognised by the Commissioner of income-tax and that it was only a provision and not an actual payment. He also took note of the fact that the provision has been made on the basis of twelve year' salary for one director and 9 1/4 years' salary for the other director and that the provision thus, in fact, related to the earlier years and not to the year of account only. The disallowance of the claim of the assessee was questioned before the