Commissioner of Income Tax vs Bharat Vijay Mills Ltd.

M.S. Shah, J.

In this reference at the instance of the revenue, the following questions are referred for our opinion in respect of the assessment year 1980-81 :

"1. Whether the assessee is entitled in law to the allowance of Rs. 52,000 being deferred annuity premium paid in respect of two managing directors of the assessee ?

Whether the assessee is entitled in law to the allowance of Rs. 44,000 being the expenses incurred on issue of bonus shares ?"

Heard Mrs. Mauna Bhatt, the learned standing counsel for the applicant-revenue and Mr. M.J. Shah, the learned counsel for the respondent-assessee.

Our attention is invited to the decision of this court in Commissioner of Income Tax Vs. Deepak Family Trust No. 1 and Others, wherein this court had an occasion to consider several questions including the above referred two questions.

In respect of the premium on deferred annuity on the lives of the directors, this court held that where the ownership of the policy is with the company, the company has the discretion to pay amounts and, therefore, the premium paid on such deferred annuities is not deductible.

Following the aforesaid decision, our answer to question No. 1 is in the negative, i.e., in favour of the revenue and against the assessee.

Coming to question No. 2, in the aforesaid decision, this court also considered the question of bonus shares and held that the expenditure on issue of bonus shares is capital in nature.

Following the aforesaid decision, our answer to question No. 2 is also in the negative, i.e., in favour of the revenue and against the assessee.

The reference, accordingly, stands disposed of with no order as to costs.