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TMI Blog1971 (3) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Indian Income-tax Act, 1922, which will hereafter be referred to as " the Act ". The question has arisen in connection with the assessment of the respondent who will hereafter be referred to as "the assessee", in respect of the assessment years 1959-60, 1960-61, 1961-62 and relates to his income under the head " Salary ". The relevant previous years ended on March 31, 1959, March 31, 1960, and March 31, 1961, respectively. The respondent, Lala Shri Dhar, was a director of Madan Mohan Lal Sri Ram and Co. (P.) Ltd., which will hereafter be described as the " employer-company ". He was stationed at the company's works at Calcutta. On, January 29, 1957, the board of directors of the employer company decided by a resolution to purchase personal accident insurance under comprehensive policy in respect of the assessee and one other person, Lala Shri Ram. We are concerned in this case with the assessee only. The policy was effected on February 3, 1958, with the London Lancashire Insurance Co. Ltd., the premium payable being Rs. 1,597.19. The duration of the policy was one year. The insurance company undertook to pay to the insured the benefits written in the schedule thereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the amount of premium paid by the employer-company in the present case was not liable to be treated as a perquisite in the hands of the assessee and deleted the addition of Rs. 1,597 in all the three years under appeal. The revenue preferred appeals for all the three years under reference before the Income-tax Appellate Tribunal against exclusion of the income of Rs. 1,597. It was contended on its behalf that the payment of premium was covered by clause (v) of Explanation 1 of section 7(1) of the Act and ought to have been treated as a perquisite in the hands of the assessee. At the hearing of the appeal, it is not merely with reference to clause (v) but also with reference to clauses (iii) and (iv) of Explanation 1 of section 7(1) that arguments were addressed. The Tribunal, however, took the view that the payment of premium by the employer-company was not covered by any of the three clauses in Explanation 1 and thus dismissed the appeal. At the request of the Commissioner of Income-tax, the Tribunal, however, referred for the opinion of this court the following question of law : " Whether, on the facts and in the circumstances of the case, the premium of Rs. 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e " accountable person " the Zonal Appellate Controller of Estate Duty, Delhi, deleted the amount holding that there could be no question of the deceased having any interest in the compensation and that the mere right of nomination which the deceased had exercised in that case was of no consequence. The revenue appealed against the decision to the Appellate Tribunal which confirmed the exclusion. On a reference made to this court, it was held that the right to get compensation as a condition of one's service created such an interest in property as any other interest which a person might have in incorporeal property, such as chose-in-action, etc. The circumstance that the occasion for the exercise of that right arose after the death of that person and was also conditional upon death did not in any way detract from the existence of that right and the deceased's interest therein during his lifetime. Mr. Sharma contended that, although the occasion for the exercise of the right arising out of the, policy of personal accident insurance might arise after the death of that person and in the case of other injuries it might arise during his lifetime, yet that did not in any way detract fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olicies may be taken and the company will pay the premium in respect of such insurance." This resolution clearly shows that the decision to take the policy was taken by the board of directors of the employer-company. It was not a voluntary act of the assessee himself. It also shows that the proposal of the policy was to be filled in by the assessee, but it was the duty of the employer-company to pay the premium in respect of such insurance. There is nothing on the record to show that the assessee himself wanted to take that insurance or that if the employer-company stopped paying the premium the policy would still have been taken or that if it had been taken, it would have been renewed from year to year. It is wellknown that under the insurance law if the person taking a policy, either on his own life or in respect of personal accidents, does not pay the premium, the policy lapses and the person has no right to claim any insurance from the insurance company by the mere fact that he had signed the proposal for insurance and no payment of premium was made by him to the insurer. The Tribunal, therefore, appears to us to be right when it says that clause (iv) of Explatiation 1 did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actually derived by him as the payment of the amount under the policy depended upon events which may or may not take place. The mere covering of risk of accident cannot be said to be a benefit till the policy matures. We have already said that the policy was taken out by the employer-company to safeguard its own interest and to provide itself with a cover that in the event of the assessee being involved in an accident, the compensation amount would be paid by the insurer The payment of premium in respect of such a policy or acquiring cover. in the form of insurance policy could not be said to be a benefit granted to the assessee. Clause (iii) is, therefore, clearly inapplicable to the facts of the case. This takes us to clause (ii), which reads as under : " the value of any benefit or amenity granted or provided by a company free of cost or at concessional rate to an employee who is a director thereof or who is substantially interested in the company within the meaning of sub-clause (iii) of clause (6C) of section 2. " This clause has reference to sub-clause (iii) of clause (6C) of section 2, which reads as under : " the value of any benefit or perquisite, whether convertib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e society had to contribute every month 1/3rd of the premium payable by each employee. The remaining 2/3rds for effecting a policy of insurance as paid by the employee concerned. The society as trustees had to take out policies of insurance securing a deferred annuity upon the life of each employee equivalent to the pension to which he would be entitled on his attaining the age of superannuation. If an employee left the service of the society or was dismissed from service or died in the service of the society he was entitled only to be repaid the total amount of the portions of the premiums paid by him though the trustees in their discretion, under certain circumstances, could give him a proportion of the premiums paid by the society. It was also open to a retiring employee to elect to surrender the right to the annuity and receive the amounts paid by him and by the society by way of premiums with interest. It was held that (i) until an employee attained the age of superannuation he did not acquire any vested right in the employer's share of the contribution towards the premiums: at best he had a contingent right therein, and (ii) that the expression " perquisites which are allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal, the Tribunal has actually not gone into the question of correspondence between Messrs. Jardine Henderson Ltd. and Shri F. H. Vallibhoy, Commissioner of Income-tax, West Bengal. The reason is quite apparent. In the resolution which the Commissioner of Income-tax, West Bengal, was asked to consider, the insurance policies were taken out by the company concerned on its own behalf and as agent of the associated companies in respect of the employees of such companies. The annual premiums were paid by the company each year and on the introduction of the scheme the employees of the company or associated companies concerned were advised by means of a circular letter that while such employees did not have any contractual right to any benefit arising from the policy, it was the intention of the company or associated companies, as the case may be, to apply any moneys paid by the insurer for the benefit of the employee or his dependents subject to adjustments in respect of tax liability to which the employer may be liable in respect thereof. While replying to this letter the Commissioner made it clear that it was not obligatory on the employer-company to pass on the insurance money to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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