Section 3
SEC. 3. The retirement pay, gratuity or pension payable to any person by operation of this Act shall be based upon (1) the same rank and rate of salary upon which his original retirement pay, pension or gratuity was computed; or (2) the rank in which he is entitled to be retired under section ten of Republic Act Numbered Eight hundred forty, as amended by Republic Act Numbered Eight hundred seventy-eight, and the rate of base and longevity pay which he would have been entitled to receive had he been in the active service on July twenty-six, nineteen hundred forty-eight, whichever amount is greater: Provided, That if the pre-war permanent rank of such person was not readjusted on account of his death, retirement or honorable separation, he shall be retired in the rank to which he would have been promoted had his pre-war permanent rank been readjusted in the manner prescribed for the readjustment of ranks of all other officers of his rank in the Armed Forces of the Philippines in nineteen hundred forty-seven and nineteen hundred forty-eight, and his retirement pay, pension or gratuity under this act shall be computed on the basis of the base and longevity pay prescribed for such higher rank on July twenty-six, nineteen hundred forty-eight, unless he shall be entitled to a higher retirement pay, pension or gratuity under this section: Provided, further, That if a person entitle to the benefits of the next preceding proviso was in the active service for at least one year after the effective date when his permanent rank would have been readjusted, in nineteen hundred forty-seven or nineteen hundred forty-eight, then he shall be retired in the rank next higher to that determined in accordance with the next preceding proviso, but in no case higher than the rank of colonel.