AJIT K. SENGUPTA, J. ( 1 ) IN this reference under Section 256 (1) of the Income-tax Act, 1961, for the assessment year 1979-80, the following questions of law have been referred to this court :"1. Whether, on the facts and in the circumstances of the case, and on a correct interpretation of the words 'salary' and 'perquisite' as defined in Explanation 2 to Section 40a (5) of the Income-tax Act, 1961, the Tribunal was justified in holding that the cash allowances would form part of salary paid to the employees for the purpose of computing the disallowance under Section 40a (5) of the said Act " ( 2 ) WHETHER, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the sum of Rs. 65,421 paid to the managing director as salary and perquisites, which became recoverable from the payee within the relevant 'previous year' by virtue of his appointment not getting the approval of the Central Government was allowable as a deduction in computing the assessee's income for the assessment year 1979-80?" 2. Shortly stated, the facts are that the Income-tax Officer included the cash allowance as perquisite for the purpose of disallowance under Section 40a (5) of the Act. ( 3 ) THE Commissioner of Income-tax (Appeals) held that the cash allowances made to the assessee's employees were not perquisite within the meaning of Section 40a (5) and, accordingly, directed the Income-tax Officer to compute the disallowance under Section 40a (5) by excluding the cash allowances made to the assessee's employees. ( 4 ) BEING aggrieved, the assessee went in further appeal before the Tribunal and contended that cash allowances should have been considered as salary in terms of Explanation 2 to Section 40a (5 ). The Tribunal accepted the assessee's contention and modified the Commissioner of Income-tax (Appeals) order by directing the Income-tax Officer to work out the disallowance under Section 40a (5) by treating the cash allowances as part of salary of the respective employees to whom such cash allowances have been made. On these facts the questions set out hereinbefore have been referred to this court. ( 5 ) THE first question may appear to be concluded by the decision of this court in CIT v. Johnston Pumps (India) Ltd. [1988] 172 ITR 333 but in fact there the question was slightly different. On these facts the questions set out hereinbefore have been referred to this court. ( 5 ) THE first question may appear to be concluded by the decision of this court in CIT v. Johnston Pumps (India) Ltd. [1988] 172 ITR 333 but in fact there the question was slightly different. The issue raised in that case was whether the cash allowances could be perquisites within the definition of perquisites for the purpose of computing the disallowance under Section 40a (5 ). But here the question goes a step further, namely, whether cash allowances could form part of the salary. The question has been raised specifically to that effect. Therefore, the earlier decision in Johnston Pumps (India) Ltd. , The question has to be answered independently. "salary" is defined in Explanation 2 below Section 40a (5) in the following terms :" (a) 'salary' has the meaning assigned to it in Clause (1) read with Clause (3) of Section 17 subject to the following modifications, namely : (1) in the said Clause (1), the word 'perquisites' occurring in Sub-clause (iv) and the whole of Sub-clause (vii) shall be omitted ; (2) in the said Clause (3), the references to 'assessee' shall be construed as references to 'employee or former employee' and the references to 'his employer or former employer' and 'an employer or a former employer' shall be construed as references to 'the assessee'. " ( 6 ) THE definition is thus interconnected with Section 17 with the exception that perquisite is excluded and the amount of the transferred balance of an employee participating in a recognised provident fund to the extent taxable as salary is also excluded. The rest of the definition of salary in Section 17 is also its definition for Section 40a (5 ). So "salary" is to include any "profits in lieu of or in addition to any salary or wages. " "profits in lieu of salary" is again defined in Clause (3) of Section 17. The definition is inclusive, it will take in its ambit any amounts received by an employee from his employer arising from employment relation. In that view of the matter, cash allowances received by an employee from the employer in his capacity as an employee would also be part of the salary. Thus a cash payment to an employee is not a perquisite but that does not preclude its being salary otherwise. In that view of the matter, cash allowances received by an employee from the employer in his capacity as an employee would also be part of the salary. Thus a cash payment to an employee is not a perquisite but that does not preclude its being salary otherwise. The view we have taken has support from the decision of the Kerala High Court in CIT v. Toshiba Anand Lamps Ltd. [1984] 145 ITR 563. ( 7 ) FOR the reasons aforesaid, we answer the first question in the affirmative and against the Revenue. ( 8 ) THE facts relating to the second question are that in the assessment year under consideration, the Income-tax Officer also disallowed Rs. 1,18,654, being the remuneration of Shri A. Chakraborty ex-managing director of the assessee-company on the ground that the appointment of Shri Chakraborty was not approved by the Central Government. ( 9 ) AGAINST the said order of the Income-tax Officer, the assessee went in appeal before the Commissioner of Income-tax (Appeals ). The Commissioner of Income-tax (Appeals) held that the Income-tax Officer was justified in coming to the conclusion that the salary and perquisites paid to Shri Chakrabotry were not admissible for deduction. The Commissioner of Income-tax (Appeals), however, directed the Income-tax Officer to verify the actual amount of salary and perquisite paid to Shri Chakraborty for the period from January 1, 1978, to July 28, 1978, and restrict the disallowance to the actual salary and perquisite paid to Shri Chakraborty. ( 10 ) THE Tribunal was of the view that the actual salary paid for the services rendered by the managing director for the period from January 1, 1978, to July 28 1978, to the extent of Rs. 65,421 is to be allowed as deduction in computing the assessee's income in terms of Section 37 of the Act. ( 11 ) OUR attention has been drawn to the decision of this court in the case of CIT v. Dipak Corporation Pvt. Ltd. [1978] 111 ITR 452. There this court held that the deduction as claimed by the assessee was allowable as business expenditure incurred for the purpose of paying salary to the employees. This court relied on the decision of the Madras High Court in the case of CIT v. Sree Rajendra Mills Ltd. [1974] 93 ITR 122. There this court held that the deduction as claimed by the assessee was allowable as business expenditure incurred for the purpose of paying salary to the employees. This court relied on the decision of the Madras High Court in the case of CIT v. Sree Rajendra Mills Ltd. [1974] 93 ITR 122. The managing director was appointed by the company but he rendered services and also was paid remuneration. Subsequently, the Central Government did not approve the appointment of the managing director. In the meantime the managing director rendered services for which remuneration was paid. Accordingly, the actual salary paid for the services rendered by the managing director cannot be disallowed on the ground that the Central Government did not approve his appointment. If one has been rightly or wrongly appointed and such appointment is dependent on the Central Government, remuneration for the services rendered between the time of appointment and the date when the approval was refused cannot be denied to such employee who discharged his duties and responsibilities as the managing director of the company. ( 12 ) WE are of the view that the Tribunal was justified in allowing the actual salary paid to the managing director. For the reasons aforesaid, we answer the second question in this reference in the affirmative and in favour of the assessee. There will be no order as to costs.