TMI Blog1973 (5) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... 1960, an agreement was executed between the Hindu Office and the National Press Employees Union and M/s. Kasturi and Sons Ltd. (hereinafter called " the company "), the proprietors of Hindu and Sports and Pastime, for payment of gratuity. Under the scheme of this agreement, every employee who had been in service or continues in service after 1st January, 1957, would be entitled to the payment of gratuity on retirement, death or termination otherwise than as punishment on the basis and conditions referred to therein. In order to give effect to this agreement, an actuary was appointed to report on the financial arrangements needed for starting and maintaining the gratuity scheme. The two principal questions on which the actuary's advice was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed providing for vesting of the fund in the trustees and for administration of the trust fund. On December 18, 1960, the board of directors of the company passed the following resolution : " Resolved that the initial contribution of Rs. 19,50,000 as ascertained by the actuary in his report dated October 4, 1960, be paid in instalments to the trust without interest and the question of interest be considered after the next valuation. " In the report to the shareholders on the account for the year ended 30th June, 1961, the directors stated : " The gratuity trust referred to in our last report has been created and the rules thereunder have been approved by the income-tax department. The company proposes to pay off the backlog of initial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Commissioner confirmed this order of the Wealth-tax Officer. On a further appeal, the Tribunal was of the view that a real liability existed in the sum of Rs. 19,50,000, that this liability was not a contingent one and that it represented a liability that had already arisen in respect of the existing employees for services rendered prior to 1960. In this view, the Tribunal allowed the appeals filed by the assessees and directed to modify the assessment and rework the value of the shares after taking into account the sum of Rs. 19,11,620. At the instance of the Commissioner of Wealth-tax, identical questions have been referred to us under section 27(1) of the Wealth-tax Act, 1957 (hereinafter called " the Act "). The question read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. But, in the present case, in our opinion, the interposition of a trust and vesting the gratuity fund in the trustees makes a difference. One of the two questions referred to the actuary for advice was as to the amount of liability that has already arisen in respect of the existing employees for services rendered prior to 1960. The actuary determined this amount at Rs. 19,50,000. The trust deed provided that the company shall pay to the trustees every year commencing from July 1, 1960, such sum or sums as may from time to time be determined in accordance with the provisions of the rules and regulations of the trust fund. The entire fund shall vest in the trustees who shall administer the same in accordance with and for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the board on December 16, 1960, and executed by the company. On execution the company became a debtor to the trust so far as the initial contribution of Rs. 19,50,000 was concerned with a liability to pay future yearly contributions as well. It is true that the board by its resolution dated December 18, 1960, resolved not to pay interest but the liability to pay the initial contribution had been confirmed. Clause 14(c) extracted above does not leave any option to the company not to pay the initial deposit but only provides payment of that liability in instalments. In Kesoram Industries and Cotton Mills' case the Supreme Court pointed out that " a debt is a sum of money which is now payable or will become payable in future by reason of a pre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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