Discretionary incentive payments are not wages unless payable under the employment contract; limited statutory fictions cannot expand the definition.

Incentive Inam paid under an employer's discretionary scheme did not constitute "wages" under section 2(22) of the Employees' State Insurance Act because it was not payable as a contractual term of employment, express or implied. The scheme was introduced after the original contract, could be altered or withdrawn at the employer's discretion, and denied payment where targets were missed for reasons beyond the workmen's fault, which was inconsistent with any implied contractual entitlement. The statutory fiction in the Explanation to section 41 was confined to sections 40 and 41 and could not enlarge the general definition of wages. No contribution was therefore payable in respect of the Inam.

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Issues: Whether incentive Inam paid under the employer's scheme formed part of "wages" under the Employees' State Insurance Act, 1948 as remuneration payable when the terms of the contract of employment, express or implied, were fulfilled.

Analysis: The relevant inquiry was confined to the first part of the definition of "wages" in section 2(22), namely whether the payment was remuneration payable under the contract of employment. The Scheme was introduced later than the original contract of service, was expressly stated to be withdrawable or alterable at the employer's discretion, and denied payment where targets were not met for reasons beyond the workmen's fault. Those features were inconsistent with any implied contractual right in favour of the employees. The Explanation to section 41 was a limited legal fiction confined to sections 40 and 41 and could not be extended to enlarge the general definition in section 2(22). The payment was therefore only an incentive reward and not a contractual incident of employment.

Conclusion: The Inam was not "wages" within section 2(22) of the Act and no contribution was payable in respect of it; the appellant succeeded.

Ratio Decidendi: A discretionary incentive payment does not become "wages" unless it is payable as a term of the contract of employment, and a limited statutory fiction cannot be extended beyond the purpose for which it was enacted.

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