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Issues Involved:
1. Whether the sums paid as pension by the assessee-company are deductible under section 10(2)(xv) of the Indian Income-tax Act, 1922, or the corresponding section 37 of the Income-tax Act, 1961. 2. The nature of the obligation to pay pensions-whether it lies with the company or the Staff Pension Fund. 3. The treatment of excess payments made by the company over the income received from the fund. Issue-wise Detailed Analysis: 1. Deductibility of Pension Payments: The primary issue was whether the sums of Rs. 13,789, Rs. 16,587, Rs. 31,454, Rs. 14,622, Rs. 12,907, and Rs. 15,570 paid as pension by the assessee-company for the assessment years 1959-60 to 1964-65 are deductible under section 10(2)(xv) of the Indian Income-tax Act, 1922, or the corresponding section 37 of the Income-tax Act, 1961. The Income-tax Officer disallowed the claim, reasoning that the income credited to the Staff Pension Fund had already been subjected to tax and did not form part of the assessee's income. The Tribunal, however, held that the primary obligation to pay the pension was on the company, and the fund had no legal obligation to pay pensions to employees other than the specified beneficiaries. 2. Obligation to Pay Pensions: The court examined whether the obligation to pay pensions lay with the company or the Staff Pension Fund. The fund was initially constituted to give effect to an agreement dated March 14, 1939, and to provide pensions for employees and ex-employees. The rules of the fund, particularly Rule 9, indicated that the fund's income after expenses and specific pensions could be utilized by the company for pension payments. The court concluded that the payment of pensions was an expenditure of the fund and not the company. However, any excess payment made by the company over the amount received from the fund was considered a company expenditure. 3. Treatment of Excess Payments: For the assessment years 1961-62, 1962-63, 1963-64, and 1964-65, the company paid pensions exceeding the fund's income by Rs. 1,004, Rs. 5,070, Rs. 2,352, and Rs. 6,716, respectively. These excess amounts were charged to the company's profit and loss account. The court held that these excess payments were deductible under section 10(2)(xv) of the Indian Income-tax Act, 1922, or the corresponding section 37 of the Income-tax Act, 1961, as they were made out of business and commercial expediency. Conclusion: The court held that for the assessment years 1959-60 and 1960-61, the sums of Rs. 13,789 and Rs. 16,587 are not allowable deductions under section 10(2)(xv) of the Act. For the assessment years 1961-62, 1962-63, 1963-64, and 1964-65, only the excess amounts of Rs. 1,004, Rs. 5,070, Rs. 2,352, and Rs. 6,716, respectively, are allowable deductions. The revenue succeeded in substance and was entitled to its costs, with counsel fees set at Rs. 250.
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