Dear shaikhsohail,
I am totally agree with the views of Mr. Abhishek and would also like to add that Section 2A of The Payment of Gratuity Act for Continuous Services itself says that:
(a) for the said period of one year, if the employee during the period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than--
(i) one hundred and ninety days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) two hundred and forty days, in any other case;
It clearly means that, if an employee work for 240 days in a year, then it will counted as a complete year. So, as the employee has already completed 4 Years and 240+ days in 5th year, he is eligible for Gratuity.
Apart from this, I would like to mention that as you have mentioned that the employee is retiring on that date, that means he cannot work further as per your company rules. Otherwise, govt. has revised the retirement age to 60 years, even proposed for 62.
So, if your organization let him work more than he could complete 5 years..!! If your organization want to pay him gratuity then your organization may also award him gratuity on his retirement as he has given this much time to your organization or his retirement may also extend for 2 months as a special case. By this way, his 5 years will be completed and you can easily pay him gratuity.
Final decision is of your organization.