Appeal No 2555 of 1966
Appeal from the judgment and order dated March 16 1966 of the Calcutta High Court in Income Tax Reference No 76 of 1962
section C Manchanda
G C Sharma R N Sachthey and B D Sharma for the appellant
A K Sen T A Ramachandran and D N Gupta for the respondent
775 The Judgment of the Court was delivered by Shah J
The respondent Company appointed one Harvey its Managing Director
Under the terms of agreement Harvey was to retire on attaining the age of 55 years
The Company arranged to provide a pension to Harvey on retirement and executed a deed of trust on September 16 1948 appointing three trustees to carry out that object
The respondent Company set apart in 1948 Rs 109643 and in each of the six subsequent years Rs 4364  and delivered the various amounts to the trustees who were authorised to take out a deferred annuity policy to secure an annuity of pound 720 per annum payable to Harvey for life
from the date he attained the age of 55 years and in the event of his death before that date an annuity of pound 61112 annually to his widow
In its return for the assessment year 1949 50 the Company claimed that in the computation of its taxable income Rs 109643 paid in 1948 to the trustees under the deed of trust were allowable as an amount wholly and exclusivelyexpended for the purpose of its business
In the subsequent years of assessment the Company claimed allowance of the annual payment of Rs 4364 
The Income tax Officer disallowed the claim
The Company disputed the decision and carried it to the Income tax Appellate Tribunal
The Tribunal submitted a statement of case to the High Court of Calcutta on the question whether the payments  constituted expenditure  within the meaning of that word in section 102xv of the Indian Income tax Act 1922 in respect of which a claim for deduction can be made subject to the other conditions mentioned in that clause being satisfied
The High Court answered the question in the negative
The view taken by the High Court was confirmed by this Court in appeal Indian Molasses Co P Ltd vs Commissioner of Income tax West Bengal1
This Court held that the expenditure deductible for income tax purposes is one towards a liability actually existing at the time but a sum of money set apart which may be deemed appropriated to a purpose for which it was intended on the happening of a future event was not expended within the meaning of section 102xv of the Act until the event occurs and since the Company had dominion through the trustees over the funds and there was a possibility of a trust resulting in its favour by setting apart
the funds no expenditure within the meaning of section 102xv of the Indian Income tax Act 1922 may be deemed incurred
During the pendency of those proceedings the Company ar ranged to give an enhanced pension to Harvey and executed a supplementary deed of trust on October 29 1954 and set apart an additional sum of Rs 47607 to enable the trustees to take out an annuity policy in the names of the trustees in favour of Harvey 1  776 and his wife to cover the enhanced pension
The terms of the original trust deed were made applicable to the supplementary deed
Harvey died in May 1955 before he was due to retire and in the return of its taxable income for the assessment year 1956 57 the Company claimed that Rs 183434 being the total amount paid by the Company to the trustees in terms of the original trust deed dated September I 6 1 94 8 and the supplementary deed dated October 29 1954 be allowed as a permissible expenditure in the computation of the Company s business profits in the previous year ending December 31 1955
The Income tax Officer disallowed the claim without assigning any reasons
In appeal the Appellate Assistant Commissioner confirmed the order observing that the amount paid long before the commencement of the previous year were not admissible under section 102xv of the Income tax Act 1922
The Income tax Appellate Tribunal in appeal reversed the order and allowed the claim of the Company holding that the amount of Rs 183434 was effectively disbursed during the accounting year and was on that account an admissible allowance in the computation of the Company s business profits
At the instance of the Commissioner of Income tax the Tri bunal submitted a statement of the case to the High Court of Calcutta on the following two questions  1 Whether on the facts and in the circumstances of the case the sum of Rs 183434 was an expenditure effectively laid out or expended during the accounting year 1955 within the meaning of section 102xv of the Income tax Act  2 If the answer to Question No 1 is in the affirmative then whether the said expenditure of Rs 183434 represented a revenue expenditure  The High Court of Calcutta recorded answers in the affirmative on both the questions
With certificate granted by the High Court under section 66A2 of the Indian Income tax Act 1922 this appeal is preferred by the Commissioner of Income tax
Answer recorded by the High Court on the first question was in our judgment correct
This Court had in the earlier decision Indian Molasses Co Private Ltd vs The Commissioner of Income tax  held that the Company had not parted with control over the amounts set apart between the years 1948 and 1954 for securing the pension benefit to Harvey and on that account no amount was appropriated to make it expenditure within the meaning of section 102xv of the Act
At the date when different sums of money were set apart there was no existing liability and the sums 1 777 of money set apart to meet an obligation which may or may not arise on the happening of a future event the Company did not lay out or expend the sums within the meaning of section 102xv
The amounts set apart became subject to the obligation to pay the pension arranged to be given only when Harvey died and must be deemed expended then within the meaning of section 102xv of the Indian Income tax Act 1922
But on the materials before us we are unable to answer the second question for the Tribunal has found no facts on which the admissibility of the allowance may be determined and the High Court has declined to allow the argument to be raised by the Commissioner that in the circumstances of the case the amounts expended were not admissible under section 102xv of the Act
Sections 101 and 102xv of the Act insofar as they are relevant provide  section 101 The tax shall be payable by an assessee under the head profits and gains of business profession or vocation in respect of the profit or gains of any business profession or vocation carried on by him section 102 Such profits or gains shall be computed after making the following allowances namely xv any expenditure not being an allowance of the nature described in any of the clauses i to xiv inclusive and not being in the nature of capital expenditure or personal expenses of the assessee laid out or expended wholly and exclusively for the purpose of such business profession or vocation
 Sub section 4A of section IO which was added by the Finance Act of 1956 with effect from April 1 1956 may also be read  Nothing in sub section 2 shall in the computation of the profits and gains of a Company be deemed to authorise the making of a any allowance in respect of any expenditure which results directly or indirectly in the provision of any remuneration or benefit or amenity to a director or a person who has a substantial interest in the company within the meaning of sub clause iii of clause 6C of section 2 or b any allowance in respect of any assets of the company used by any person referred to in 778 clause a either wholly or partly for his own purposes or benefit
if in the opinion of the Income tax Officer any such allowance is excessive or unreasonable having regard to the legitimate business needs of the company and the benefit derived by or accruing to it therefrom
Explanation
The provisions of this sub section shall apply notwithstanding that any amount disallowed under this sub section is included in the total income of any person referred to in clause  a An amount proved to be expended by a tax payer carrying on business is subject to sub section
4A of section 10 a permissible allowance in the computation of taxable income of the business if it be established that the allowance claimed is a expenditure which is not of the nature described in cls
i to xiv of section 102 b that it is not of the nature of capital expenditure or personal expenses of the assessee and c that the expenditure was laid out or expended wholly and exclusively for the purpose of such business profession or vocation
The expenditure incurred by the Company is not allowance of the nature described in any of the clauses i to xiv inclusive of section 102 nor is it of the nature of capital expenditure or personal expenses of I the assessee
In our judgment the argument advanced before the High Court that the expenditure resulting from the setting apart of the money for securing an annuity to provide pensionary benefit to Harvey and his wife was of a capital expenditure was rightly negatived by the High Court
To attract the exemption under section 102 xvit had still to beestablished that the amount set apart was laid out or expended wholly and exclusively for the purpose of the business of the Company
On this part of the case there is no discussion in the orders of the taxing authorities and the Tribunal
To recall the Income tax Officer recorded no reasons for disallowing the expenditure
The Appellate Assistant Commissioner disallowed it on the ground that it was not debited in the profit and loss account of the Company in the previous year
The Tribunal assumed and in our judgment erroneously that this Court had in the earlier judgment pronounced upon the applicability of all the conditions of section 102xv of the Act to the amount set apart when it became expenditure
This Court did not express any opinion on that question
 The language in which the question was framed in the earlier case clearly indicated that the enquiry contemplated was only whether the amounts set apart were expended and no other
779 The judgment of this Court also does not imply that in the view of the Court if the setting apart of the amount was expenditure the other conditions for the expenditure to be a permissible allowance under section 102 xv were satisfied
It cannot be assumed that because on the death of Harvey the amounts previously set apart were deemed expended the outgoing was admissible as expenditure under section 102xv read with section 104A
The Tribunal considered two questions only  1 whether the setting apart of the amounts amounted to expenditure within the meaning of section 102 xv and 2 if it was expenditure whether it could be regarded as capital expenditure and not revenue expenditure
On both the contentions the Tribunal decided in favour of the Company
But before section 102xv could be called in aid to support the claim of the company it had to be established that it represented expenditure laid out or expended wholly and exclusively for the purpose of the business and that it was authorised under section 104A
The High Court was of the view that because before the Tri bunal the question was not expressly raised that the other conditions inviting the application of section 102xv were not satisfied the allowance was not admissible the Commissioner was incompetent to urge that plea before the High Court
In support of that view they relied upon the judgment of this Court in Commissioner of Income tax Bombay vs Scindia Steam Navigation Co Ltd1
The High Court observed that before the Tribunal the plea that the expenditure was not laid out or expended wholly and exclu sively for the purpose of the business of the Company was not argued and since the question raised and referred was not wide enough to include that submission the Commissioner could not urge it before them We are unable to hold that the decision in Scindia Steam Navigation Company s case  supports the opinion of the High Court
The plea that the amount claimed to have been expended was not admissible as an allowance was raised by the Department
The Appellate Assistant Commissioner had decided in favour of the Department and the order was sought to be supported before the Tribunal by the Departmental representative
Granting that an aspect of the question was not argued before the Tribunal the question was on that account not one which did not arise out of the order of the Tribunal
In our judgment the expression question of law arising out of such order in section 661 is not restricted to take in only those questions which have been expressly argued and decided by the Tribunal
If a question of law is raised before the Tribunal even if an aspect of that question is not raised in our judgment that aspect may be urged before the High Court
The judgment of this Court in Scindia Steam Naviga tion Co Ltd s case  does not only not lend any assistance to the 1  780 view taken by the High Court but negatives that view
In that case certain steamships belonging to the assessee Company were lost during the World War 11 by enemy action
The Government of India paid to the Company compensation which exceeded the written down value of the steamships
The Department sought to charge the excess amount to tax under the fourth proviso of section 102vii of the Income tax Act 1922 inserted by the Income tax Amendment Act 1946 which came into force in the yea of assessment
The Income tax Officer held that the material date for the purpose of the fourth proviso to section 102vii was the date when the compensation was in fact received and therefore the  amount was assessable in the assessment year 1946 47
At the instance of the Company the Tribunal referred the question whether the difference between the written down value and compensation was properly included in the total income for the assessment year 194647
Before the High Court the Company for the first time raised the contention that the fourth proviso to section 102vii did not apply to the assessment as it was not in force on April 1 1946 and the liability of the Company had to be determined as on April 1 1946 when the Finance Act 1946 was brought into force
The Commissioner of Income tax contended that the question did not arise out of the order of the Tribunal within  the meaning of section 66 as it was not raised before nor dealt with by the Tribunal and it was not referred to the Court
The High Court overruled the objection
This Court held that the High Court had jurisdiction to entertain the Company s contention raised for the first time before it that the fourth proviso to section 102vii did not apply to the as sessment as the contention was within the scone of the question as framed by the Appellate Tribunal and was really implicit therein
The Court in that case held that the question as framed was comprehensive enough to cover the question of the applicability
of the fourth proviso to section 102vii of the Income tax Act
Venkatarama Aiyar J observed at p 612  Section 66 I  speaks of a question of law that arises out of the order of the Tribunal
Now a question of law might be a simple one having its impact at one point or it may be a complex one
trenching over an area with approaches leading to different points therein
Such a question might involve more than one aspect requiring to be tackled from different standpoints
All that section 661 requires is that the question of law which is referred to the Court for decision and which the Court is to decide must be the question which was in issue before the Tribunal
Where the question itself was under issue there is no further limitation imposed by the section that the reference should be limited to those aspects 1  781 of the question which had been argued before the Tribunal
it will be an over refinement of the position to hold that each aspect of a question is itself a distinct question for the purpose of section 66 1 of the Act
 The second question raised in the present case in our judg ment permits an enquiry whether the amount claimed is an admissible allowance under section 102xv
We are unable to hold that it is restricted to an enquiry whether the expenditure is of a capital nature
The Tribunal did not consider whether the amount was laid out or expended wholly and exclusively for the purpose of the business of the Company
Expenditure is admissible as an allowance under section 102xv
if all the conditions prescribed thereby are satisfied and is authorised by section 104A
We are unable to hold that the question framed and referred excluded an enquiry Whether the expenditure was wholly and exclusively laid out or expended for the purpose of the business of the Company
Nor are we able to hold that because before the Tribunal stress was not pointedly laid upon the ingredients which enable an expenditure to be claimed and allowed the question does not arise out of the order of the Tribunal
The matter in dispute before the Tribunal was whether the Company was entitled to the allowance under section 102xv of the Indian Income tax Act 1922
The Tribunal considered whether the amount claimed to have been laid out or expended became expenditure within the meaning of section 102xv on the death of Harvey and whether it was capital expenditure
They did not consider whether the expenditure was laid out or expended wholly and exclusively for the purpose of the business of the Company
Since the Tribunal gave no finding on this part of the case we are unable to answer the question on the materials placed before US
The High Court was in our judgment in error in refusing to allow the argument to be raised that the requirements of section 102xv were not satisfied and the expenditure on that account was inadmissible
Two courses are now open to us  to call for a supplementary statement of the case from the Tribunal or to decline to answer the question raised by the Tribunal and to leave the Tribunal to take appropriate steps to adjust its decision under section 665 in the light of the answer of this Court
If we direct the Tribunal to submit a supplementary statement of the case the Tribunal will according to the decisions of this Court New Jehangir Vakil Mills Ltd vs Commissioner of Income tax Bombay North Kutch and Saurashtra  Petlad Turkey Red Dye Works Co Ltd vs Com missioner of Income tax  and Keshav Mills Co Ltd vs Commissioner of Income tax Bombay North Ahmedabad  be res 1 3 782 tricted to the evidence on the record and may not be entitled to take additional evidence
That may result in injustice
In the circumstances we think it appropriate to decline to answer the question on the ground that the Tribunal has failed to consider and decide the question whether the expenditure was laid out or expended wholly and exclusively for the purpose of the business of the Company and has not considered all appropriate provisions of the statute applicable thereto
It will be open to the Tribunal to dispose of the appeal under section 665 of the Income tax Act 1922 in light of the observations made by this Court after determining the questions which ought to have been decided
There will be no order as to costs in this appeal


Summary:
The respondent company appointed a managing director who was to retire at the age of 55
The company arranged to provide a pension to him on retirement or a pension to his widow if he died before attaining the age of 55
It executed a trust deed on September 16 1948 and paid to the trustees certain amounts to enable the trustees to take out an annuity policy to cover the pension
On October 29 1954 the company arranged to give enhanced pension to the director or his wife and set apart an additional sum on the same terms
The director died in 1955 before attaining the age of 55 and the company claimed in the return of its taxable income for the assessment year 1956 57 the total amount paid by it to the trustees as a permissible expenditure in the computation of the company s business profits in the previous year
The Appellate Tribunal held i that the setting apart of the funds amounted to expenditure Within the meaning of s102xv and ii that it amounted to revenue expenditure and not capital expenditure
The Tribunal did not however consider whether the outgoing represented expen diture laid out or expended wholly and exclusively for the purpose of the business and whether it was authorised under s104A
The Tribunal referred to the High Court two questions namely  1 whether the amounts constituted expenditure during the relevant accounting year 1955 within the meaning of the section and 2 whether it represented a revenue expenditure
The High Court held in favour of the company
When the Department sought to urge the plea that before the section could be called in aid it had also to be established that the expenditure was wholly and exclusively for the purpose of the business and that it was authorised by s104A the High Court did not permit the plea to be raised as it was not expressly raised before the Tribunal
In appeal to this Court HELD  1 The amounts set apart became subject to the obligation to pay the pension arranged to be given only when the director died and since he died in May 1955 they must be deemed to have been expended only then that is during the accounting year 1955
776 H 777 A B 774 Indian Molasses Co P Ltd vs Commissioner of Income tax West Bengal  referred to
I I 2 An amount proved to be expended by a tax payer carrying on business is a permissible allowance under s102 iv in the computation of the taxable income of the business if it is established i that the allowance claimed is expenditure which is not of the nature described in cls
i to xiv of section 102 ii that it is not of the nature of capital expenditure or personal expenses of the assessee iii that the expenditure was laid out or expended wholly and exclusively for the purposes of such business and iv that it was authorised under section 10 4A
778 C F 3 The expression question of law arising out of such order  in s661 is not restricted to take in only those questions which have been expressly argued before and decided by the Tribunal
If a question of law is raised before the Tribunal even if an aspect of the question was not raised that aspect may be urged before the High Court
In the present case the second question as framed and referred does not exclude an enquirY whether the expenditure was wholly and exclusively laid out or expended for the purpose of the business of the company
It cannot be held that because before the Tribunal stress was not pointedly laid upon the ingredients which enable an expenditure to be claimed and allowed the question did not arise out of the order of the Tribunal
Therefore the High Court was in error in refusing to allow the argument to be raised that the requirements of section 102 xv were not satisfied
779 H 780 A 781 B F Commissioner of Income tax Bombay vs Scindia Steam Navigation Co Ltd   explained and followed
4 Since the Tribunal gave no finding on that part of the case a supplementary statement could be called from it but such a supplementary statement would be restricted to the evidence on record and may result in injustice to the parties
781 F New Jahangir Vakil Mills Ltd vs Commissioner of Income tax Bombay North Kutch  Saurashtra Petlad Turkey Red Dye Works Co Ltd vs Commissioner of Income tax and Keshav Mills Co Ltd vs Commissioner of Income tax Bombay North
Ahmedabad  referred to
5 Therefore
it is appropriate to decline to answer the second question on the ground that the Tribunal bad failed to consider and decide the question whether the expenditure was laid out or expended wholly and exclusively for the purpose of the business of the company and that it had not considered all appropriate statutory provisions
and to leave it to the Tribunal to dispose of the appeal under section 665 of the Act 782 A C