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TMI BlogExpressions salary and year as used in clause (10) as it stood prior to its substitution by Finance Act, 1974 - Interpretation ofX X X X Extracts X X X X X X X X Extracts X X X X ..... ce is invited to the Boards Circular No. 4-P(LVIII-22), dated 6-8-1964 [Clarification 2] on the above subject. Several representations have been received by the Board seeking clarification about the meaning of the term salary as used in section 10(10). 2. As was explained in that circular, salary would include only the periodical payments made to the employee by the employer as compensation fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... east. Under this clause, a months salary is to be calculated on basis of the average salary of the employee for three years immediately preceding the year in which the gratuity is paid. This circular explains the import of the expressions salary and year used in the aforesaid clause. 2. The Income-tax Act does not contain a general definition of the word salary. The definition contained in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments made by the employer to the employees by way of allowances, or perquisites or any payment in the nature of gratuity or bonus should not, therefore, be taken into consideration as salary for the purpose of the aforesaid provision. 3. The word year is not defined in the Income-tax Act and, therefore, its meaning has to be construed in accordance with its definition in section 3(66) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause for the first time in the expression each year of completed service is not used as simpliciter but in relation to the service rendered by the employee. In this context, the expression each year of completed service is to be construed to mean a period or periods of twelve months service rendered by the employee, reckoned from the date on which he joined service with his employer. Circular ..... X X X X Extracts X X X X X X X X Extracts X X X X
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