Payment to employee under Payment of Gratuity Act.1972 - auditors say that we have not followed 240 days system

Dear Seniors, We have paid Gratuity Payment to an employee of our company after continuous service of 5 years
He had worked with us from 01/08/2012 to 08/06/2019 and also gratuity is part of CTC in our company
Our auditors raised a question that we have not followed 240 days system and they said if employee has not worked 240 days in a year then he is not entitled for gratuity payment.
We have paid gratuity on the basis of continuous service of 5 years without break , Gratuity is part of CTC
Please provide your valuable suggestion.
Thanks

Query of the auditor is not clear.
He has worked for more than 5 years.
Are there breaks in service??
Gratuity being part of CTC is not relevant.
Kindly provide year wise days of service and whether any breaks in service etc have taken place,though you mentioned continuous service,

What is the meaning of Basic wages under the payment of Gratuity Act

Salary structure is contained of many components like Basic, DA, LTA, uniform allowances etc..
So basic wages mean Basic + DA part of salary, under the payment of Gratuity act.

How To Calculate Gratuity: Amount of gratuity is directly proportional to the tenure of service, and also to the last drawn salary. The gratuity is given at the rate of 15 days of last drawn salary for each year of service. And the salary that is considered for the calculation of gratuity is the last drawn salary that includes basic pay and dearness allowance. It is typically calculated according to this formula: Last drawn salary (basic salary plus dearness allowance) X number of completed years of service X 15/26. According to this formula, the time period of over six months or more is considered as one year. This means if you have completed five years and seven months of service, the number of years would be considered as six years for calculation of gratuity benefit. On the other hand, if the service period is five years and five months, for gratuity calculation will be considered as five year.

basic wages” means all emoluments which are. earned by an employee while on duty or [on. leave or on holidays with wages except HRA and OT allowance. bonus allowance etc..hence gratuity calculation should be done on gross salary after deducting HRA OT and bonus allowance.