AJIT K. SENGUPTA, J. ( 1 ) IN this reference under Section 256 (1) of the Income-tax Act, 1961, for the assessment year 1975-76, the following question of law has been referred to this court :"whether, on the facts and in the circumstances of the case, and having regard to the fact that the gratuity fund was approved with effect from March 27, 1976, the Tribunal was legally justified in holding that the conditions laid down in Section 40a (7) of the Income-tax Act, 1961, were fulfilled and the assessee was entitled to the deduction of Rs. 4,27,781 representing provision for payment of gratuity made in the previous year which ended 30th June, 1974 ?" ( 2 ) THE facts are that the Income-tax Officer, while computing the income of the assessee, disallowed the assessee's claim for gratuity amounting to Rs. 4,27,781. The assessee, being aggrieved by the order of the Income-Officer, preferred appeal before the Commissioner of Income-tax (Appeals ). The Commissioner of Income-tax (Appeals), by his order dated November 25,1978, upheld the order of the Income-tax Officer. ( 3 ) BEING dissatisfied with the said order of the learned Commissioner of Income-tax (Appeals), the assessee brought the matter by way of a second appeal before the Appellate Tribunal. The Tribunal found that the recognition to the approved gratuity fund was granted by the Commissioner of Income-tax, West Bengal-V, Calcutta, with effect from March 27, 1976. The Tribunal held that the conditions laid down in Section 40a (7) of the Act were complied with and, therefore, the assessee was entitled to deduction of Rs. 4,27,781. ( 4 ) IT is not in dispute that the assessee had applied for the Commissioner's approval on December 30, 1975, in respect of the employees' gratuity fund but the approval was not accorded to the assessee till May, 1980. ( 5 ) THE Commissioner of Income-tax passed an order on May 12, 1980, wherein it has been stated as follows :"under Rule 2 (1) of Part C of the Fourth Schedule to the Income-tax Act, 1961, I hereby accord approval to 'khaitan Gratuity Fund' constituted under the trust deed dated December 30, 1975, as amended by deed of variation dated March 20, 1980. The approval of the fund maintained by the above named employer will take effect from March 27, 1976, and shall be subject to any conditions to be imposed in future by me in the light of changes in the income-tax law and rules. " ( 6 ) THE assessee was not allowed the benefit of deduction towards the gratuity fund only on the ground that although the assessee applied for the approval of the gratuity before the Commissioner of Income-tax, such approval was not accorded till the matter was heard by the Commissioner of Income-tax (Appeals ). And that was the only ground on which the assessee's claim was rejected. Before the Tribunal, the assessee produced the aforesaid order of the Commissioner of Income-tax granting approval with effect from March 27, 1976. Section 40a (7) (b) (ii) (2) provides that the assessee shall create an approved gratuity fund and the application for approval of such gratuity fund trust must be made before January 1, 1976. Admittedly, the assessee made an application for approval on December 30, 1975, and, accordingly, the assessee had done whatever he could have done in this behalf. Where the assessee makes an application in compliance with the mandate of Section 40a (7) (b) (ii) (2), it is immaterial whether the approval has been accorded before the assessment is made. If the Department does not accord approval within a reasonable time and the approval comes after four years, for that the assessee cannot be penalised. The approval once granted must relate back to the assessment year in question. ( 7 ) WE, therefore, answer the question in the affirmative and in favour of the assessee and against the Revenue.