Dipak Kumar Sen, J. - (1.) The relevant facts which have been found or are admitted and the earlier proceedings leading up to this reference are, inter alia, as follows : The Indian Molasses Co. (P.) Ltd., the assessee, a private limited company, appointed one J.B.R. Harvey in its service some time in 1935. It was a term of the employment that the employee in normal course would retire on attaining the age of 55 years on September 20, 1955. It was also arranged or understood that the employee would be entitled to receive a pension from the assessee when he retired. J.B. Harvey ultimately became the managing director of the assessee. On September 16, 1948, the assessee executed a deed of trust appointing three trustees with the object of providing a pension to the employee. In the same year, i.e., 1948, the assessee set apart and made over a sum of Rs. 1,09,643 to the said trustees.
(2.) The assessee also decided to pay and paid thereafter a sum of Rs. 4,364 per annum for six consecutive years to the trustees. It was recorded in the trust deed that the assessee was under an obligation to provide the employee with pension. The total amount paid to the trustees aggregated Rs. 1,34,827 which the trustees agreed to hold on trust and invest in a deferred annuity policy with an insurance company on the life of the employee to cover an annuity of 720 payable to the employee for life from the date of his attaining 55 years. It was further provided in the trust deed that if the employee died before he reached 55 years, his widow would receive a pension of 611.12 annually.
(3.) Subsequently, in 1954, the assessee agreed to grant an enhanced pension to the employee on account of increased cost of living and for the said purpose executed a supplemental trust deed on October 29, 1954. The trustees appointed earlier were also appointed trustees under the supplemental deed and the assessee paid a further sum of Rs. 47,607 to the trustees on the same terms, namely, that the trustees would receive the said supplemental amount on trust for the purpose of taking out a further life annuity policy in favour of the employee and his widow for an additional annuity of 186.14 per annum during the joint lives of the employee and his wife from the date when the employee attained the age of 55 years and for an increased annuity of 238.13 to the employee in the event of the death of his wife before the employee reached the age of 55 years, also an increased annuity of 238.13 per annum to the widow of the employee, in the event the employee died before attaining the age of 55 years.;