TMI Blog1978 (7) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 1961-62 for which the accounting year is the year ending 31st March 1961. The assessee is a company which deals in liquor and has also income from agency commission and allowance. The controversy in the present reference is about the allowability of pension paid to one R. Preston, who was an employee of the company for more than thirty years. He commenced the employment with the company as an assistant and ultimately rose to the position of a director. He retired in 1956, but his services were continued to be retained till the end of September, 1959. At the time of retirement his salary amounted to about Rs. 2,500 per month. He had no service agreement with the company. The company had also no regular scheme for payment of pension ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the statement made on behalf of the assessee that one employee, a peon, who had retired before this date (and who was, therefore, not entitled to any gratuity under the said scheme) was given pension. According to the AAC, Preston had made a demand for pension privileges, although he had not agitated for the same as the other employees did. In his view the grant of the pension to Mr. Preston was the incurring of a liability by way of amicable settlement and had to be treated in the same manner as incurring of a liability after the adoption of agitational methods by the employees. The AAC considered the pension as not excessive and, therefore, decided to allow the same. The department carried the matter in second appeal to the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon and as from the date of Mr. Preston's retirement from the company's service with the consent of the company or upon and as from the date of his death whilst still in such service (whichever of such dates shall be the earlier). (2) Recipients :--Subject as below provided, the pension shall be payable to the following persons, if and so long as they shall respectively be living, and in the following order :-- (a) to Mr. Preston during his life, and after his death, (b) to his wife, Mrs. Eileen Margaret Preston, during her life, and after her death, (c) to their son, Richard Preston during his life. (3) Cessation :--The pension shall in any event cease to be payable at the expiration of ten years from the commencing date notwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m under section 10(2)(xv). " The aforesaid decision of the Supreme Court and other decisions which have applied the tests enunciated by, the Supreme Court in Gordon Woodroffe Leather Manufacturing Co.'s case [1962] 44 ITR 551 were considered by a Division Bench of this High Court in CIT v. Fairdeal Corporation P. Ltd. [1977] 108 ITR 280. It was observed by Tulzapurkar J., speaking for the Bench, that the concluding passage from the decision of the Supreme Court, which we have earlier extracted, clearly brings out the fact that the three tests indicated by the Supreme Court are alternative tests and that each one of them is independent of the other. In the Fairdeal Corporation's case [1977] 108 ITR 280 (Bom), counsel for the assessee had v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under a particular clause of the managing director's agreement with the company were held to be not allowable under s. 10(2)(xv) of the Indian I.T. Act, 1922, and s. 37 of the I.T. Act, 1961. The peculiar feature of the agreement was that it contained no provision whereby the managing director was to be given any benefit If he worked as such for the full period of the agreement, and that under the clause under consideration payment was to be made to the widow only if an unfortunate event like the managing director dying during the pendency of the agreement occurred. In this context, the court observed as under (p. 439) : " As we have stated above, one can understand if the object was to benefit Sir Chandavarkar after the period of the ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other employee, a more humble one, who had also missed having the benefit of the gratuity scheme on account of his retirement from the service of the company being prior to the introduction of the scheme. Thus, the payment can be regarded as being made in lieu of a benefit available under the gratuity scheme, though it cannot be regarded as one directly under such a scheme or any other retirement benefit scheme. Again, the facts are not comparable to Gordon Woodroffe Leather Manufacturing Co.'s case [1962] 44 ITR 551 (SC), where no practice to make such payment had been established. One such example has been clearly found by the Tribunal; this would be the second case of its type and not an isolated payment to a specifically favoured employ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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