As per case facts, the assessee, which had no gratuity scheme before 1970, introduced one in mid-1970. Based on an actuarial report, the total liability was debited to the Profit ... and Loss Account. The Income Tax Officer initially allowed only a small portion of this claim, but the Appellate Assistant Commissioner and the Appellate Tribunal subsequently allowed the entire amount. The Revenue then appealed to the Supreme Court. The question arose whether the assessee was entitled to the deduction of the entire provision for gratuity as claimed under the relevant sections of the Income Tax Act, 1961. Finally, the Supreme Court allowed the appeal and set aside the High Court's judgment, remanding the case for fresh consideration. The Court observed that the High Court needed to thoroughly examine whether the provisions of Section 40A(7)(b)(ii) of the Income Tax Act, 1961, had been fully complied with, especially focusing on the satisfaction of the second and third conditions, as the first condition was not in dispute between the parties.