AJIT K. SENGUPTA, J. ( 1 ) IN this reference under Section 256 (1) of the Income-tax Act, 1961, the following questions of law have been referred to this court for the assessment year 1974-75 :"1. Whether, on the facts and in the circumstances of the case and on a proper interpretation of the relevant provisions of the Special Export Promotion Scheme, the receipt of Rs. 1,40,864 arising out of the transfer of import entitlements are capital receipts and not revenue receipts assessable to tax. " ( 2 ) WHETHER, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the reimbursement of out of pocket expenses amounting to Rs. 21,000 actually incurred by the directors of the assessee-company is an entertainment expenditure which falls within the mischief of Section 37 (2a) of the Income-tax Act, 1961, and in so holding whether the Tribunal acted perversely ? ( 3 ) WHETHER the Tribunal was justified in upholding the disallowance of reimbursement of expenses amounting to Rs. 21,000 actually incurred by the directors of the assessee-company and in holding that the said reimbursement of expenses was in the nature of entertainment allowance or entertainment expenditure paid by the assessee to any employee or other person within the meaning of Clause (i) of the Explanation to Section 37 (2a) of the Income-tax Act, 1961 ? ( 4 ) WHETHER, on the facts and in the circumstances of the case, the sum of Rs. 7,400 paid as bonus to Shri D. H. Shah, managing director, would constitute 'salary' within the meaning of Section 40a (5) read with Section 27 of the Income-tax Act, 1961 ? ( 5 ) WHETHER, on the facts and in the circumstances of the case, the Tribunal was justified in restricting the deduction to Rs. 60,000 out of Rs. 91,498 paid to Sri P. K. Ambani, under the provisions of Section 40a (5) of the Income-tax Act, 1961?" 2. The facts are that the assessee claimed before the Income-tax Officer that receipts of Rs. 1,40,864 arising out of the transfer of import entitlements were capital receipts. The Income-tax Officer rejected that claim of the assessee. The assessee paid Rs. 21,000 to its directors as out of pocket allowance and claimed deduction thereof. The Income-tax Officer negatived this claim of the assessee. The assesbee paid remuneration of Rs. 1,40,864 arising out of the transfer of import entitlements were capital receipts. The Income-tax Officer rejected that claim of the assessee. The assessee paid Rs. 21,000 to its directors as out of pocket allowance and claimed deduction thereof. The Income-tax Officer negatived this claim of the assessee. The assesbee paid remuneration of Rs. 1,01,650 to its managing director, Shri D. H. Shah. This amount included bonus of Rs. 7,400. The assessee claimed deduction of the entire amount of Rs. 1,01,650. But the Income-tax Officer restricted the allowance out of this claim to the extent of Rs. 72,000 in view of the provisions of Section 40a (5) of the Income-tax Act, 1961. In doing so, the Income-tax Officer treated the payment of bonus of Rs, 7,400 as "salary", 3. The assessee paid remuneration of Rs. 91,498 to one of its employees, Shri P. K. Ambani, who retired during the previous year relevant to the year under reference. This amount represented salary of Rs. 30,000, bonus of Rs. 4,998, leave salary of Rs. 10,000 and cash gratuity of Rs. 46,500. The Income-tax Officer disallowed Rs. 31,498 out of the aforesaid amount of Rs. 91,498 under Section 40a (5) as this amount represented excess over Rs. 60,000. 4. On appeal, the Appellate Assistant Commissioner held that the receipts arising out of transfer of import entitlements were revenue receipts. He also held that the Income-tax Officer was justified in disallowing the amount of Rs. 21,000 as entertainment expenses. He held that the bonus payment of Rs. 7,400 was to be treated as salary for the purpose of Section 40a (5 ). He upheld the disallowance of Rs. 31,498 made by the Income-tax Officer out of remuneration paid by the assessee to one of its employees, Shri P. K. Ambani. 5. Against the aforesaid order of the Appellate Assistant Commissioner, the assessee preferred a second appeal before the Tribunal. Before the Tribunal, it was contended on behalf of the assessee that the receipts arising out of transfer of import entitlements could not be regarded as revenue receipts. The Tribunal, however, rejected this stand of the assessee and upheld the order of the Appellate Assistant Commissioner on this point, following its order in the assessee's own case for the earlier years. ( 6 ) AS regards the disallowance of Rs. The Tribunal, however, rejected this stand of the assessee and upheld the order of the Appellate Assistant Commissioner on this point, following its order in the assessee's own case for the earlier years. ( 6 ) AS regards the disallowance of Rs. 21,000 claimed by the assessee as out of pocket allowance, learned counsel for the assessee contended before the Tribunal that the amount in question was paid to its directors for attending and entertaining business associates or guests and hence should have been allowed as admissible deduction. Reliance was placed on the order of the Tribunal in the case of one of the directors of the assessee-company, Shri D. H. Shah, wherein it was held that the allowance refers to a fixed sum granted to meet certain expenses in connection with his duties and thus it could not be termed as entertainment expenses. The Tribunal found that this very question stood covered against the assessee by the order of the Tribunal referred to above. The Tribunal was of the opinion that the order of the Tribunal in the case of one of the directors of the assessee-company did not help the assessee because, in that case, the question for consideration was whether a fixed allowance granted to a director for meeting expenses to be incurred in the performance of his duties comes within the mischief of Section 37 (2 ). But, in the present case, the assessee-company incurred expenses by way of giving allowance for meeting the entertainment charges. The Tribunal, therefore, upheld the order of the Appellate Assistant Commissioner on this point. ( 7 ) THE Tribunal also upheld the order of the Appellate Assistant Commissioner restricting the allowance of payment Of remuneration to its managing director, Shri D. H. Shah, to the extent of Rs. 72,000 in view of the provisions of Section 40a (5 ). In doing so, the Tribunal observed that the bonus paid to an employee should be regarded as "salary" for the purpose of income-tax. ( 8 ) COMING to the point pertaining to the disallowance of Rs. 72,000 in view of the provisions of Section 40a (5 ). In doing so, the Tribunal observed that the bonus paid to an employee should be regarded as "salary" for the purpose of income-tax. ( 8 ) COMING to the point pertaining to the disallowance of Rs. 31,498 under Section 40a (5) out of the remuneration paid to one of its employees, Shri P. K. Ambani who retired during the previous year relevant to the year under reference, the assessee's counsel urged before the Tribunal that, in accordance with the clear provisions of Sub-clause (i) of Clause (c) of Section 40a (5), the assessee was entitled to the deduction of expenditure incurred for payment of salary to an employee, of an amount calculated at the rate of Rs. 5,000 for each month for the period during which the said employee was in the employment of the assessee-company, and the amount of Rs. 60,000 in the case of a former employee who ceases or ceased to be the employee of the assessee during the previous year or any earlier previous year. It was pointed out that Shri Ambani was paid salary of Rs. 30,000 as an employee of the assessee-company and he was paid Rs. 61,498 as retirement benefit because he ceased to be the employee of the assessee-company during the previous year relevant to the assessment year under reference. It was, therefore, submitted that both the limits, as mentioned above, in Section 40a (5) (c) (i) which were mutually exclusive, were applicable in respect of payment of salary and retirement benefits made to Shri Ambani during the year under reference. ( 9 ) THE Tribunal, after hearing the submissions made before it by both the parties, upheld the order of the Appellate Assistant Commissioner on this point too. ( 10 ) SO far as the first question is concerned, it is now concluded by a decision of this court in the case of this assessee in Jeewanlal (1929) Ltd. v. CIT [1983] 139 ITR 865. Following the said decision, we answer the first question by saying that the receipt of Rs. 1,40,864 arising out of the transfer of the import entitlements is not a capital receipt but a revenue receipt assessable to tax. Following the said decision, we answer the first question by saying that the receipt of Rs. 1,40,864 arising out of the transfer of the import entitlements is not a capital receipt but a revenue receipt assessable to tax. ( 11 ) SO far as the second question is concerned, as we have already indicated, the amount in question was paid to its directors for attending on and entertaining business associates or guests. The assessee-company incurred expenses as' allowance for meeting, the entertainment charges. There cannot be any dispute that the expenditure in question in the hands of the assessee will be entertainment expenditure. We, therefore, answer the second question in the affirmative and in favour of the Revenue. ( 12 ) ON the facts found by the Tribunal and in view of the foregoing finding of the Tribunal regarding the nature of the expenditure, the third question is also answered in the affirmative and in favour of the Revenue. ( 13 ) THE fourth question pertains to the sum of Rs. 7,400 paid as bonus. Under Section 17 (3), profit in lieu of salary includes any payment other than the payment mentioned therein due to or received by the assessee from the employer. Accordingly, salary within the meaning of Section 40a (5) will also include bonus. In our view, the Tribunal came to the correct conclusion on the facts of this case. Payment of bonus is no longer considered a gift or bounty. An employee, by reason of his contribution to, or participation in the business of employer, is entitled to payment of bonus. The bonus paid to the employees covered by the Payment of Bonus Act is part of salary or wages of such employees. ( 14 ) IN the absence of any specific definition of the word "salary" in Section 40a (5), the word "salary" has to be construed in the mariner understood in the setting and context of the facts of the present commercial and industrial climate. In a contract of service, apart from basic salary, dearness allowance, bonus and several allowances are payable to employees. All these payments would come within the scope of salary. ( 15 ) FOR the reasons aforesaid, we answer the fourth question in the affirmative and in favour of the Revenue. In a contract of service, apart from basic salary, dearness allowance, bonus and several allowances are payable to employees. All these payments would come within the scope of salary. ( 15 ) FOR the reasons aforesaid, we answer the fourth question in the affirmative and in favour of the Revenue. ( 16 ) SO far as the fifth question is concerned, the Appellate Assistant Commissioner found that the total remuneration amounts to Rs. 91,498. It consists of the following amounts : Rs. Salary 30,000 4,998 Bonus Leave salary 10,000 Cash gratuity 46,500 91,498 ( 17 ) THE Income-tax Officer has disallowed Rs. 31,498 under Section 40a (5) which represents the excess over Rs. 60,000. Shri P. K. Ambani retired during the previous year. According to the appellant, he received Rs. 30,000 as an employee during the previous year. The bonus, leave salary and cash gratuity were paid to him after his retirement. Therefore, he received Rs. 30,000 as an employee and Rs. 61,498 as an ex employee. ( 18 ) THIS question came up before this court in the case of Hindustan Motors Ltd. v. CIT [1985] 156 ITR 223, where the question was whether the sum of Rs. 23,600 was allowable out of the salary and gratuity paid to the employee under Section 40a (5) (c ). The Income-tax Officer in that case held that the permissible limit up to which the assessee eould claim deduction for payment of amounts to its employees on account of salary or gratuity was Rs. 60,000. He disallowed the deduction of Rs. 22,000 paid to the employee as claimed by the assessee. The assessment was confirmed by the Appellate Assistant Commissioner who held that the employee concerned ceased to be an employee of the assessee during the relevant previous year and, therefore, the limit of Rs. 60,000 prescribed in Section 40a (5) (c) (i) in the case of a former employee applied to the facts of this case. On appeal, the Tribunal held that, under Section 40a (5) (c) (i), the said employee came within the definition of a former employee in the relevant assessment year. 60,000 prescribed in Section 40a (5) (c) (i) in the case of a former employee applied to the facts of this case. On appeal, the Tribunal held that, under Section 40a (5) (c) (i), the said employee came within the definition of a former employee in the relevant assessment year. As a former employee, the terminal benefits by way of gratuity paid to him by the assessee came within the definition of salary in the said section and the total amount in the said your including his salary and gratuity exceeded the limit prescribed for a former employee. Accordingly, the Tribunal dismissed the appeal on thu. se facts. On a. reference, this court held that an employee can be paid up to Rs. 5,000 per month which could be claimed as deduction. A former employee can be paid in the aggregate or at a time up to Rs. 60,000 in the year. The section itself indicates that an employee who Retires during a particular previous year would be a former employee and, accordingly, the question which was referred was answered by saying that the sum of Rs. 22,000 paid as salary to the employee is allowable under Section 40a (5) (c) of the Act. ( 19 ) IN view of the said decision, we answer the fifth question in this reference by saying that the salary paid to the employee before the retirement is allowable under Section 40a (5) (c) of the Act and the Tribunal, in disposing of the case under Section 260, shall determine the quantum which will be allowable under the aforesaid provisions, The question is answered accordingly. There will be no order as to costs.