ALLAHABAD BANK LTD. vs. COMMISSIONER OF INCOME-TAX, WEST BENGAL.

CIVIL APPEAL No. 161/1952Supreme Court[1954] 1 S.C.R. 19508 October 1953Bench: 5 JudgesAuthor: M. PATANJALI SASTRI, SUDHI RANJAN DAS, VIVIAN BOSE, GHULAM HASAN, NATWARLAL HARILAL BHAGWATI9 pages
AI SummaryDismissed

What were the facts?

Allahabad Bank Ltd. (the appellant) created a trust deed on March 15, 1946, for the payment of pensions to its staff. The deed stated a pension fund was constituted, with an initial sum of Rs. 2,00,000 transferred to three trustees. The bank could make further contributions but was not obligated to. In the accounting year 1946-47, the bank paid an additional Rs. 2,00,000 to this fund. The bank claimed this Rs. 2,00,000 as a deduction under Section 10(2)(xv) of the Income-tax Act as business expenditure. The Income-tax Officer, Appellate Assistant Commissioner, and Income-tax Appellate Tribunal rejected this claim. The Tribunal referred the matter to the High Court of Calcutta.

What did the Supreme Court hold?

The Supreme Court held that the High Court was correct in its conclusion that no legal and effective trust was created. The Court reasoned that the trust deed did not impose any obligation on the bank or the trustees to grant any pension. The payment and amount of pension were entirely at the discretion of the company, which also retained the power to withdraw or modify any pension and alter the rules at its will. This lack of certainty regarding beneficiaries and the absence of a clear obligation meant that the deed did not create a power in the nature of a trust that could be enforced by the court. Consequently, the Rs. 2,00,000 could not be considered as expenditure for the purposes of business within the meaning of Section 10(2)(xv). The Court found it unnecessary to decide the other questions raised by the parties. The appeal was dismissed.

What were the issues?

1. Whether, in the facts and circumstances of the case, the Income-tax Appellate Tribunal was right in disallowing Rs. 2,00,000 as a deduction under Section 10(2)(xv) of the Indian Income-tax Act. Assessee's contention: The appellant argued that the Rs. 2,00,000 paid to the trust was an expenditure laid out wholly and exclusively for the purposes of its business. The appellant sought to rely on English case law, specifically Brown v. Higgs and Burrough v. Philcox, to argue that even if the specific intention failed, the general intention in favour of a class could be carried into effect, implying a power in the nature of a trust that the court could execute. The appellant also raised questions regarding the scope of the reference. Revenue's contention: The revenue contended that the trust deed was not valid. The High Court focused on the validity of the trust deed as the determinative issue. The revenue also raised questions about whether the expenditure was capital or revenue and if it could be allowed under Section 10(4)(c).

Which sections of the Income-tax Act were involved?

Section 10 (2) (xv),Section 66(1),Section 3,Section 5,Section 6,Section 10 (4) (c)

AI-generated summary — verify with the full judgment below

) • S.C.R. SUPREME COURT REPORTS 195 appears to us to be apposite. It is unfortunate that l953 the last mentioned case was not brought to the notice 0 . . ,, . • onimiasioner oJ of the High Court before the Judgment under appeal Income-tax, was delivered.

West Bengal Dissent has been expressed in the judgment under appeal from the recent decision of the Bombay High Court in New Shorrock Spinning and 1l1 anuf acturing Co. Ltd. v. Commissioner of Income-tax, Bombay(').

The facts of that case are entirely different from the facts of the case before us and that decision has no manner of application to the present case. It is, there- fore, unnecessary for us to discuss or express any opinion as to whether the observations to be found in the judgment in that case are or are not well-founded.

For reasons stated above, we accept this appeal and hold that the answer to the question referred by the Appellate Tribunal to the High Court should be in the negative. The respondent company must pay the costs of the appellant in this court as well as in the High Court.

Appeal allowed.

Agent for the appellant: G. H. Rajadhyaksha.

Agent for the respondent: S. C. Bane

The order continues below.

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