Case: Allahabad Bank Limited Vs. Commissioner of Income Tax, West Bengal

2. The appellant is a banking Company carrying on business at among other places, Calcutta and Allahabad. On 15-3-1946 the appellant executed a deed by which it purported 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. It then recited that a sum at Rs. 2,00,000 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 at the said sum at Rs. 2,00,000 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 at the accounting year 1946-47, the bank made a further payment of Rs. 2,00,000 to this fund.In its assessment for the assessment year 1947-48 the appellant claimed deduction of that sum of Rs. 2,00,000 under S. 10 (2) (xv) of the Act on the ground that it was an item of expenditure laid out or expended wholly and exclusively for the purposes at its business. The Income-tax Officer, the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal rejected this claim at the appellant and the Income-tax Appellate Tribunal at the instance of the appellant stated a case and referred for the consideration at the High Court the followingin the facts and circumstances of this case, the Income-tax Appellate Tribunal was right in disallowing Rs. 2,00,000 as a deduction under S. 10 (2) (xv), Indian Income-taxHigh Court answered the question in the affirmative and hence this appeal.

Reasoning: 7. On a consideration of the provisions of the deed of trust above set out it is clear that the bank or its officers duly authorised in that behalf were constituted the sole authorities to determine what pensions and in what manner the same should be paid out of the income of the fund. The fund was declared to have been established for the benefit of the retiring employees to whom pensions shall have been granted by the bank. Officers of the staff who were qualified under Cl. 8 were declared entitled to apply to the bank for a pension. But there was nothing in the terms of the deed which imposed any obligation on the bank or its officers duly authorised in that behalf to grant any pension to any such applicant. The pension if granted could also be withdrawn, modified or determined under the directions of the bank or any officer of the bank duly authorised in that behalf and such directions were binding on the trustees. The regulations in relation to the fund could also be altered and new regulations could be made to the exclusion of or in addition to all or any of the regulations contained in the deed of trust.It was open under the above provisions for the bank or its officers duly authorised in that behalf to grant no pension at all to any officer of the staff who made an application to them for a pension and also to withdraw, modify or determine any pension payable to such officer if in their opinion the conduct of the recipient or the circumstances of the case should justify them in so doing. The whole scheme of the deed invested the bank or its officers duly authorised in that behalf with the sole discretion of granting or of withdrawing, modifying or determining the pension and it was not at all obligatory on them at any time to grant any pension or to continue the same for any period whatever. The beneficiaries, therefore, could not be said to have been indicated with reasonable certainty. What is more it could also be validly urged that there being no obligation imposed upon the trustees no trust in fact was created, even though the moneys had been transferred to theif there is a power to appoint among certain objects but no gift to those objects and no gift over in default of appointment, the Court implies a trust for or gift to those objects equally if the power be not exercised. But for the principle to operate there must be a clear indication that the settlor intended the power to be regarded in the nature of a trust.This position, however, does not avail the appellant. As already stated there is no clear indication in the deed of trust that the bank intended the power to be regarded in the nature of a trust, inasmuch as them was no obligation imposed on the bank or its officers duly authorised in that behalf to grant any pension to any applicant. There was no duty to grant any pension at all and the pension, if granted, could be withdrawn, modified or determined by the bank or its officers duly authorised in that behalf as therein mentioned. Under the circumstances it could not be said that there was a power in the nature of a trust which could be exercised by the Court if the donee of the power for some reason or the other, did not exercise the same.Even though he may be qualified under Cl. 8 to apply for the grant of a pension he could not certainly enforce that provision because there was no obligation imposed at all on the bank or its officers duly authorised in that behalf to grant any pension to him and in the absence of any such obligation imposed upon anybody it would be futile to urge that a valid trust was created in the manner contended on behalf of the appellant.In our opinion, therefore, the High Court was right in the conclusion to which it came that there was uncertainty as regards the beneficiaries and there was an absence of any obligation to grant any pension with the result that no legal and effective trust could be said to have been created and further that the provision of Rs. 2,00,000 in the accounting year 1946-47 was not an expenditure or an expenditure for the purposes of the business within the meaning of S. 10(2)(xv), Indian Income-tax Act.In view of the above we do not think it necessary to go into the interesting questions which were sought to be noised by the appellant, viz., what was the scope of the reference and by the respondent, viz., whether the expenditure was a capital expenditure or revenue expenditure and if the latter whether the, deduction could still not be allowed in view of the provisions of S. 10(4)(c) of the Act.