GENERAL FAMILY PENSION FUND vs. THE COMMISSIONER OF INCOME-TAX, WEST BENGAL

CIVIL APPEAL No. 144/1953Supreme Court[1955] 1 S.C.R. 82201 November 1954Bench: 5 JudgesAuthor: MEHR CHAND MAHAJAN, SUDHI RANJAN DAS, GHULAM HASAN, NATWARLAL HARILAL BHAGWATI, T.L. VENKATARAMA AIYYAR OF8 pages
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What were the facts?

The appellant, General Family Pension Fund, a company established in 1870 and registered in 1906, conducts business exclusively in granting terminable pensions or annuities dependent on human life. The dispute concerns the income-tax assessment for the periods 1943-44 to 1946-47. The Income-tax Officer's initial assessments in 1945 were challenged. The Appellate Assistant Commissioner remanded the case for further enquiry. Subsequently, in 1946, the Income-tax Officer made fresh orders for all four years, holding the business was not life insurance and computation should be under Rule 2(a), but erroneously used figures from Rule 2(b) as a basis. The Appellate Assistant Commissioner confirmed these orders, stating the annuity business was life insurance and Rule 2 applied. The Tribunal, in 1949, held the business was "in a way" insurance and remanded the matter for correct computation under Rule 2.

What did the Supreme Court hold?

The Supreme Court held that the business of the appellant company is indeed life insurance business and its profits should be computed in accordance with Rule 2 of the Schedule to the Income-tax Act. Regarding the second issue, the Court found that the Income-tax Officer had failed to make an independent computation under Rule 2(a). The Court noted that while the High Court believed the appellant had not provided necessary materials, the Tribunal's order and statement of the case contained no finding that the appellant had withheld requisite materials. The admission by the Departmental Representative before the Tribunal that the calculations under Rule 2(a) were not in accordance with its requirements, coupled with the absence of a finding of wilful failure by the appellant to produce evidence, led the Supreme Court to conclude that there was no proper determination of profits under Rule 2(a). Consequently, the Tribunal's order remanding the case for further enquiry and fresh disposal in accordance with law was deemed correct. The appeal was allowed, and the second question referred by the Tribunal was answered in the negative, directing the Income-tax Officer to proceed with the enquiry as per Rule 2.

What were the issues?

1. Whether the business of the appellant company, which consists of granting terminable pensions or annuities dependent on human life, constitutes "life insurance business" within the meaning of Section 2(11) of the Insurance Act, 1938, and therefore, its profits and gains are to be computed in accordance with Rule 2 of the Schedule to the Indian Income-tax Act, 1922. The assessee contended that the business is life insurance business and profits should be computed under Rule 2. The revenue, through the Income-tax Officer, initially argued it was not life insurance business, then adopted figures from Rule 2(b) for Rule 2(a) computation. The Tribunal held it was "in a way" insurance. 2. Whether the Income-tax Officer correctly computed the profits of the appellant company under Rule 2(a) of the Schedule to the Indian Income-tax Act, 1922, by adopting the figures arrived at under Rule 2(b) without an independent computation. The assessee argued that no independent computation was made under Rule 2(a) as required by the Rules. The revenue, via the Departmental Representative before the Tribunal, admitted that calculations under Rule 2(a) were not in accordance with its requirements, explaining that necessary information was unavailable and an estimate based on Rule 2(b) was used.

Which sections of the Income-tax Act were involved?

Section 10(7),Section 2(11),Section 66(1)

AI-generated summary — verify with the full judgment below

1954 India United Mills Ltd. v.

Commissioner of Excess Prefits Tax, Bombay.

Vtnkatarama AYJar J, 1954 Novttnber I. 822 SUPREME COURT REPORTS [1955] relief granted, and that when the Excess Profits Tax Officer finds that an assessee to whom relief had been granted under section 26(3) has utilised the buildings, plant or machinery in business after the termination of the war, he is entitled to proceed under section 15 of the ·Act.

In the result, the appeal fails, and is dismissed with costs.

Appeal dismissed. GENERAL FAMILY PENSION FUND I ' THE COMMISSIONER OF Il'iCOME-TAX, WEST BENGAL, [MEHR CHAND MAHAJAN C.J., s. R. DAS, GHDLAM HASAN, BHAGWATI and VENKATARAMA AYYAR JJ.] Indian Income-tax Act (XI of 1922), s. 10(7) and schedule Rule 2(a)(h) as published in 1939-Inco1ne-tax on insurance company- Hotv ascertained-Statement of Depa1·tn1ental Representative, Effect of-Insurance Act (JV of 1938) s. 2(11)-Life Insurance business.

In accordance with the provisions of s. 10(7) of the Indian Income-tax Act, 1922, the profits and gains of Life Insurance busi- ness for the periods 1943-1944 to 1946-1947 are to be computed under Rule 2(a) and Rule 2(b) o

The order continues below.

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