1992 (12) TMI 25 - HC - Income Tax

Summary

Issues:
Whether deferred annuity policies purchased by employers are assessable to tax in the hands of the assessee.

Detailed Analysis:
The case involved a reference application under section 256(1) of the Income-tax Act, 1961, for the assessment year 1973-74. The Tribunal sought the High Court's opinion on whether deferred annuity policies purchased by employers should be assessed for tax in the hands of the assessee. The assessee, a director of a company, was initially entitled to a commission on net profits. However, the company decided to purchase deferred annuity policies worth a specified amount in lieu of the commission.

The company purchased a deferred annuity policy for the assessee from the Life Insurance Corporation of India. The policy provided for annuity payments to the assessee upon retirement or to his dependents in case of his death. The assessee claimed that the amount paid for the deferred annuity policy should not be taxable. The Income-tax Officer and the Appellate Assistant Commissioner disagreed, but the Tribunal ruled in favor of the assessee based on a Supreme Court decision in CIT v. L. W. Russel [1964] 53 ITR 91.

During the High Court proceedings, it was argued that a previous judgment by the court in a similar case (CIT v. J. G. Keshwani [1993] 202 ITR 391) held that such amounts should be assessed under the head "Salaries." The court noted that the provisions under the 1922 Act and the 1961 Act were similar, and the previous judgment was conclusive on the matter. Therefore, the court answered the reference question against the assessee, confirming that the amount paid for the deferred annuity policy was taxable as salary income.

The judgment was delivered by G. C. Bharuka J., with Aftab Alam J. concurring. The court directed the transmission of the judgment to the Income-tax Appellate Tribunal, Patna Bench, in accordance with the Act. The decision was made without any order as to costs.