The main legal point established in the judgment is the interpretation of the term 'salary' in section 10(10) of the Income-tax Act, 1961 and its inclusion of dearness allowance and special allowance for calculating the exempt portion of gratuity.

Chandrashekhar, J.

1. At the instance of the income-tax department, the Income-tax Appellate Tribunal, Bangalore Bench, has under sub-section (1) of section 256 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), referred to this court the following question of law :

"Whether, on the facts and in the circumstances of the case, the Appellate 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 ?"

2. 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, he 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 for 15 months. The Income-tax Officer held that the assessee could claim exemption in respect of that portion of the gratuity which represented his basic pay only for 15 months and not in respect of the portion of the gratuity which represented the dearness allowance and special allowance which, according to the Income-tax Officer, cannot be regarded as a part of his salary for the purpose of sub-section (10) of section 10 of the Act. Annexure "C" to the statement of the case is a letter of the management of the Canara Bank in which it is stated that the bank pay an employee special allowance : (i) in recognition of any special skill or qualification possessed by him; (ii) in view of the responsible, onerous or difficult nature of duties attaching to the post or position occupied by him in the bank and that under the gratuity rules of that bank, the term "salary" includes special allowance.

3. The relevant parts of section 10 of the Act read :

"10. Incomes not included in total income. - In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included,....

(10) any death-cum-retirement gratuity received under the revised Pension Rules of the Central Government or under any similar scheme of a State Government or a local authority or any payment of retirement gratuity received after the first day of June, 1953, under the new Pension Code applicable to the members of the Defense Services, 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 dependents on his death, to the extent it does not, in either case, exceed one-half month's salary for each year of completed service, calculate on the basis of the average salary for the three years immediately proceeding 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."

4. 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 is only for purposes of sections 15 and 16 of the Act Again, the definition of the word "salary" in rule 2 of Part "A" of the IV Schedule to the Act is also for the purpose of that party only. In the absence of the definition of the word "salary", applicable to section 10(10) of the Act, the ordinary meaning of that word should be taken while construing that sub-section, unless there is anything in the context which requires a wider or narrower meaning to be given to that word.

5. In Webster's New International Dictionary, second edition, the relevant meaning of the word "salary" is as follows :

"The recompense or consideration paid or stipulat