TaxTMI 
TaxTMI 
2013 (2) TMI 72
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.... raised by the assessee in ITA No. 756/Chd/2012, are reproduced hereunder as an illustrative case : "1. The word salary has nowhere in the Income Tax Act has been defined as Basic (+) DA. Section 17 of the Act defines, salary includes wages. Wages has been defined in the Minimum Wages Act-1948 and Payment of Gratuity Act, 1972 and by different IT Deptt. Circulars (Cir. No/46 dated 14.09.1970 and Cir No./90 dated 18.05.1973). 2. (a) Clause 2(h) of Part A of Fourth Schedule of the Act, the words are, "Salary includes dearness allowance, if the terms of the employment so provides." (b) Section 2(s) of the Gratuity Act defines "All emoluments which are earned by an employee while on duty or on leave ....
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.... "(h) "Salary" includes dearness allowance, if the terms of employment so provide, but exclude all other allowances and perquisites." 4. Ld. 'DR', on the other hand, placed reliance on the order passed by the lower authorities. 5. We have carefully perused and considered the rival submissions, facts of the case and the relevant records. The issue involved in these appeals, pertain to computation of gratuity and leave encashment. The AO has included basic pay + Dearness Allowance and applied the formula, as applicable to the gratuity and leave encashment, for the purpose of working out the eligible amount of gratuity and leave encashment. The relevant findings of the AO, are reproduced in para 5 & 6 of the order dated 27.1....
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.... - 315000) to which no reply could be furnished by him. Therefore, an addition of Rs. 35000/- as worked out above is made to the returned income of the assessee. As the assessee has concealed the particulars of his income of Rs. 35000/-, penalty proceedings are initiated u/s 271(1)(c). 6. Leave encashment : The assessee had received an amount of Rs. 175772/- as leave encashment which was claimed as exempt u/s 10(10AA) of Income-tax Act, 1961. The exempt leave encashment in this case was worked out at Rs. 146712/- by taking one month's average salary on the basis of last ten months' salary drawn multiplied by no. of days of leave at his credit divided by 30. Salary for this purpose includes basic pay and dearness allowance a....
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....red. When confronted as to why the excess gratuity claimed be not disallowed, the appellant did not offer any comment. The excess claim of Rs. 35,000/- was therefore disallowed. Before me the appellant contended that bank salary mean basic pay, special pay, fixed personal pay, professional pay and DA. 5.3 I have gone through the submissions made and I am of the opinion that the AO has rightly computed the amount of gratuity exempted under the Act by following definition of salary as per Fourth Schedule, Part A Rule 2(h) which defines salary for the purpose of this Act. 5.4 In view of this part of the ground no. 2 is dismissed. 6. The third part of the 2nd ground of appeal contests the disallowance of Rs. 29,060/- ....
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....mputation of benefit of gratuity and leave encashment, as contemplated u/s 10(10) and 10(AA) are to be governed by the definition of 'salary' contained in the above Explanation and not by any agreement, as contended by the ld. 'AR', viz 8th Bipartite Settlement on wage revision and other similar conditions between Indian Banks' Association and their Workmen. The definition of 'salary' as reproduced above is squarely and specifically applicable to section 10(10) and 10(AA) of the Act and, hence, any other definition of 'salary' cannot be imported and applied to such sections. 8(i) This view is, further, supported by the direct decision of the Hon'ble Madras High Court in the case of K. Gopal Krishan....
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....in the above clause, and it is the said definition which should be applied while construing section 10(10) and section 10(10AA)." 8(iii) In the ultimate analysis, Hon'ble High Court concluded the matter as under : "Hence, the contention of the petitioner that the expression "salary" found in section 10(10) and section 10(10AA) of the Income-tax Act should be given a wider meaning than found in clause (h) of rule 2 of Part A of the Fourth Schedule is wholly untenable. Thus, the petitioner is not entitled to the grant of any part of the prayer made by him in the writ petition." 8(iv) Hon'ble Madras High Court has categorically and clearly held that expression 'salary' appearing in section 10(10) and 10(10AA) can....