A special allowance paid to employees that is not paid under the terms of a contract of employment or is not linked to any items such as price index, demand for increase in wages, production, attendance, etc., does not form part of the basic wages and is therefore not subject to provident fund contribution.

( 1 ) THIS writ petition is for the issue of writ of certiorari to call for the records of the respondent in proceedings No. C4/ TN/2709/ ENF/ MDU/89 dated March 21, 1989 and quash the same.

( 2 ) THE case of the petitioner is that they are doing business of jewellery sales. They engage employees of various categories like Accountants, Clerks, Salesman, Attenders, Watchmen etc. It is contended on behalf of the petitioner that the wages paid to the employees are more than the minimum wages fixed by the Government of Tamil Nadu. The wages include Basic pay and Dearness Allowance. Apart from the wages, it is averred in the writ petition that some of its employees are being paid ex-gratia amount on the 15th of every month as a special allowance. It is also the case of the petitioner that the said allowance is not paid to all its employees and even in respect of some of the employees they have stopped payment also. It has been contended that the special allowance was never treated as a part of their basic wages and as a matter of fact, when the leave salary has to be paid, this allowance is not taken into account for payment of leave salary. Even when the gratuity is to be paid on the superannuation of any employee, the special allowance is not taken into account for the purpose of computation of gratuity. It is also averred that so far as Provident Fund is concerned, the Management has been making its contribution to the authorities under Section 6 of R. Ramanathan Chettair Jewellers vs. Regional Commissioner, Employees Provident Fun. . . Page 3 of 8 the Employees Provident Funds and Miscellaneous Provisions Act, 1952. Learned counsel for the petitioner has brought to the notice of this Court the provisions of Section 6 of the Act, which reads as under: "the contribution which shall be paid by the employer to the fund shall be six and a quarter per cent of the basic wages, Dear-ness allowance and retaining allowance (if any) for the time being payable to each of the employees. " It is contended that the contribution depends upon the basic wages and dearness allowances payable to each of the employees. Learned counsel for the petitioner has brought to notice Section 2 (b) of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 which defines basic wages as under:

" "basic wages" means all emoluments which are earned by an employee while on duty or on leave with wages in accordance with the terms of the contract of employment and which are paid or payable to him, but does not include: (i) the cash value of any food concession, (ii) any dearness allowance (that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living), house rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment; (iii) any presents made by the employer. "

It is also contended that the special allowance will not come under the definition of wages as they are not paid to all the employees nor under the terms of any contract of employment entered into between the Management and the workmen. It is further argued that the special allowance will come within the scope of the exclusions in the definition of Section 2 (b) of the Act. In the view of the above position, the petitioner has not been paying any contribution or administrative charges on the special allowance which is paid to the workmen. As the matter stood thus, the respondent issued a notice dated May 13, 1998 R. Ramanathan Chettair Jewellers vs. Regional Commissioner, Employees Provident Fun. . . Page 4 of 8 calling upon the petitioner to make contribution and pay the administrative charges in respect of the special allowance. It is also contended that another notice dated September 26, 1998 calling upon the petitioner to furnish the supplementary returns for the period from July 1974 till date has been issued. Th