Decided on December 06,1982



K.S. Viswanathan, Accountant Member - (1.) 1 to 4. [These paras are not reproduced here as they involve minor issues.] 5. In ground No. 3, objection is taken by the department against the allowance of Rs. 56,225 which represented excess provision for replacement of goods sold. The assessee supplies certain industrial machines along with certain guarantees on its performance. These guarantees are in the usual shape of warranties. The experience of the company shows that the customer is not satisfied with the performance of the machineries supplied and the company has invariably to incur some further expenditure in replacement of parts, etc. They have followed a system of accounting of providing for such expenditure consequent to the warranties on sale on a provisional basis. The company's experience had been that such provisions made are invariably required in executing the assessee's contract for performance of the machineries supplied. During the accounting year concerned, the assessee had made a provision of Rs. 1,89,787. However, during this year, the actual amount of expenditure incurred was only Rs. 1,33,562. There was thus an excess provision of Rs. 56,225. This excess provision had been written back to the accounts in the accounting year ended 30-6-1976 which is assessable for the assessment year 1977-78. 6. The ITO brought this amount to tax on the ground that this amount did not represent an expenditure and it was only an estimate. He also noted that the provision written back in the next year would be excluded from the assessment of that year. 7. The assessee appealed. The Commissioner (Appeals) accepted the assessee's explanation and deleted the addition. 8. Shri Sathe, for the department, contended that the entire provision is a mere contingent liability and in view of the authority in the case of Addl. CIT v. U.P. State Agro Industrial Corporation [1982] 133 ITR 597 (All.) a contingent liability cannot be allowed as a deduction. 9. We are unable to accept this submission. No doubt, the amount is contingent and at the time when the provision is made in the accounts it is merely on the basis of an estimate. But, such an estimate is based on the assessee's experience in the earlier years. We have been given particulars of the estimates made in the prior two years. For instance, in the accounts for the year 1972-73, the estimate of expenditure was Rs. 1,34,845 as against the actual of Rs. 1,42,903. For the accounting year 1973-74, the estimate was Rs. 2,06,129 as against the actual of Rs. 2,04,875. In the earlier years, the department had accepted the estimates made. For the accounting year 1973-74 the short provision of Rs. 8,058 had been allowed in the subsequent year. For the accounting year 1974-75, there was an excess provision of Rs. 1,254, but this was not sought to be taxed. When the assessee knows for certain that some expenditure has to be incurred and there is sufficient material to approximate the amount of such expenditure, as a prudent businessman, the assessee-company has to make a provision for the same. It may be that there are marginal differences in respect of the estimates and the actuals. But the accounting method followed by them ensures that such excess or shortfall is made good in the subsequent year. When such a method is followed uniformly for all the years, it will not be reasonable to meddle with it and make adjustments in the accounting year itself. After all, the assessee is a limited company. The rate of tax is the same. There is no loss for the department, either in disallowing the amount this year or taxing the excess next year. In these matters, one should not be very technical and should adopt a pragmatic approach. Although the ITO had noted that the excess would not be brought to tax in the next year, as a matter of fact, it has been assessed in the next year also. Under these circumstances, we should think that no disturbance should be made and the order of the Commissioner (Appeals) on this point should be upheld. 10 to 14. [These paras are not reproduced here as they involve minor issues.] 15. We now take up the facts regarding ground No. 2. In this ground, the department seeks to restore an addition of Rs. 4.5 lakhs made by the ITO. The facts leading to this addition are as follows. The assessee-company had created three separate trusts on 7-4-1973, the object of which was for the benefit of the employees working in the various units. The first trust was intended to benefit the staff in the central office, the second trust for the staff in the branch offices and the third trust for those working in the factories. The trust deeds are worded in identical fashion. The settlor in all these trusts is the assessee company itself. The trustees are two directors and one employee. In respect of the trust for the central office, Shri Patel, one of the employees, had been made a trustee, while the two other trustees are the two directors, Sathena and Aga. In respect of the trust for the branches, along with the two directors aforementioned, Shri B.K.G. Rao, an employee of the trust, was the trustee. In respect of the trust for the factory workers, the trustees were Sathena and Kabraji, directors and Mr. N.S. Mirza, an employee. 16. The trust properties initially consisted of Rs. 1,000 paid in cash. There had been further contributions from the company from time to time. The objectives of the trusts as given in the preamble of the deeds are the welfare and benefit of the staff. The objects have to be worked out through the rules and regulations framed thereunder. Rule 6 says that the trust fund would be more or less for making loans or grants of money to the employees for housing facilities, relief in any distress caused by elements of nature or otherwise, medical relief, education relief and any other welfare objects. We may mention that Clause 2 of the trust deed, which deals with the investments to be made by the trust, directs that the trustees should invest the trust fund other than the income derived from such funds in the purchase of shares or debentures of any kind issued by the assessee or in the fixed deposits with the assessee-company. 17. Since its inception, the company had contributed substantial amounts to the three trusts. In the accounting year 1972-73, which is relevant for the assessment year 1974-75, Rs. 1,26,000 were contributed to each of these trusts. For the accounting year 1973-74, the contribution was Rs. 1.5 lakhs each. Such contributions had been allowed as a deduction in computing the income for the respective assessment years. During the accounting year we are concerned with, there had been a similar contribution of Rs. 1.5 lakhs for each of the trusts. These totalling to Rs. 4.5 lakhs had been claimed as a deduction. 18. The ITO rejected the assessee's claim. He noticed that the trust is forced to invest their funds only in the shares and debentures of the assessee company and that only the dividend income could be used for. the purpose of the welfare of the employees. The amount utilized was trifling. He was of opinion that it amounted to a capital expenditure. The assessee had relied on the decisions of the Bombay High Court given in the case of CIT v. New India Assurance Co. Ltd. [1969] 71 ITR 761 and Hindusthan Klockner Switchgear Ltd. v. CIT [1971] 81 ITR 20. The Commissioner (Appeals) found that these decisions would apply to the facts of the case and he held that the claim is allowable. 19. The department is on further appeal before us. Shri Sathe made four submissions. He first submitted that the trust itself is not genuine and the case laws relied on do not apply on the facts of the case. Secondly, he submitted that even if the trust is genuine, it is not operative in law being in contravention of the rule against perpetuity. Thirdly, he submitted that even if the trust is valid, it is not for the purpose of business but for other certain oblique purposes. Finally, even if it is held to be for the purpose of business, he submitted that the expenditure was capital in nature. Elaborating the first point, Shri Sathe submitted that the trustees are only representatives of the management of the companies and nominated by the companies. The employees have no voice at all. Neither they have any representation. The trust is, therefore, an alter ego of the company only. He then pointed out that the initial corpus was a meagre sum of Rs. 1,000. This is, prima facie, insufficient for any welfare work for a company of the standing like the assessee. This invariably means that the trustees will have to depend on contributions from outsiders. Such contribution necessarily has to come only from the company since the beneficiaries are the company's employees. But, there is no obligation in the trust deed under which the company is obliged to make any such contribution. Taking all these facts, he submitted that the benefit for the employees is totally illusory. He then submitted that whatever welfare requirements of the staff are not brought on the records, there is really no nexus between the welfare of the staff and the expenses. The only effective result is that the trust has become the means for reducing the taxable income of the company. He also submitted that there was no obligation on the trustees to spend the amount on any welfare scheme within a time given. If the trustees accumulate funds for a number of years, they cannot be questioned. Further, pointing out to the clause which requires the trust to invest their funds in the shares and debentures of the company itself, he submitted that it would be only a further means of controlling the company. Finally, he submitted on this aspect of the matter that if these facts are kept in mind, it will be realized that the trust is only nominal or a make-believe. The case laws relied on by the assessee were instances of genuine trusts and they are not applicable. 20. Developing the second line of attack that the trust is not valid, he submitted that the trusts insofar as they hold property in a fiduciary capacity and with no legal requirements for its being spent within a stipulated time, violated the rule of perpetuity. He submitted that perpetuity rule would apply to trusts of every type. The law does not allow property to be tied dawn for an indefinite period as in this case. If the rule of perpetuity is offended, then the trust is ab initio invalid. He further submitted that even if the trust did not violate the rule of perpetuity, it was nevertheless not a valid trust because the beneficiaries of the trust are not ascertainable. For this purpose, he relied on the Supreme Court decision in the case of Allahabad Bank Ltd. v. CIT [1953] 24 ITR 519. 21. Shri Sathe further submitted that the object of the trust cannot be considered to be for the business of the assessee. In order to show that the contribution of Rs. 4.5 lakhs was the business expenditure, the company has to show that there was a requirement of this much of expenditure during the accounting year. There is no such requirement of expenditure shown. If there was no such expenditure, the contribution can only be towards the corpus of the trust fund. If the contribution is for the corpus of the trust fund, then it cannot be considered to be for the purpose of the business of the assessee. For the same reason, he submitted that if the contribution is for the corpus, the alternative contention that the expenditure is capital in nature would apply since that is laid down by the House of Lords in Atherton v. British Insulated & Helsby Cables Ltd. [1925] 10 TC 155. 22. Shri Khare, in support of the order of the Commissioner (Appeals), submitted that the ITO had rejected the claim only on the ground that it was a capital expenditure. No other reason had been given. Nobody had so far disputed that the trust was not genuine. He further submitted that in the prior assessment years these contributions had been allowed as a deduction. The funds had been utilised for the welfare of the employees as the accounts for the subsequent accounting years would show. He then pointed out that it is not correct to say that the employees had no voice in the management of the trust. He further submitted that in each of the trusts, there is one representative of the employees. All the funds of the trusts are at the control of the trustees only. The company cannot be accused of trying to control the management through the trusts because such a subterfuge is unnecessary since the company itself is a private limited company, with regard to the investments of the trust funds, he submitted that a proper reading of Clause 2 would show that only such funds which, in the discretion of the trustees required investment, could be considered for investing in the shares and debentures of the company. He submitted further that it is open for the trustees to invest in other securities also according to their discretion. He further pointed out that there is no requirement that the income should be invested. He pointed out that elaborate procedures had been laid out for dealing with the applications from employees for relief. 23. With regard to the objection that there was no contractual obligation to make a payment to the trustees, he pointed out that this was deliberately omitted because otherwise such contributions would become taxable in the hands of the trustees. With the result very little money would be available for trust activities. He then pointed out that the reduction in the tax liability of the company was a mere consequence and it was not an object. 24. With regard to the objection that the trust was not valid, he submitted that the rule against perpetuity has two aspects : (i) a general aspect and (2) a specific aspect as laid down in Section 14 of the Transfer of Property Act. He further submitted that the provisions of Section 14 of the said Act would not apply since the provision assumes that a transfer of property has been made in which an interest in property is sought to be created which will take effect after the lifetime of one or more persons living at the date of such transfer. The provisions, therefore, postulate a future vesting of property. In this case, there is an immediate vesting of property in the trustees. When the trust is a discretionary trust, i.e., where the trustees have the power to apply both income as well as corpus for the benefit of the beneficiaries, then the trustees may apply the entire trust fund in the year of donation itself and, therefore, it cannot be said that the transferor intended to create an interest which is yet to take effect. Shri Khare referred to the provisions in the trust deed which had provided distribution of the property of the trust on the determination of the trust. This would take place when the company is wound up. At that stage, the properties of the trust would be distributed among the members of the staff serving the company at the time of winding up. Even this, Shri Khare submitted, did not act to create an interest for an unborn person. At best it could be said that such a vesting of property on employees, who had not born at the time of creation of the trust, was void. The trust itself cannot be said to be void. He then submitted that the settlor is a company. The company has got perpetual life till it is wound up. So, the issue would be whether the expression 'beyond lifetime of persons living' would have to exclude the lifetime of the settlor which is a company. He pointed out that Section 5 of the Transfer of Property Act refers to companies specifically. If that is so, the assessee has to be treated as a living person and so long as the company is in existence, Section 14 of the Transfer of Property Act cannot apply. 25. He then submitted that assuming that the rule of perpetuity generally is applicable, even then, the authorities have held that where the trustees have power of disposing of both the income and the corpus of the trust, the rule of perpetuity will not apply. 26. With regard to the submission that the beneficiaries are not certain, he pointed out that at any given time the class of beneficiaries is certain being the employees of the company in the particular branch. The actual benefit may be given to an employee who needs it but the potential of the employees are the beneficiaries and there is no uncertainty. 27. He also submitted that the expenditure is only for the purpose of business. It is not necessary that there should be a pre-existing liability which the company will liquidate by transferring funds to the trust. In view of the clear provisions of the trust deed that the trustees can dispose of the corpus also, it cannot be said that contributions are earmarked for the corpus. He further submitted that on these facts the decisions of the Bombay High Court referred to by the Commissioner (Appeals) would clearly apply. 28. The first issue to be considered is whether the department can take up the additional arguments now put before us by Shri Sathe in support of the ITO's finding that Rs. 4.5 lakhs are not eligible for deduction. Shri Khare had pointed out that the only case of the ITO was that the expenditure was capital in nature. According to him, no other submission should be considered. We are, however, unable to accept Shri Khare's submission on this point. The issue before the ITO was whether this amount could be allowed as a deduction. It may be that there are a number of arguments both for and against the case for deduction. The ITO had given only one reason. That does not mean that the other arguments available with the department on the basis of the records should not be considered. Equally, the assessee also can support its stand by referring to the various other arguments which were never placed by them before the ITO. So long as no argument is advanced which is not based on materials on record, it is not correct to shut out either the department or the assessee. We are of opinion that it is open for the department to advert to any arguments available to them so long as they do not travel outside the records and so long as they do not call for further facts and materials. 29. The first submission of Shri Sathe is that the trust itself is not genuine. We are unable to accept this submission. According to Shri Sathe, the trustees are only the nominees of the company and ergo (sic) company itself. Therefore, there is no real expenditure and the trust is not genuine. This itself is not factually correct. We have stated in para 15 that some of the trustees are employees and not directors. It is true that no representation of any employees' association is given in the trust. But, that does not mean that the trust itself is one with the company. According to the trust deed, the trustees succeeding the first trustees have to be appointed by the company. This, no doubt, gives the company an upper hand in nominating the trustees. But, once the trustees take their office, they have to conduct themselves within the powers granted to them in advancing the objects of the trust and they cannot act as mere mouth-piece of the company. It has also been submitted that the corpus of the trust being only Rs. 1,000, it is totally inadequate for welfare work and that the trustees have to depend upon contributions from the company. No doubt, the company has to support the finances by contributions but it is in the company's interest to make the regular contributions to the trust. It is now more or less accepted that in these days where priority is given for welfare of employees it is a duty cast on the company to look after the welfare of their employees. For this purpose, the company has created this trust since the members would take over much of this work. The trust would be in a better position because they would be untrammelled by the administrative control of the company. It is also made sure that the employees have also a voice insofar as some of the trustees are bound to be employees. It is true further that there is no requirement on the part of the company to give any fixed contributions. But the reason for this had been explained by Shri Khare. If it was made compulsory, then perhaps such contribution would be treated as income of the trust and, therefore, taxed, with the result that the trust may have very little income for welfare activities. Shri Sathe had also submitted that there was no nexus between the welfare of the staff and the expenses and that the only result of the creation of the trust was to reduce the taxable income. We are unable to accept these arguments. The welfare of the staff is the object of the trust and there is an obligation for the trustees to expend the money on the objects of the trust. It is true that there is no fixed time given under which the funds have to be spent on the objects. But, we find that the trustees have drawn up rules and regulations and it is open for an employee who would require help from the trust to apply for the assistance. The trustees cannot sit over such applications. They will have to deal with it according to the rules and regulations. We are satisfied that sufficient safeguard has been taken to make the trust in any way illusory. 30. The second objection, i.e., the trust deed is not valid, has two aspects. The first aspect is that the trust violates the rule of perpetuity and the second is that the beneficiaries are uncertain. We take up the first aspect regarding rule of perpetuity. As Shri Khare pointed out, the rule of perpetuity has two aspects. The first is the general rule, which is part of the principles of property law, that the liberty of alienation should not be exercised to its own destruction and that all contrivances shall be void which tend to create a perpetuity or place property for every one out of the reach of the exercise of the power of alienation. Apart from this general law, there is also the rule of perpetuity as found in Section 14 of the Transfer of Property Act. We will first take up the general proposition. Shri Khare had submitted that neither the general concept nor the specific concept as found in the Transfer of Property Act would be applicable to the trusts such as the one created by the assessee. We are unable, to accept this submission as it is against the rules laid down by authorities. Keaton in the Law of Trust had pointed out in the 8th edition of his book at page 102 that the law of perpetuity would be applicable to trusts. The same is the position in Indian law as pointed out by O.P. Agarwala in his book on Trusts, 6th edition, at page 167. Commentaries on Transfer of Propery Act by Mulla as well as by V.B. Mitra also lay down that this rule would be applicable to trusts. 31. The general rule of perpetuity makes void any limitation on the free dealing in property. Now, a free dealing in property is subject to limitation when it is not open to the person holding the property to dispose it of in any way he likes. There are two further aspects to this. The first is a bar on the transfer of the property and the second is directions regarding the income of the property as distinguished from the corpus of the property. Almost all the cases regarding perpetuity have this in common that by a will or a trust the ownership of the property is tied down to certain limitations over a period. The ques-t ion is whether such limitations are applicable in the case of a trust, the object of which is the welfare of a group of individuals. If the group of individuals were to represent the cross-section of a society, then there is no difficulty because the objects being welfare and the beneficiaries being cross-section of a society, the trust itself would be qualified as a charitable trust. It is an admitted position that such charitable trusts escape the rigours of the rule of perpetuity. We can think of cases where the trust does not qualify as a charitable trust because the beneficiaries of the trust are in personal relationship to a common propositus. These are provident funds for the benefit of the employees of a company, superannuation funds, gratuity funds, etc., such trusts are never considered to violate the rules of perpetuity. 32. The reason why these trusts are not considered to violate perpetuity has been summarized in Halsbury's Laws of England. Quoting Megarry and Wade, it is stated that the pertinent questions, which may have to be asked in cases of gifts to trustees for non-charitable indefinite objectives or non-charitable unincorporated institutions or societies, which may last for an indefinite time, are as follows : First question is.Is it a gift to individual members for the time being constituting the association or is it a gift to the association ? If the former the gift is good ; if it is a gift to the association as such, the next question is : is it a gift free and unfettered or is it trust ? If it is an unfettered gift the gift is good. If it is a trust the final question arises : is it an endowment so that donee must hold the corpus for all times to come, cannot deal with the corpus as and when he pleases or is it an immediate beneficial, gift so that the donee can use the corpus and income as it pleases and when it pleases. Further authorities are also quoted which are given below : In re Clarke [1901]2 Chancery 110, Byrns J. stated-'it is I think established by the authorities that a gift to a perpetual institution not charitable is not necessarily bad. The test or one test appears to be, will the legacy when paid subject to any trust which will prevent the existing members of the association from spending it as they please ? If not, the gift is good. So also if the gift is to be construed as a gift to or for the benefit of the individual members of association. On the other hand if it appears that the legacy is one which on the terms of the gift or which by reasons of the constitution of the association in whose favour it is made tends to perpetuity the gift is bad.' In Drummond Ashworth v. Drummond [1914] 2 Chancery 90, a legacy was given to trustees on trust to pay the income to trustee of a company to contribute to the holiday expenses of the workmen employed in the spinning department of the company, in such manner as the directors in their absolute discretion think fit and the directors were empowered to divide the income equally or unequally between workmen and the residue of the estate should be held on trust for the old Bradfordians' club. It was held that the trust for the workmen was not a charitable trust but the residuary gift which imposes a trust that the money should be expended at the discretion of the trustees in the best interest of the school and the club was valid because it did not tend to perpetuity. In Re. Taylor v. Midland Bank Executor and Trustee Co. Ltd. v. Smith and Ors. [1940] 2 All England Report 637 a testator after making certain bequests to his wife and daughters directed his trustees to hold the residuary interest in the trust for the Midland Bank Staff Association, Liverpool and the District Centres formed the trust to be administered in accordance with the instructions and rules of the fund. Objects of the fund as set out in the constitution were partly of charitable and partly non-charitable nature and included rendering of financial assistance to past and present members of the staff of the bank. The fund however provided that it was to be administered in accordance with the instructions of the committee whose members were free to deal with it as they pleased ; it was held that the committee administering fund being at liberty to deal with it at their own free will there was nothing to render the gift invalid. 33. The principles of these decisions, as rightly pointed out by Shri Khare, are that when the trustees have powers to use and dispose of the corpus of the trust fund at their discretion and these powers are limited to the interests of the fund only, the rule against perpetuity is not violated. It has been made further clear in another decision in In re. Price [1943] 2 All ER 505 (Ch.) : Bequest of one half of the residual estate to an unincorporated society to be used at the discretion of the chairman and executive council of the society for carrying on the teaching of the founder Dr. Stoiner was held to be good because there was no perpetuity created, trustees having the power to spend both capital and income on the objects at their discretion. These decisions were reviewed by the Judicial Committee in an appeal from Australia : Sehy v. Attorney 1959-All E.R. 300 without dissent. 34. Shri Sathe had referred to Lawin on Trust and had cited the passage dealing with perpetuities which shows that even under these circumstances a trust similar to these would be void. We find that the case laws mentioned in the foot notes in Lawin are the same as the case law mentioned in Halsbury, to which we have made a reference earlier. Since Halsbury deals with them a little more elaborately than Lawin and since the facts and principles culled out by the Court are made clear therein, it appears that there is no real conflict on this point between the two authorities Halsbury and Lawin. What we have to see is whether the trustees are limited to utilising only the income and further whether they are limited from disposing of the property, i.e., the corpus. A careful reading of the trust deed shows that neither of the two limitations is present. As Shri Khare pointed out, the trustees are the owners of the property. This ownership is subject to the rights of the beneficiaries but, nonetheless, the trustees are the full owners. They have only a legal obligation attached to the ownership of the properties to utilise the property and income for the purpose for which the trust was created. The trust deed makes no difference between the income and the corpus. Both of them are part of the trust fund and this is made clear by the rules. The trust gives full authority to dispose of the trust fund for the objectives of the trust. Rule 6 makes clear that the trust fund, whether representing accumulated income or corpus, can be utilized in making loans or granting facilities to the employees of the company according to their requirements. Thus, there is no limitation that only the income should be utilised and consequently there is no tying of the property in violation of perpetuity. The three questions posed by Megarry and Wade (supra) have to be answered in favour of the assessee. We, therefore, hold that the trust deed does not violate the rule of perpetuity in its primary and general sense. 35. We are equally clear in our mind that Section 14 of the Transfer of Property Act does not apply to the facts of the case. In order to bring it in this section, there must be first an assumption that a transfer of property has been made and further that an interest in the property is sought to be created which will take effect after the lifetime of one or more members living at the date of such transfer. As we see, this assumption is not available in this case since there is no interest segregated which is sought to be given effect to after the lifetime of one or more persons living on the date of the creation of the trust. As Shri Khare pointed out, there is no question of a future vesting of property. The trustees are the full and complete owners of the properly subject only to rights of the beneficiaries. Even those rights of the beneficiaries cannot be considered as an interest in the property within the meaning of Section 14. It is well settled that a beneficiary of a discretionary trust, as in this case, does not have any vested right which could be quantified and treated as property passing on death-Weir's Settlement Trusts v. IRC [1970] 76 ITR 53 (CA) and Gartside v. IRC [1968] 70 ITR 663 (HL)-or to be treated as a part of the assets for the purpose of wealth-tax-CWT v. Master Jehangir H.C. Jehangir [1982] 137 ITR 48 (Bom.). So, it is not a case of an interest of any beneficiary which would be realisable on a future occasion after a lapse of time. 36. We have also considered this aspect from the point of the determination of the trust. According to Clause 6 of the trust deed the trust will determine on the winding up of the company. On such determination, the trustees would distribute the trust fund among the employees in a specified manner given in the clause. Merely because the manner of distribution of trust funds upon determination of the trust on winding up of the company is provided for in the trust deed, it cannot be said that there is an intention on the part of the settlor to create interest in favour of any specific unborn person. The trust being discretionary in corpus as well as income, there is no certainty that any property will remain at the time of winding up. Even if there is some property left we are of opinion that it would not create any invalidity. Only the creation of an interest in property in favour of the employees at the time of winding up of the company becomes void and this does not permit one 1o say that the transfer of the properties made to the trustees when the trust deed had full liberty to dispose of the corpus itself is ab initio void. There are no words or expression in the trust deed or the rules by which one could say that an attempt is made to create an interest which will take effect for the beneficiaries living at the time of winding up of the company. 37. Even if we assume all these points against the company, still, insofar as the settlor is the company and it has perpetual existence till it is wound up, it cannot be said that it violates perpetuity. So long as the company is not wound up, it is in existence and, therefore, one of the persons living at the time of creation of the trust is in existence. Shri Sathe submitted that the life of the settlor should not be considered for the purpose of Section 14 of the Transfer of Property Act. We are unable to see how this can be excluded when the expression used therein is 'one or more persons living at the date of such transfer'. 38. We are, therefore, satisfied that the rule of perpetuity is not violated and the trust is not invalid on that account. 39. The second objection is that the beneficiaries of the trust are uncertain. For this purpose, the Supreme Court's decision, in Allahabad Bank Ltd.'s case (supra) has 5een cited. We are not able to see how there is uncertainty in the beneficiaries of the trust. Clauses 2 and 3 of the trust deed make it clear that the beneficiaries would be the employees of the nature envisaged by Section 77 of the Indian Companies Act. There is no difficulty at all in determining who the employees of the company are. But, Shri Sathe, relying on the Supreme Court, decision in Allahabad Bank Ltd.'s case (supra), submitted that it is not sufficient for the purpose of validity of the trust and the trust deed should further be precisely spelt out which of the employees are entitled to the benefits. In our opinion, it is not necessary. There is no express limitation placed either in the rules or in the trust deed which would disable any employee from claiming (he relief. All the employees appear to be entitled and, therefore, all the employees are beneficiaries. In Allahabad Bank Ltd.'s case (supra), there was no such clear provision. The provisions of the trust deed therein made it clear that it was not so much a trust for the benefit of the employees but it was a trust for the persons who would be recommended by the bank for the payment of pensions. The employees had no direct access to the trust. They had to apply to the bank and the bank could withdraw, modify and determine any pension payable. The bank, i.e., the settlor, was invested with discretion in fixing the amount of pension and the trustees could not alter it. It was under those circumstances that the Supreme Court held that there was uncertainty as regards the beneficiaries and there was an absence of an obligation to grant any pension, with the result that there was no legal and effective trust created. This case appears to be easily distinguishable. 40. Shri Sathe's next submission was that the expenditure could not be considered to be for the purpose of business. We are unable to accept this submission. As we have pointed out, the welfare of the employees is certainly a matter of concern for the employer and in these modern days it is incumbent on the employer to make arrangements for meeting this expenditure. The employer can meet the expenditure either directly or indirectly by setting up trusts as this company has done. But, his case is that unless a requirement of such an expenditure is shown to be in existence during the accounting year, the contributions cannot be considered as business expenditure. In our opinion, the requirement regarding welfare is continuous and amounts would be required from time to time in order to meet the same. It may not be possible for the company to precisely judge the same and then set apart (he amount so required. It is precisely to avoid such difficulties that the assessee had to set up welfare trusts. After its setting up, it would be the problem for the welfare trusts to locate the areas requiring expenditure or the employees who require assistance and do the necessary to meet the requirements. We are satisfied that the expenditure is only for the purpose of business. 41. The last contention of Shri Sathe is that even then the expenditure is of capital nature. He had relied on the decision of the House of Lords in the case of Atherton (supra). In that case, the assessee had a contractual liability to pay pension to the employees. The company created a trust and transferred certain funds with the object that the trust would hereinafter meet the requirements of payment of pension to the retired employees. The sum transferred was arrived at upon the actuarial calculations and it was the sum which was thought necessary to enable past years of services of the existing staff to be taken into account for the purpose of pension, ft was held that the sum was not an admissible deduction in arriving at the company's profits being a capital expenditure. The House of Lords found this to be a nucleus of a pension fund and that the pension fund would completely extinguish an existing liability. There was, therefore, a benefit of an enduring advantage. The company, therein, thereafter need not bother about payment of pension to their employees, that being taken care of by the trust. In the case before us, there is no such complete extinguishment of any liability. The liability is continuous as we have pointed out. As and when necessity arises, the trust will have to deal with them by making payments by way of loans or outright gifts. There is no extinguishment of any liability, as in Atherton's case (supra). This had been explained by the Bombay High Court in the case of New India Assurance Co. (supra) as well as in the case of Hindusthan Klockner Switchgear Ltd. (supra). For these reasons, we are satisfied that this does not represent a capital expenditure either. Under the circumstances, it has to be considered only as a revenue expenditure and allowed as a deduction. 42. In the result, the appeal is partly allowed.;

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