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TMI Blog1964 (4) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... ployment. Under the terms of the scheme the trustee has to effect a policy of insurance for the purpose of ensuring an annuity to every member of the Society on his attaining the age of super-annuation or on the happening of a specified contingency. The Society contributes 1/3 of the premium payable by such employee. During the year 1956-57 the Society contributed Rs. 3,333 towards the premium payable by the respondent. The Income-tax Officer, Kozhikode Circle, included the said amount in the taxable income of the respondent for the year 1956-57 under section 7(1), Explanation 1, sub-clause (v) of the Act. The appeal preferred by the respondent against the said inclusion to the Appellate Assistant Commissioner of Income-tax, Kozhikode, was dismissed. The further appeal preferred to the Income-tax Appellate Tribunal received the same fate. The assessee thereupon filed an application under section 66(1) of the Act to the Income-tax Appellate Tribunal for stating a case to the High Court. By its order dated December 1, 1958, the Tribunal submitted a statement of case referring the following three questions of law to the High Court of Kerala at Ernakulam : " (1) Whether the contribut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice the provisions of the scheme, for the scope of the respondent's right in the amounts representing the employer's contributions thereunder depends upon it. The trust deed and the rules dated July 27, 1934, embody the super-annuation scheme. The scheme is described as the English and Scottish Joint Co-operative Wholesale Society Limited Overseas European Employees' Superannuation Scheme, hereinafter called the Scheme. It is established for the benefit of the male European members of the Society's staff employed in India, Ceylon and Africa by means of deferred annuities. The Society itself is appointed thereunder as the first trustee. The trustees shall act as agents for and on behalf of the Society and the members respectively ; they shall 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 the payment of the moneys payable under such policy or policies and shall hold such moneys as trustees for and on behalf of the person or persons entitled thereto under the rules of the scheme. The object of the scheme is to provide for pensions by means of deferred annuities for the members upon retirement from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice of the Society there shall be paid to him or his legal personal representatives the total amount of the portions of the premiums paid by such member and if he shall die whilst in the service of the Society or shall leave or be dismissed from the service of the Society on account of permanent breakdown in health (as to the bona fides of which the trustees shall be satisfied) such further proportion (if any) of the total amount of the portions of the premiums paid by the Society in respect of that member shall be payable in accordance with Table C in the Appendix to the Rules if the total amounts of the portion of the premiums in respect of such member paid by the Society together with interest thereon as aforesaid shall not be paid by the trustees to him or his legal personal representatives under sub-rule (1) of rule 15 then such proportion or the whole, as the case may be, of the Society's portion of such premiums and interest thereon as aforesaid as shall not be paid by the trustees to such member or his legal personal representatives as aforesaid shall be paid by the trustees to the Society ; the rules may be altered, amended or rescinded and new rules may be made in accorda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in another contingency, to the employee. Now let us look at the provisions of section 7(1) of the Act in order to ascertain whether such a contingent right is hit by the said provisions. The material part of the section reads : " 7. (1) The tax shall be payable by an assessee under the head 'Salaries' in respect of any salary or wages, any annuity, pension or gratuity, and any fees, commissions, perquisites, or profits in lieu of, or in addition to, any salary or wages, which are allowed to him by or are due to him, whether paid or not, from, or are paid by or on behalf of, ........ a company .... Explanation 1.--For the purposes of this section, 'perquisite' includes-- (v) any sum payable by the employer, whether directly or through a fund to which the provisions of Chapters IXA and IXB do not apply, to effect an assurance on the life of the assessee or in respect of a contract of annuity on the life of the assessee. " This section imposes a tax on the remuneration of an employee. It presupposes the existence of the relationship of employer and employee. The present case is sought to be brought under the head " perquisites in lieu of, or in addition to, any salary or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be the interpretation of section 7(1) of the Act, it is not possible to hold that the amounts paid by the society to the trustees to be administered by them in accordance with the rules framed under the Scheme are perquisites allowed to the respondent or due to him. Till he reaches the age of super-annuation, the amounts vest in the trustees and the beneficiary under the trust can be ascertained only on the happening of one or other of the contingencies provided for under the trust deed. On the happening of one contingency, the employer becomes the beneficiary, and on the happening of another contingency, the employee becomes the beneficiary. Learned counsel for the appellant strongly relied upon the decision of the King's Bench Division in Smyth v. Stretton. There, one Stretton, one of the Assistant Masters of Dulwich College, was assessed to income-tax in the sum of pound 385 in respect of his emoluments as Assistant Master received from the Governors of Dulwich College for the year ended the 5th day of April, 1901. He objected to the assessment on the ground that it included pound 35 not liable to taxation, being the amount placed to his credit by the Governors under the Provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernors of the Schools that they should apply it in a particular way. " No doubt it is possible for another court to come to a different conclusion on the construction of the provisions of the scheme ; but the learned judge came to the conclusion that clause (c) of paragraph 1 of the scheme provided for an additional salary to the Assistant Masters. Indeed, the Court of Appeal in Edwards v. Roberts construed a similar scheme and came to the contrary conclusion and explained the earlier decision on the basis we have indicated. There, the respondent was employed by a company under a service agreement dated August 31, 1921, which provided, inter alia, that, in addition to an annual salary, he should have an interest in a " conditional fund ", which was to be created by the company by the payment after the end of each financial year of a sum out of its profits to the trustee of the fund to be invested by them in the purchase of the company's shares or debenture stock. Subject to possible forfeiture of his interest in certain events the respondent was entitled to receive the income produced by the fund at the expiration of each financial year, and to receive part of the capital of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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