THE MEANING OF "EXPENDITURE" UNDER S. 10(2)(XV) OF THE INCOME-TAX ACT, 1922.

( 1 ) THE argument addressed to us in this Reference has been lengthy and, if I may say without offence, of a somewhat wandering character, but the point referred is an extremely slender one. It covers but a fraction of the question which will have to be decided in favour of the assessee, if its claim for deduction of certain amounts of money in the computation of its taxable profits is to be allowed.

( 2 ) THE assessee, the Indian Molasses Co. Ltd. , is a public limited company. In 1948 its Managing Director was a gentleman of the name of Mr. John Bruce Richard Harvey who had already been in its service for about thirteen years. It has been, found; that there was an agreement that "the Company should provide a pension to Mr. Harvey when he retires. " In implementation, apparently, of that agreement, the assessee executed on 16-9-1948. a Deed of Trust by which it appointed three Chartered Accountants as trustees and declared that it had already paid over to the trustees a certain sum of money and undertaken to pay to them certain annual sums for six consecutive years on condition that the trustees would execute a declaration of trust as thereafter specified. The deed went on to repeat that the company was undertaking and binding itself to pay to the trustees a certain sum on 20th September of every year for six consecutive years, the first of such payments to be made on 20-9-1949.

( 3 ) I may pause here to state that Mr. Harvey was due to retire on 20-9-1955, on reaching the age of fiftyfive years. To revert to the Trust Deed, it proceeded to set out the declaration of trust made by the trustees. Clause 2 of the deed states that trustees hold a sum of 8,208-19-0 which, by the way, was the sum already paid to them and shall hold the rupee equivalent of 326-14-0 which, by the way, was the annual payment which the assessee was undertaking to make upon trust to expend the same and the income thereof, if any, in taking out a Deferred Annuity Policy with the Norwich Union Life Insurance Society in the names of the trustees but on the life of Mr. Harvey. This policy was to cover an annuity of 720 per annum, payable to Mr. Harvey for life from the date when he would attain the age of fiftyfive years.

( 4 ) THE next clause in the Trust Deed makes an alternative provision. It states that the trustees would, if so required by the company, take out "a deferred longest life annuity policy" with the same company instead of the Deferred Annuity Policy mentioned in Clause 2, in their own names, but in favour of Mr. and Mrs. Harvey. This policy was to cover an annuity of 558-1-0 per annum which would be payable during the joint, lifetime of Mr. and Mrs. Harvey from the date when Mr. Harvey would attain the age of fiftyfive years and thereafter during the life of the survivor of the two. It was further provided! that the policy would have to include a provision for the payment of an increased annuity of 611-12-0 to Mrs. Harvey in the event of Mr. Harvey's death before he attained the age of fiftyfive years.

( 5 ) IT would thus appear that if the trustees took out a Deferred Annuity Policy in terms of Clause 2 of the Trust Deed the annuity covered thereby would be receivable by Mr. Harvey if he reached the age of retirement and earned the right to a pension irrespective of whether Mrs. Harvey was alive or dead. The longest life annuity policy referred to in Clause 3 brings in Mrs. Harvey and makes an annuity payable to her during her own life even after the death of Mr. Harvey, should he live up to the age of fiftyfive and then predecease her and also if Mr. Harvey should die, leaving Mrs. Harvey him surviving, even before reaching the age of fifty-five years.

( 6 ) THE next clause in the Trust Deed proceeded to make another provision. It stated that in the event of Mr. Harvey dying before attaining the age of fiftyfive years, the trustees would stand possessed of the capital value of the Deferred Annuity Policy referre