TMI Blog1996 (11) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... under the provisions of the Income-tax Act, 1961. On retirement, under the rules of the fund, the first petitioner is receiving an annuity under a policy purchased by the trustees of the fund from the Life Insurance Corporation of India. The second petitioner is a society registered under the West Bengal Societies Registration Act, 1961. Its membership consists of pensioners of various non-contributory approved superannuation funds. Petitioner No. 1 is the secretary of the association. It is the contention of the petitioners that certain improvements which have been effected in the executive staff pension fund of the Indian Oxygen Ltd. in 1985 should be made available to the existing pensioners of the Indian Oxygen Ltd., and the denial of the benefits of such an improvement to the existing pensioners of the said fund is arbitrary and violative of article 14 of the Constitution. The petitioners have also challenged rule 11(1)(cc) of Part B of Schedule IV to the Income-tax Act, 1961, as conferring an unguided power to the Board to frame rules. They have also challenged rules 89 and 91 of the Income-tax Rules, 1962, as arbitrary and violative of article 14. The petitioners have als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he trade or undertaking on their retirement at or after a specified age or on their becoming incapacitated prior to such retirement, or for the widows, children or dependants of persons, who are or have been such employees on the death of those persons. Contributions in respect of each employee are required to be made by the employer to the fund so set up. The trustees of the superannuation fund are required to make an application to the Assessing Officer for approval of the fund under rule 4 of the said Part B. Rule 11 deals with the rule-making power of the Board. Rule 11(1)(cc) empowers the Board to make rules for regulating the investment or deposit of the moneys of an approved superannuation fund. Part XIII of the Income-tax Rules, 1962, covering rules 82 to 97 and dealing with approved superannuation funds is framed in exercise of the powers conferred, inter alia, under rule 11(1)(cc) of Part B of Schedule IV. Under rule 85 of the Income-tax Rules, 1962, all moneys contributed to the approved superannuation fund are required to be, invested in a Post Office Savings Bank Account in India or in a current account or in a savings account with any scheduled bank or utilised in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xisting scheme of the Life Insurance Corporation of India. This annuity is payable for a minimum fixed period and thereafter as long as the recipient is alive. The Life Insurance Corporation of India Ltd. in its affidavit has set out that it is common to provide that the annuity would be payable for a selected number of years, irrespective of whether the annuitant is alive or not. At the end of the selected number of years if the annuitant is alive, the annuity is continued throughout the life-time of the annuitant. Rules 85 and 89 are meant to safeguard the moneys deposited in the superannuation fund and to secure to the annuitant the annuity amount. Undoubtedly, rule 89 requires the trustees to purchase an annuity from the Life Insurance Corporation of India to the exclusion of any one else. But this provision must be judged in the context of the fact that the contracts of life insurance which are entered into by the Life Insurance Corporation of India are backed by a Government guarantee which is provided by section 37 of the Life Insurance Corporation Act, 1956. The payment of annuity is thus properly secured. The petitioners contended that any improvements made in the exis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se circumstances the ratio of D. S. Nakara v. Union of India, AIR 1983 SC 130, cannot be applied to extend the benefit of improvement in the pension schemes of such funds to the existing pensioners. By the very nature of this scheme, such benefits are available only to members in service. In the present case, the pension fund is created out of contributions made by the employer in respect of its employees who are in service in the manner provided under the Income-tax Act and the Rules. The contribution is in the form of a fixed percentage of salary of each of the employees. There is, therefore, no provision for an employer making any additional payment in respect of its past employees who are the existing pensioners. In Nakara's case, AIR 1983 SC 130, the increase in pension could be met from the general revenue of the Central Government. No such reserve of funds is available to the trustees of an approved superannuation fund. As soon as an employee retires and an annuity is purchased for his benefit under rule 89, there remains no scope for any fresh contribution on his account, so as to entitle him to an increased pension prospectively on the basis of improvements made subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the benefit of the employees of any establishment or undertaking and to ensure that the fund shall have for its sole purpose provision of annuities for the employees on their retirement or on their becoming incapacitated or in the event of their death for the benefit of their dependants. It is, necessary that the funds should be invested in a manner which secures them over a period of time for this purpose. Rule 11(1)(cc) gives to the Board the power to make rules for the purpose of regulating the investment or deposit of moneys of an approved superannuation fund. This cannot be called as an arbitrary conferment of power on the Board. By the very nature of the scheme as framed, the purpose of regulating investment of the trust funds is to ensure their safety. In pursuance of this rule-making power rule 89 is framed. Under rule 89, for the purpose of providing the annuities for the beneficiaries, the trustees of a superannuation fund are required either to enter into a scheme of insurance with the Life Insurance Corporation of India or they have the option to accumulate the contributions in respect of each beneficiary and purchase an annuity from the Life Insurance Corporation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed for the purchase of annuity. The annual instalment contains an element both of interest as also a part of the capital so that over a period of years as actuarially calculated, the entire capital and the interest earned thereon are utilised for the payment of annuities to the beneficiary. Secondly, the Life Insurance Corporation has introduced a new annuity scheme under which an option has been given to the existing members to switch over to the new scheme. As per the new option available to the pensioners the value of outstanding instalments is determined and this is used for the purchase of an annuity. This new annuity would be payable during the life-time of the beneficiary and the value of the outstanding instalments is returned to the beneficiary's nominee on his death. The petitioners have the option to switch over to this new scheme in respect of their outstanding instalments. Therefore, in any event there can be no question of the Life Insurance Corporation appropriating the capital purchase price of an annuity on the death of the annuitant. Rule 91, therefore, in any event, cannot be considered as giving any unjust gains to the Life Insurance Corporation of India. Mor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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