LexCOMMISSIONER OF INCOME-TAX, KERALA AND COIMBATORE versus L. W. RUSSEL
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7 S.C.R SUPREME COURT REPORTS 569 COMMISSIONER OF INCOME-TAX, KERALA AND COIMBATORE v. L. W. RUSSEL IK. SUBBA RAO, J. c. SHAH AND s. M. SIKRI, JJ.] Income Tax-Scheme to effect a-policy of i.nsura.nce for the purpose of ensuring annuity to every employee on his attaini:ng age of superannuation or on happening of a spec~fied contin- gency·-Contribution's to be made both by employer and em- ployee-Whether amount paid b11 the employer towards pre- mium payable by employee taxable under s. 7(1)-Meamng of perquisite-Indian Income-tax Act. 1922 (11 of 1922), s. 7(1), The respondent is an employee of the English and Scottish Joint Co-operative Wholesale Society Ltd. incorporated in England. The Society established a superannuation scheme for the benefit of the male European members of its staff employed in India by means of deferred rnnuities. Under the terms of the scheme, the trustee has to effect a policy of insurance for the purpose of ensuring an annuity to every member of the Society on his attaining the age of superannuation or on the happening of a specific contingency. The Society contributed one-third of the premium payable by each empioyee. During the year 1956-57, the Society contributed Rs. 3333/- towards the premium payable by the respondent. an employee of the Society. The Income-tax Officer included the said amount in the taxable income of the respondent for the yeaT 1956-57 under s. 7(1), Explanatian 1, sub-cl. (v) of the Act. The appeals of the respondent were dismissed both by the Appellate Assistant Commissioner of Income-tax and the Income-tax Appellate Tribunal. The Tribunal referred to the High Court the following three questions of law:- (1) Whether the contribution paid by lhe employer to the assessee under the terms of a trust deed in res- pect of a contract for a deferred annuitv on the life of the assessee is a perquisite as conlernplated by s. 7(1) of the Income-tax Act? (2) Whether the said contributions were allowed to, or due to the applicant by or from the employer in the accounting year'! (3) Whether the deferred annuity aforesa'd is annuity hit by s. 7(1) and para (v) of Explanation 1 thereto. The High Court held that the employer's contribution under the terms of the trust deed was not a perquisite as con- templated by s. 7(1). The employer's contributions were not all~wed to or due t? the employee in the accounting year. The legislature not havmg used the word "deferred" with annuity m .s. 7(1) and the statute being a taxing one, the deferred an- nUity would not hit para (v) of Explanation 1 to s. 7-(1) of the Act. Against the decision of High Court. the appellant came to this Court by special leave. Dismissing the appeal, 19G~ April 1 • 1964 Commissioner of Income-tax, Kerala and Coimbatore v. L. W. Ruwr::l 570 SUPREME COURT REPORTS [1964] Held: The answers to the questions of law as given by the High Court were correct. Unless a vested interest in the sum accrues to an employee, it is not taxable. In the present ccse, no interest in the sum contributed by the employer under the scheme vested in the employee, as it was only a contingent interest depending upon his reaching the age of superannuafon. lt is not a perqu.isite allowed to him by the employer or an amount due to him from the employer within the meaning of s. 7(1) of the Act. A perquisite is only that amount of money which is allowed to the employee by or is due to him from the employer or is paid to him to elfect an insurance en his life. Smyth v. Stretton, (1904), 5 T.C. 36, and Edwards (H. M. Inspector of Taxes) v. Roberts, (1935), 19 T.C. 618, referred to. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 220/ 1963. Appeal by special leave from the judgment and order dated January 9, 1961 of the Kerala High Court in I.T.R. Case No. 17 of 1959. K. N. Rajagopal Sastri and R. N. Sachthey, for the ap- pellant. The respondent did not appear. April I, 1964. The Judgment of the Court was delivered by SuM,a R.,,,; J. SuBBA RAO, J.-This appeal by special leave preferred against the judgment of the High Court of Kerala at Erna- kulam raises the question of the interpretation of s. 7(1) of the Indian Income-tax Act, 1922 (Act No. XI of 1922), here- inafter called the Act. The respondent, L. W. Russel, is an employee of the English and Scottish Joint Co-operative Wholesale Society Ltd., Kozhikodc, hereinafter called the Society, which was incor
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