TaxTMI 
TaxTMI 
1975 (2) TMI 25
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....Tribunal was right in law in holding that the term 'salary' occurring in section 10(10) of the Income-tax Act, 1961, includes the 'dearness allowance' and 'special allowance' for purposes of calculating the exempt portion of gratuity received by the assessee for the assessment year 1968-69 ?" The facts relevant for decision of the above question, as found in the statement of the case by the Appellate Tribunal, are briefly these : The respondent-assessee was an employee of the Canara Bank. On his retirement, be was paid a gratuity of Rs. 23,250. Out of that amount, he claimed under section 10(10) of the Act exemption in respect of Rs. 19,935 which represented the aggregate of his average basic pay, dearness allowance and special allowance....
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...., any other gratuity received by an employee on his retirement or on his becoming incapacitated prior to such retirement or on termination of his employment, or any gratuity received by his widow, children or dependants on his death, to the extent it does not, in either case, exceed one-half month's salary for each year of completed service, calculated on the basis of the average salary for the three-years immediately preceding the year in which the gratuity is paid, subject to a maximum of twenty-four thousand rupees or fifteen months' salary so calculated, whichever is less." The word "salary" is not defined in section 2 of the Act, which contains definitions. Though that word has been defined in section 17 of the Act, that definition ....
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....acter of pay, except in its temporary nature, as an addition to pay which may be decreased or increased, according to circumstances, or abolished altogether .... I am, therefore, clearly of opinion that 'dearness allowance' will be part of a man's salary like acting allowance, when a man is discharging the duties of a higher office for the prescribed period under the rules and is entitled to it. Names may differ, but the character of the payment is the same. Dearness allowance fulfils the very same function as basic pay, and must, therefore, be deemed to be part of the salary unlike travelling allowance, housing allowance, etc., which are meant for particular purposes and are confined to particular occasions, and sometimes to particular are....
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.... of the Canara Bank which paid gratuity to the respondent-assessee. The above contention had not been urged before the Income-tax Appellate Tribunal. Even otherwise, the definition of the word "salary" in the rules governing the gratuity scheme of a particular employer, is only for the purpose of those rules and cannot, in our opinion, be relevant for interpretation of section 10(10) of the , because any interpretation of that sub-section should be uniform in cases of all employees irrespective of how that word is understood or defined in the gratuity schemes of their respective employers. Mr. Rajasekhara Murthy next referred to the following passage in Corpus Juris Secundum, volume 77, at page 554 : " The word 'salary' is defined ....