Gratuity exemption for insurance agents denied where commission-based status did not satisfy the employee salary formula.

Gratuity exemption under section 10(10) applies only to an employee whose salary can be computed under the statutory formula; a Life Insurance Corporation agent paid by commission and treated separately from employees does not satisfy that condition, so the gratuity remained taxable. The Life Insurance Corporation of India (Agents) Regulations, 1972 were part of the relevant material for determining the assessee's status and did not constitute fresh material requiring a further opportunity of hearing before the Income-tax Officer. The exemption claim therefore failed, and the objection based on alleged new material was rejected.

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Issues: (i) Whether the gratuity received by a Life Insurance Corporation agent was exempt under section 10(10) of the Income-tax Act, 1961. (ii) Whether the Life Insurance Corporation of India (Agents) Regulations, 1972 constituted new material requiring an opportunity of hearing to the Income-tax Officer.

Issue (i): Whether the gratuity received by a Life Insurance Corporation agent was exempt under section 10(10) of the Income-tax Act, 1961.

Analysis: Clause (iii) of section 10(10) applies only to gratuity received by an employee and contemplates salary capable of monthly computation, including the average salary for the three years immediately preceding the payment of gratuity. The assessee was not in receipt of fixed monthly salary but earned commission under the Regulations. The amount received as gratuity could not be linked to the statutory formula of one and a half months' salary for each completed year of service. The Regulations themselves treated agents separately from employees and indicated that the assessee was an agent and not an employee for the purposes of the exemption provision.

Conclusion: The gratuity was not exempt under section 10(10), and the claim for exclusion from total income failed.

Issue (ii): Whether the Life Insurance Corporation of India (Agents) Regulations, 1972 constituted new material requiring an opportunity of hearing to the Income-tax Officer.

Analysis: The Regulations governed the assessee's appointment as agent and were part of the material relevant to deciding his status. They did not amount to fresh or extraneous material requiring a further opportunity of hearing.

Conclusion: The objection based on alleged new material was rejected.

Final Conclusion: The assessee was held not to be an employee of the Life Insurance Corporation for purposes of section 10(10), so the gratuity could not be excluded from taxable income.

Ratio Decidendi: Exemption for gratuity under section 10(10) is available only where the recipient is an employee receiving salary capable of computation under the statutory formula; an insurance agent paid commission and treated separately from employees does not qualify.

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