TMI Blog1984 (9) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... g previous year is that ended March 31, 1971, the assessee, who is an individual, functioned as the managing director of M/s. Jyoti Limited, a public limited company. This was under an agreement dated February 27, 1967, which was to be operative from January 1, 1966, for a term of five years. Clause 5(viii) of that agreement provided for payment of gratuity to the managing director at one month's salary per year for each year of the tenure of appointment calculated on the basis of the last salary drawn by the managing director at the time of the termination of appointment. The validity of the agreement is not in dispute. In fact, it was approved by the Company Law Board. In the year of account relevant to the assessment year, the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Defence Services ; or any other gratuity not exceeding 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 section applies to " any other gratuity " and the limit of the gratuity claimable as exempt is also indicated in the provision. "Gratuity" is a term which is not defined in the Income-tax Act and has necessarily, therefore, to be understood as understood in common parlance. The assessee's case was that the amount was claimable as gratuity in accordance with the terms of the ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as managing director. In such a case, irrespective of what happens to the managing director thereafter-whether the managing director is appointed for a fresh term under a fresh agreement or not-the earlier agreement works itself out and consequently when the managing director retires, he or she would be entitled to whatever gratuity is contemplated as payable under the agreement. If parties have stipulated for payment of gratuity, any such payment made pursuant thereto would be gratuity due to the managing director on retirement under the terms of the agreement and in accordance with the terms of the same agreement. The fact that such person is employed again under a fresh contract without any break need make no difference, for it will not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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