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TMI Blog1961 (1) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... on completion of the age of 55, and would not under clause 15 of the deed be payable, if the employee left service earlier, or be dismissed in the meanwhile, or died. Were the employment to end because of any of the three events stated above, the sums paid by the employee as the premiums were to be refunded to him or his legal representative. Under another provision of the arrangement, should the discontinuance be as the result of ill-health or unsuitability, the society in its discretion could pay a proportion out of the society's contribution to the employee or his legal representative. The arrangement also provided that were the retiring employee to elect not to take the annuity, it would be open to him to surrender the right and to get back the amounts paid by him and by the society in this behalf with interest. In all the cases, the trustee collected the money, the employer-society being constituted the trustee under the terms of the deed which, in its turn, paid the premia to the insurer and received later from the insurer. In the assessment year 1956-57 the society hadeoiitfibuted the following sums for the following employees: R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue to the applicant by or from the employer in the accounting year? (3)Whether the deferred annuity aforesaid is an annuity hit by section 7(1) and paragraph (v) of explanation I thereto? These three questions are common to the two references, though one of which, Income-tax Reference No. 17 of 1959, has been made on the application by L.W. Russel, and the other, Income-tax Reference No. 18 of 1959, has been referred by petition of the remaining eight employees. When dealing with the arguments by the learned advocate for the assessees, it would be of advantage to give extracts from the trust deed, as well as summarise the important parts of the rules, under which the contributions have been made. Trust Deed Paragraph 2. The society hereby declares that it will pay the proportion of the premiums payable by the society under the rules of the scheme and will observe and perform its obligations under the scheme. Paragraph 3. The trustees shall as agents for and on behalf of the society and the members of the scheme respectively effect or cause to be effected such policy or policies as may be necessary to carry out the scheme and shall collect and arrange for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be paid such further proportion of the total amount of the portions of the premiums paid by the society in respect of a member in accordance with Table C in the Appendix, should the member die whilst in the service of the society, or leave, or be dismissed from the service of the society on account of permanent breakdown in health. That Table C among other things provides as follows: Number of years of service of members with the society in India, Ceylon or Africa. Proportion of total amount of premiums paid by the society which is payable to the member or his legal personal representatives. Under 10 years None. Over 10 years but under 15 years One-quarter. 15 20 One-half. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat mere expectancy does not amount to acquisition of right has been again accepted in Cotton Agents Ltd. v. Commissioner of Income-tax [1960] 40 ITR 135 (SC), where the words income which accrues or arises were again interpreted according to what has been laid down in Sassoon's case (supra). The proposition is further established by Edwards (H.M. Inspector of Taxes) v. Roberts [1934-35] 19 Tax Cas. 618, which has been relied by the learned advocate of the assessee. The respondent in the case was employed by a company under an agreement that provided in addition to annual salary an interest in a conditional fund , which the company had to create by payment at the end of each financial year of a sum out of its profits to the trustees of the fund to be invested by them in the purchase of the company's shares or debenture stock. The respondent, who was entitled to the income at the expiration of each financial year and to part of the capital of the fund at the expiration of five financial years, resigned from the service when the trustees transferred to him the shares, which they had purchased out of the payments made to them in the years 1922 to 1927. The income-tax author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it from the payments would not justify being taxed under the Indian Income-tax Act. In further support of this view we may refer to Commissioner of Income-tax v. Bombay Burma Trading Corporation Ltd. [1933] 1 ITR 152 (Rang) where the question referred to was whether the interest paid by the company's own contribution to the provident fund account of that member is income falling under the head 'salaries' as denned in section 7, Income-tax Act , and the answer at page 157 reads as follows: In my opinion, upon a true construction of section 7(1) unless and until the salary has been received by the employee and has been paid by the company to him, such salary is not assessable to income-tax. The construction that I am disposed to put upon section 7(1) is supported by the terms of section 18(2)... It follows that the benefit in money, for which the person is being made liable to the tax, should be vested in order to be treated as salary, wages, annuity, pension, gratuity, fee, or commission; otherwise annuity under will, while the testator be still alive, would be taxable under section 7(1). The proposition which the learned Government pleader has urged is tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service from the benefit of the employer's contribution. It follows that on a fair reading of the provisions the assessees till the pensionable age be reached obtain no rights in the employer's contributions and in those circumstances we cannot hold the employer's contribution would attract the liability under section 7(1). The learned Government pleader has further urged that paragraph 5 of Explanation 1 to section 7(1) covers the employer's contribution in the case due to their being sums payable under a contract for annuity on the life of the assessee. We feel that the aforesaid paragraph to the Explanation contemplates two classes: the first being where a sum is payable by the employer to effect an assurance on the life and the next where the sum by the employer is paid in respect of a contract for an annuity on the life of the assessee. Obviously the payments taxed here are not covered by the first, and the learned Government pleader has urged that they are in respect of a contract for an annuity. The taxing authorities have also assessed as though the second class covered the payments. But even such payments must confer some present interest on the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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