LexCOMMISSIONER OF INCOME TAX WEST BENGAL - I, CALCUTTA. versus ASSOCIATED ELECTRICAL INDUSTRIES (INDIA) PRIVATE LIMITED.
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627 WOO:SSIONER OF INCOME TAX WEST BENGAL - I, CALCUTl'A. Vo ASSOCIATED ELECTRICAL INDUSTRIES (INDIA) PRIVATE LIMITED. OCTOBER 10, 1985 [V.D. TUl2APURKAR AND R.S. PATHAK, JJ.] ' Indian Income Tax Act 1922 Sections 10(2) (xv) and 10(4)(c). Company - Pension and Life Assurance Plan for employees - Company contributing to premium - Plan rules amended to make direct payment of policy amount to members - Company having no control over money - Expenditure incurred on contribution by company to Plan - Whether an allowable deduction• The asses see, is s' . firm carrying on the busine&s of Electrical Engineers and Contractors. It put into effect a pension and Life Assurance Plan for its Europe&n employees about the year 1948 and took out policies with a Life Assurance Society in the name of those employees. Under the Plan, rules were framed and the assessee paid his part of the contribution to the premium and the employees whose lives were insured their portion of the premium. The assessee claimed a deduction every year of the sums paid by it by way of its contribution to the premium and the Income-Tax Department allowed the sum as a deductible expenses. However, for the first time, the Income-tax Officer disallowed the claim in respect of the assessment year 1956-57. The assessee 1 s appeal to the Appellate Assistant Commis- sioner, was dismissed on the · ground that the provisions of Clause (c) of sub-a. (4) of s. 10 of the Act barred the allowance claimed by the assessee as ·no· effective arrangements had been made by the assessee to secure that tax would be deducted at source from the amounts paid fiDally to the employees by the Society in terms of the policies. In further appeal, the Income-Tax Appellate Tribunal allowed the appeal in part, holding that all the contributions made in the relevant year by the assessee to the premium on the life policies of the Plan Members were not allowable as A B c D E F G H B c j) E F G H 628 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R. deductions in the hands of the assessee, and what was allowable were the contributions made by the assessee to the policies of such employees who had actually been paid pensionary and retirement benefits by the Society. After compl,eting the assessment for the year 1956-57, the Income Tax Officer reopened the assessments of the assessee for the assessment years 1948-49 to 1955-56 under s. 34 of the Act and disallowed the deductions which had been allowed earlier. On appeal by the assessee, the Appellate Assistant Comllissioner allowed the deductions claimed in respect of payments made by the Society to the employees in those years. The relevant rules under the Plan were amended on December 21, 1957 by the Board of Directors to provide that the amount due under the policies would be paid to the Plan Members entitled thereto, leaving the assessee with no control over the moneys. For the assessment year 1959-60, the asseasee claimed a deduction of all the contributiona made by it towards the payments on the policies. The Income Tax Officer, however, only allowed the contribution made in the relevant previous year on the ground that the offending rules had been amended but he did not allow the claim in respect of contributiona made in earlier years. The assessee appealed against the disallowance of the ciai.m respecting contr-ibutions made in earlier years and the Appellate Assi~tant Collllliasioner, allowed only the total contribution made by the assessee to the Pension Fund and the payment made by the Society in the assessment years 1959-60 and 1960-i'il and rejected the remaining claim. The aasessee filed a second appeal before the Income Tax Appellate Tribunal which held that the deductions were permissible under Clause (xv) of sub-Section (2) of section 10 of the Act, and that Clause (c) of sub-Section (4) of s. 10 of the Act did not come in the way, and allowed the appeal. The Appellate Tribunal at the instance of the Revenue, made a reference to the High Court which answered the question of law in favour of the assessee and against the Revenue. In the appeal, by the Revenue to this Court it was contended on behalf of the Revenue (l) that the expenditure cannot be said to have been incurred during the accounting year I I C.I.T. v. ASSOCIATED ELECTRICAL I 629 relevant to the assessment year 1959-60 as the assessee had made payments by way.o
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