LexSASADHAR CHAKRAVARTY AND ANR. versus UNION OF INDIA AND ORS.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
A
B
SASADHAR CHAKRA VARTY AND ANR.
v.
UNION OF INDIA AND ORS.
NOVEMBER 4, 1996
[A.M. AHMADI, CJ., K.S. PARIPOORNAN AND
SUJATA V. MANOHAR, JJ.]
Income Tax Act, 1961-Schedule IV-Part B-Clause Jl(cc)-
Income Tax Rules, 1962-Rules 89 and 91---{;onstitutionality of-Whether
arbitrary-Creation of superannuation fund-Fund being used to purchase
C annuity of Life Insurance Corporation at the time of death/retirement of
employee-No option to invest in any other place/scheme-Whether in the
interest of the employees-{;onstitution of India-Article 14.
M/s. Indian Oxygen Ltd., had set up a non-contributory
D superannuation fund called Indian Oxygen Ltd. Staff Pension Fund.
Under the scheme of the Fund, the employer made contribution in
respect of each of its employees (the beneficiary of the Fund). The
contribution was .made in the form of a fixed percentage of the salary
of each of the employee. At the time of retirement or death of each
employee or on his becoming incapacitated prior to retirement, the
E contribution made to the Fund was utilised for purchasing an annuity
from the Life Insurance Corporation of India.
The fund was an "Approved Superannuation Fund" as defined
under Section 2(6) of the Income Tax Act, 1961 and the contributions
F made by the employer to the Fund was deducted from the income of
the employer for the purpose oflncome Tax. Clause ll(cc) of Part B
of Schedule IV of the Income Tax Act, 1961 grants power to the
Central Board of Direct Taxes to frame Rules for regulating the
investment or deposit of the moneys of an approved superannuation
fund. In exercise of the said power Rules 82 to 97 of the Income Tax
G Rules, 1962 were framed. Under the Rules, the contributions made
towards the Fund had to be invested in a Post Office Savings Bank
Account or with a Scheduled Bank. Under Rule 89 of the Income Tax
Rules 1962, for the purpose of providing annuities for the beneficiries
the trustees of the superannuation fund are required, either to enter
H into a scheme of insurance with the Life Corporation of India
356
SASADHARCHAKRAVAR1Yv. U.0.1.
357
or they have the option to accumulate the contributions in respect of A
each beneficiary and purchase an annuity from the Life Insurance
Corporation of India at the time of retirement or death of each
employee or his becoming in capacitated prior to retirement Rule 91
provides that the beneficiary shall not have any interest in the
insurance policy taken out by the trustees and that he shall be entitled
only to an annuity. Rule 91 further prohibits the employer from B
receiving the money of the Fund or have any lien or charge thereon.
In 1985, certain improvements were made to the exisiting Fund
but the benefit of the improvements was restricted only to the current
employees and were not passed on to the past employees who were
pensioners. This was challenged by way of a writ petition by the C
petitioners. It was contended by the petitioners that denial of the
improvements to the Fund made in 1985 to the existing pensioners
was arbitrary and violative of Article I4 of the Constitution of India.
It was further contended that clause ll(cc) of Part B of Schedule IV
of the Income Tax Act, 1961, conferred unguided rule making power
to the Central Board of Direct Taxes and was therefore, arbitray. D
Validity of Rules 89 and 91 of the income Tax Rules, 1962 was also
challenged. The petitioners contended that the trustees of the
Superannuation Fund should not be compelled to purchase an annuity
from the Life Insurance Corporation but should be free to invest the
Fund in a manner which would fetch the beneficiary a higher return. E
The petitioners also contended that in view of Rule 91 of the Income
Tax Rules, 1962, the Life Insurance Corporation appropriates the
capital purchase price on the death of the annuitant which amount
to unjust enrichement of the Life Insurance Corporation at the cost
of the beneficiary.
Dismissing the Writ Petition, this Court
HELD: I. Under the Indian Oxygen Ltd. Staff Pension Fund
when an employee retires, all accumulated contributions in respect
F
of the concerned employee made by the employer to the Pension Fund G
are utilised for the purpose of purchasing an annuity from the Life
Insurance Corporation of India for the benefit of the employee. The
right of the employee to receive the annuity and the quantum of this
annuity get crystallised at the time of purchase of the annExcerpt shown. Read the full judgment & AI analysis in Lexace.