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TMI Blog1970 (4) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... on, the employees had collected Rs. 581. For the purposes of creation of the fund, a draft deed of trust had been also got prepared. The draft is drawn up in a manner that compels an inference that it was prepared by lawyers. Rules and regulations for the administration of the fund prepared in draft formed part of the schedule to the draft deed of trust. Apparently, the directors of the company had been consulted and had agreed to be parties to the deed of trust and the scheme of the welfare fund. On March 27, 1961, the board of directors of the assessee-company passed a resolution in connection with the constitution of the welfare fund as well as the execution of the deed of trust. That resolution is annexure " A " to the statement of the case. The recitals in the resolution take notice of the facts which we have mentioned above. By the resolution, the board approved of the constitution of the fund and of the draft of the trust deed and the rules and regulations of the fund. The board further nominated the first trustees of the fund, some of the trustees being some of the directors. The board nominated the chairman and the deputy chairman of the board of trustees. The board furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employees was so small that by that small expenditure no lasting and/or enduring asset could ever be brought into existence. The expenditure was not incurred towards any existing liability of the assessee-company in favour of its employees. This was only a voluntary contribution made so that certain amount of contentment may exist in the employees for continuance of better relations between them and the assessee-company. He mainly relied upon the scheme of the fund in this connection. He pointed out that, under the scheme, the corpus of the fund was liable to be utilised and exhausted and this fact proved that this expenditure could never create any advantages and/or any asset of lasting nature of any kind. In this connection, he relied upon the decision of this court in the case of Commissioner of Income-tax v. New India Assurance Co. Ltd. In reply, Mr. Joshi repeated the reasoning contained in the observations in the order of the Appellate Tribunal. His main submission was that the expenditure of Rs. 25,000 would be capital expenditure, because it was made with the object of enabling the assessee-company to establish a fund and offer to its employees benefits as mentioned in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es are authorised to dispose of all applications for payments and to make payments and/or to give loans to the employees of the company. Now, there is nothing in the rules and regulations directing the trustees to make expenses of the fund from the income earned by the trustees. On the contrary, the scheme of the fund is to authorise the trustees to expend the corpus of the fund towards the beneficial objects mentioned in regulation 8. For this very reason, provision is made for receiving from time to time voluntary contributions from the employees and the company so that the trust and the fund may not altogether cease to exist by exhaustion of its corpus. This scheme of the fund goes to support the submission made by Mr. Patil on the basis of the small amount of expenditure of Rs. 25,000 made for the creation of the fund. Apparently, this amount was entirely insufficient to meet with the necessities of the employees of the company in respect of the purposes mentioned in regulation 8. Apparently, the terms of employment of the employees had not created any liability as against the company to expend for the necessities of its employees as mentioned in regulation 8. The expenditure w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the amount transferred by the assessee was not to be utilised for payment to employees according to the purposes and objects of the society.........it is an amount of a recurring nature and was intended to be an amount commensurate with the needs of the workers and their dependants......It seems from the terms indicated from the rules and regulations of the society that the entire fund was to be utilised for the general aims and objects mentioned in rule 2 and the manner in which the society administered the fund was more or less as occasion demanded rather than upon any principle. As and when applications are made by the employees or dependants of the deceased employees, if they are deserving cases, they are considered by the committee and amounts are sanctioned for the reliefs specified to the persons concerned and it is not dependent upon what is the income available for distribution nor even upon what is the amount at the credit of the fund. " The court noticed that the reasoning which had prevailed before the Appellate Assistant Commissioner was " that by this initial contribution the company was able to divest itself from future liabilities for payment to the employees ..... X X X X Extracts X X X X X X X X Extracts X X X X
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