Law:

Section:

Section 37(1) of the Income-tax Act, 1961 [Corresponding to section 10(2)(xv) of the Income-tax Act, 1922] - Business expenditure - Allowability of - Assessment year 1947-48 - Assessee-bank executed a deed purporting to create a trust for payment of pension to members of its staff - During relevant previous year assessee paid certain sum in said pension fund and claimed same as business expenditure under section 10(2)(xv) of 1922 Act - It was found that there was nothing in terms of deed which imposed any obligation on bank or its officers to grant any pension to any officer of staff who made application to them for pension - Pension, if granted, could be withdrawn, modified or determined if in opinion if bank or officers authorized in that behalf, conduct of recipient or circumstances of case should justify them in so doing - Further, regulations in relation to fund could also be altered and new regulations could be made to exclusion of or in addition to all or any of regulations contained in deed of trust - Whether beneficiaries could not be said to have been indicated with reasonable certainty and there being no obligation imposed upon trustees, no trust in fact was created - Held, yes - Whether, therefore, provision for payment of pension in relevant accounting year was not expenditure for purposes of business within meaning of section 10(2)(xv) of 1922 Act - Held, yes FACTS The assessee-bank executed a deed purporting to create a trust for the payment of pensions to the members of its staff. The deed declared that a pension fund had been constituted and established, that a sum had already been made over to three persons who were referred to as the "present trustees" and proceeded to state that the fund would consist in the first instance of the said sum and that there would be added to it such further contributions that the bank might make from time to time, though it would not be bound to make such contributions. In the course of the relevant accounting year, the bank made a further payment to this fund. In its assessment for the relevant assessment year the assessee claimed deduction of that sum under section 10(2)(xv) on the ground that it was an item…

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