It's actually much simple than you are thinking....

here is the simplified version of it...

SELECTEarn.RowID AS EarnRowID, Earn.SalaryHeadName AS EarnSalaryHeadName, Earn.HeadType AS EarnHeadType,

Earn.SalaryAmount AS EarnSalaryAmount, Dedn.RowID AS DednRowID,

Dedn.SalaryHeadName AS DednSalaryHeadName, Dedn.HeadType AS DednHeadType,

Dedn.SalaryAmount AS DednSalaryAmount

FROM(

SELECTROW_NUMBER() OVER( PARTITION BY SummarySalaryID ORDER BY SummarySalaryID, Sequence, SalaryHeadID ) AS RowID,

SummarySalaryID, SalaryHeadID, SalaryHeadCode, SalaryHeadName, SalaryHeadAlias,

HeadType, Sequence, SalaryRate, SalaryAmount

FROM#tmpMonthlySalaries

WHEREPaymentType= 'Earning'

AND ArrearPayment = 0

AND HeadType != @strOtherPayments

) Earn

FULL OUTER JOIN

(

SELECTROW_NUMBER() OVER( PARTITION BY SummarySalaryID ORDER BY SummarySalaryID, Sequence, SalaryHeadID ) AS RowID,

SummarySalaryID, SalaryHeadID, SalaryHeadCode, SalaryHeadName, SalaryHeadAlias,

HeadType, Sequence, SalaryRate, SalaryAmount

FROM#tmpMonthlySalaries

WHEREPaymentType= 'Deduction'

AND ArrearPayment = 0

AND HeadType != @strOtherPayments

) Dedn ON Earn.SummarySalaryID = Dedn.SummarySalaryID AND Earn.RowID = Dedn.RowID

Though I am happy with what I've got, but still I am very much open to your suggestions...