Judgment

SHAH, J.: The respondent Company appointed one Harvey its Managing Director. Under the terms of agreement, Harvey was to retire on attaining the age of 55 years. The company arranged to provide a pension to Harvey on retirement, and executed a deed of trust on September 16, 1948 appointed three trustees to carry out that object. The respondent Company set apart in 1948 Rs. 1,09,643/- and in each of the six subsequent years Rs. 4,364/- and delivered the various amounts to the trustees who were authorised to take out a deferred annuity policy to secure an annuity of £ 720 per annum payable to Harvey for life from the date he attained the age of 55 years, and in the event of his death before that date an annuity of £ 611.12 annually to his widow.

2. In its return for the assessment year 1949-50 the Company claimed that in the computation of its taxable income Rs. 1,09,643/- paid in 1948 to the trustees under the deed of trust were allowable as an amount wholly and exclusively expended for the purpose of its business. In the subsequent years of assessment the Company claimed allowance of the annual payment of Rs. 4,364/-. The Income-tax Officer disallowed the claim. The Company