Judgement

BHAGWATI J.: This is an appeal from the judgment and order of the High Court of Judicature at Calcutta on reference made by the Income-tax Appellate Tribunal under S. 66 (1), Indian Income-tax Act, 11 at 1922.

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.

3. 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 following question:

"Whether in 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-tax Act."

The High Court answered the question in the affirmative and hence this appeal.

4. Though several contentions were sought to be raised by the appellant as well as the Income-tax authorities before the High Court as arising from the question, the only contention which was canvassed before the High Court and was held to be determinative of the enquiry before it was whether the deed of trust dated 15-3-1946 was valid.

On the construction of the several provisions of the deed at trust the High Court held:

"I am of at opinion that in view at these provisions at the trust deed coupled with the uncertainly as regards the beneficiaries and the absence at any obligation to grant any pension no legal and effective trust was created, and the so-called trust must be held to be void."

It further held that even it the ownership of the money had passed over to the trustees, still the further provision regarding the application at the money to the payment of pensions being entirely ineffective and void, the money cannot be said to have been expended for the purpose at the business, and that therefore was not an expenditure or an expenditure for the purposes of the business within the meaning of S. 10 (2) (xv) of the Act. This was also the only contention urged before us by Shri N. C. Chatterjee appearing on behalf of the appellant.

5. Section 3, Indian Trusts Act 2 of 1882 defines a trust as an obligation annexed to the owner-ship of property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner. The person for whose benefit the confidence is accepted is called the "beneficiary". Section 5 in so far as it is material for the purpose of this appeal says that no trust in relation to movable property is valid unless declared as aforesaid (i.e. by a non-testamentary instrument in writing signed by the author of the trust or the trustee and registered, or by the will of the author of the trust or of the trustee) or unless the ownership of the property is transferred to the trustee. Section 6 of the Act provides that subject to the provisions of S. 5, a trust is created when the a