HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Commissioner of Income Tax, Kerala and Coimbatore v. L. W. Russel
Civil Appeal No. 220 of 1963
[1964] 7 SCR 569 ·
Indian Income Tax Act, 1922: section 7(1), Explanation 1 clause (v), and section 66(1) · Indian Income Tax Act, 1922: Chapters IX-A and IX-B, referenced in the historical perquisite definition
Sources & disclosures includedDownload original judgment / order
3-judge bench · K. Subba Rao, J. · J. C. Shah, J. · S. M. Sikri, J.
Assessment years: 1956-57
01 · Facts of the case
L. W. Russel worked for the English and Scottish Joint Co-operative Wholesale Society Ltd. Under a 1934 trust deed, a compulsory scheme funded deferred annuities for specified overseas European employees. The Society contributed one-third of the premium and the employee two-thirds; in 1956-57 the employer contributed Rs. 3,333 for Russel. The Income Tax Officer, first appellate authority and Tribunal treated it as taxable under section 7(1), but the Kerala High Court answered three referred questions for the employee (SCR pp.570–571; PDF pp.2–3).
Source: Primary judgment: facts
02 · Discussion by the Hon’ble Court
The scheme used trustees as agents, funded policies for pensions at superannuation and provided different consequences for retirement, departure, dismissal, ill health or death. Before superannuation the employee could receive his own contributions but had no fixed right to the employer’s share; depending on the contingency, that share could return to the employer or become available to the employee (SCR pp.572–574; PDF pp.4–6). Reading section 7(1) with Explanation 1(v), the Court held that an amount had to be paid, due or allowed in the sense of conferring a vested right. A contingent payment did not qualify before the contingency occurred (SCR pp.574–576; PDF pp.6–8). The Court distinguished a scheme treated as added salary and followed the vested-interest analysis of a conditional-fund decision (SCR pp.576–578; PDF pp.8–10).
Source: Primary judgment: discussion
03 · Judicial decision
The Court held that no interest in the employer’s contribution had vested in Russel and approved the High Court’s answers to all three questions. Revenue’s appeal was dismissed (SCR p.578; PDF p.10).
Source: Primary judgment: decision
04 · Outcome / in whose favour
In favour of the assessee/respondent. The Rs. 3,333 employer contribution was not taxable as a perquisite allowed or due under the historical section 7(1) while his interest remained contingent (SCR p.578; PDF p.10).
Source: Primary judgment: outcome
05 · AKHB REVIEW POINT
AKHB analysis: read the governing trust deed and rules before classifying an employer contribution. Identify who owns each contribution, when vesting occurs, what happens on resignation, dismissal, death and retirement, whether the employer can recover funds, and whether a statute taxes the contribution despite contingent rights. Do not generalise this scheme-specific 1922 Act decision to modern employee-benefit arrangements (based on SCR pp.572–578; PDF pp.4–10).
Source: Primary judgment: reviewPoint
Source & verification
Download original judgment / order · Open cited source rendition
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Statutory scope
The decision applies the historical salary-perquisite language of section 7(1) of the 1922 Act to this trust deed and scheme. It does not determine the current taxation of employer pension, superannuation, insurance or employee-benefit contributions.
Later treatment
Source checked 2026-10-10. Later judicial treatment and current statutory applicability have not been comprehensively checked; no current-law or citator clearance is represented.
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