Sen, J. - (1.) This is a reference under Section 66(1) of the Indian Income Tax Act, 1922, hereinafter called the Act.
(2.) The following questions have been referred us for our opinion :-- (1) Whether on the facts and in the circum-stances of the case the sum of Rs. 1,83,434/-was an expenditure effectively laid out or expended during the accounting year 1955 within the meaning of Section 10(2)(xv) of the Indian Income Tax Act? (2) If the answer to question No. 1 is in the affirmative, then whether the said expenditure of Rs. 1,83.434/- represented a revenue expenditure?
(3.) The Tribunal submitted a statement of the case under the aforesaid section and the facts are briefly stated as follows :-- The assessee, the Indian Molasses Co. Pr. Ltd., Calcutta, is a private limited company. Its Managing Director Mr. J. B. R. Harvey, entered the service of the company in 1935. He was due to retire, had he lived, on September 20, 1955 on attaining the age of 55. He was a married man. When Mr. Harvey entered the service of the company, it was arranged that he would get a pension when he retired, but this arrangement was not reduced to writing. Pursuant to this arrangement, the company executed a trust deed elated September 16, 1948 appointing three trustees for the purpose of providing the pension and the deed recited that the assessee company was under an obligation to provide Mr. Harvey with a pension. In order to discharge the obligation the assessee company paid to the trustees in 1948, a sum of Rs. 1,09,643/- and undertook to pay to the trustees annually thereafter a sum of Rs. 4364 for each of the six consecutive years. The payments were made up to 1954 and the total amount came up to Rs. 1,35,827/-. Under the trust deed the trustees agreed to hold the aforesaid sum on trust and to spend the same in taking out a deferred annuity policy with the Norwich Union Life Insurance Society in the name of the trustees but on the life of Mr. Harvey to cover an annuity of 720 per annum payable to him for life from the date of his attaining the age of 55 years, provided that ft Mr. Harvey was to die before the age of 55 years, Mrs. Harvey was to receive an annual pension of 611-12s. On account of these payments the assessee company claimed deduction for the annual payments of Rs. 6364/-paid in each of the years previously in the assessment year 1949-50. These claims for deduction were disallowed up to the Supreme Court; the decision of the Supreme Court is reported in Indian Molasses Co. (Private) Ltd. v. Commissioner of Income Tax, West Bengal, which will be referred to in the appropriate places of our judgment.;