Gopal Sri Ram JCA:

The appellant taxpayer constituted a benefit plan for its employees. This is how the plan works. An employee will receive a lump sum payment when he or she retires or resigns or on his or her termination from service other than a termination for cause. So if an employee is dismissed for misconduct he or she will not receive anything from the benefit plan. The fund for this benefit plan is financed and administered entirely by the appellant. The employees make no financial contribution to that fund and there is no separate fund to which the employees make contributions. But there are conditions to be satisfied for an employee to receive this benefit. He or she must have served the appellant for at least 11 years. Once that condition is satisfied, the employee is regarded as having an accrued or vested right to receive the benefit. However, an employee who has served 11 years will not receive any benefit if he or she is terminated for cause. But the appellant as employer has a discretion whether to make any payment to such an employee. So much for the plan.

Now, the appellant sought to deduct the monies set aside for this plan from its income. Revenue did