SHIVASHANKAR BHAT, J. ( 1 ) THE question referred to us under the provisions of the Income-tax Act, 1961 reads thus:"whether on the facts and in the circumstances of the case the ITAT is right in law in allowing Rs. 1,36,261/- also as deduction for assessment year 1977-78 being the contribution made to approved gratuity fund eventhough the employees were admitted to the" fund in the year relevant to earlier assessment years?"earlier during the assessment year 1973-74 the assessee had claimed a deduction towards the estimated gratuity liability, but this was not allowed. At that time there was no fund established by the assessee. In October, 1975 the assessee created a trust and established a fund towards ks gratuity liability with effect from 1st october, 1975. The fund requires approval. This approval was granted during the assessment year in question with retrospective effect. The assessee thereafter contributed to this fund as part of the initial fund. The Income-tax Officer disallowed this on the ground that similar claim made by the assessee in the year 1973-74 had been disallowed and it is not open to the assessee to claim the same once again. According to the revenue the initial fund contributed is practically related to the past years and the same cannot be claimable under the Act as a deduction. The assessee's claim was upheld by the Appellate tribunal as also earlier by the Commissioner of Income-tax (Appeals ). The claim of the assessee is under Section 36 (l) (v) of the Act. The Tribunal noted that the gratuity fund was approved only on 3-1-1976 and a proper contribution could be made only after the approval. Further, the Tribunal also referred to the fact that the initial contribution may be made in not more than five annual instalments. It was contended by the learned counsel for the Revenue that the liability towards gratuity is only contingent. The contribution made by the assessee which has been disallowed in the instant case is referable to the past services of the employees and in these circumstances the same cannot be deducted. The learned counsel referred to the decision of this Court in Mysore tobacco Co. Ltd. v Commissioner of Income-tax, kamataka-II, Bangalore, 115 ITR 698. This decision will not be of any use to the Revenue in the instant case because it was not a case of contribution to an approved fund. The learned counsel referred to the decision of this Court in Mysore tobacco Co. Ltd. v Commissioner of Income-tax, kamataka-II, Bangalore, 115 ITR 698. This decision will not be of any use to the Revenue in the instant case because it was not a case of contribution to an approved fund. In Shree Sajjan Mills Ltd. v Commissioner of Income-tax, M. P. and Another, 156 ITR 585, the law governing the subject in question has been summarised at page 599. This was referred by Mr. Chanderkumar to contend that the present claim is not based on any actuarial basis and would not fall within the permitted category of deductions. The Supreme Court was not concerned with the provisions of Section 40-A (7) which were inserted in the Act in the year 1973. However, the Supreme Court has pointed out that an estimated liability under a gratuity scheme even if it amounted to a contingent liability, if properly ascertainable and its present value was fairly discovered was deductible. Mr. Chanderkumar is right that the said principle is not applicable here. But at the same time it will have to be noted that the instant case is covered by Section 40-A (7) (b) of the Act. By virtue of this provision the bar against deduction is taken away, if the contribution is towards an approved gratuity fund. Under Section 36 (1) (v) it is clear that any contribution towards an approved gratuity fund as stated therein is deductible. If the assessee establishes a fund by creating a trust, the benefit of the contribution will be available only if it is approved for which purpose appropriate rules have been framed under the Act. Rule 103 refers to the annual contribution to be made to the fund, which is approved by the Commissioner. The basis of the contribution will have to be approved by the Commissioner. Rule 104 governs the initial contribution. It specifically imposes a limitation about the quantum that can be contributed. The maximum initial contribution shall not exceed 8 1/3% of the employee's salary in respect of his past services. Therefore, the limitation for the initial contribution is fixed statutorily. In the instant case, it is nobody's case that the assessee has contravened any provisions of Rules 103 and 104. The maximum initial contribution shall not exceed 8 1/3% of the employee's salary in respect of his past services. Therefore, the limitation for the initial contribution is fixed statutorily. In the instant case, it is nobody's case that the assessee has contravened any provisions of Rules 103 and 104. The initial contribution has to be necessarily relatable to the past services of an employee; subject to the ceiling imposed by the Rule, the employer may choose his own figure having regard to his circumstances for contribution. An assessee cannot, hi anticipation of an approval to the fund make the contribution because approval to the fund depends upon the factors beyond his control to some extent. It is left to the Commissioner either to approve or reject the same. The claim for deduction will have to be necessarily towards the contribution made to the said approved fund. The Board's Circular in this regard permits the contribution of initial fund hi five annual instalments. This is referred in the third edition of Income-tax Law by Chaturvedi, page 1213. The Tribunal also refers to the availability of five instalments. Therefore, even if the fund was established with effect from 1st October, 1975, the contribution made thereto as initial contribution after the approval was obtained cannot be held as outside the purview of Rule 104; it will be a valid contribution. In Triplicane Permanent Fund Ltd. v Commissioner of Income-tax and Another, 179 ITR 492, the Madras High Court held that any contribution to the approved fund is deductible and in case the statutory requirements are contravened, it is for the authority concerned to take action and it would not affect the contribution towards the approved fund as such. In the instant case there is no necessity to go into this question because it is not the case of the Revenue that this contribution was outside the purview of the statutory Rules. The sole contention of the Revenue is based on the fact that a claim of a similar sum for deduction was negatived during the earlier year. This is entirely irrelevant. So long as the contribution satisfies the statutory requirements as a contribution to the approved fund, the assessee is entitled to the deduction and the Tribunal was justified in upholding the claim of the assessee in this regard. This is entirely irrelevant. So long as the contribution satisfies the statutory requirements as a contribution to the approved fund, the assessee is entitled to the deduction and the Tribunal was justified in upholding the claim of the assessee in this regard. Therefore, our answer to the question referred is in the affirmative and against the revenue. --- *** --- .