Perquisite treatment of employer contributions denied where benefits are contingent and not presently vested; contributions thus not taxable as salary.

Employer contributions under a trust deed for a deferred annuity that do not create a present vested beneficial interest and are payable only upon contingent future events (such as attaining pensionable age, completing minimum service, or specified ill health) are not perquisites under section 7(1); such contributions are not "allowed to" or "due to" employees in the accounting year absent present entitlement; and a deferred annuity payable only on pensionable age and subject to forfeiture does not fall within the annuity description in paragraph (v) of Explanation 1 to section 7(1).

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Issues: (i) Whether employer's contributions made under a trust deed for a deferred annuity on the life of an employee are 'perquisites' under section 7(1) of the Income-tax Act; (ii) Whether such contributions were "allowed to" or "due to" the employees in the accounting year; (iii) Whether a deferred annuity of the kind in question is an annuity taxable under paragraph (v) of Explanation 1 to section 7(1).

Issue (i): Whether the employer's contributions under the trust deed constitute perquisites under section 7(1).

Analysis: The deed and rules show that the society's contributions were held by trustees, produced benefits only on retirement at age 55, and in many contingencies conferred no entitlement (including exclusion for under ten years' service and forfeiture on leaving or dismissal). Authorities distinguishing mere expectancy from vested emoluments were applied to determine that amounts not vesting in the employee do not amount to salary or perquisite under section 7(1).

Conclusion: The employer's contributions are not perquisites under section 7(1); decision is in favour of the assessee on this issue.

Issue (ii): Whether the contributions were "allowed to" or "due to" the employees in the accounting year.

Analysis: The scheme conferred no present or vested benefit on employees in the account year; entitlement was contingent on future events (retirement, completion of minimum service, or ill-health as specifically provided). Precedent holds that only amounts creating a present vested right are taxable as salary when paid into a fund or trust.

Conclusion: The contributions were not allowed or due to the employees in the account year; conclusion in favour of the assessee.

Issue (iii): Whether the deferred annuity falls within paragraph (v) of Explanation 1 to section 7(1).

Analysis: The statutory phrase contemplates annuities where capital is converted into an immediate annuity; payments remain capital unless the payor has relinquished claim. A deferred annuity payable only on reaching pensionable age and subject to forfeiture does not meet the description of annuity intended to be taxed under paragraph (v).

Conclusion: A deferred annuity of the kind before the Court is not hit by paragraph (v); conclusion in favour of the assessee.

Final Conclusion: The references are answered in favour of the employees: the employer's contributions under the trust deed are not taxable as perquisites under section 7(1), were not allowed or due in the relevant accounting year, and deferred annuities of this character are not caught by paragraph (v) of Explanation 1 to section 7(1).

Ratio Decidendi: Employer contributions that do not create a present vested beneficial interest in the employee and are payable only upon contingent future events (such as attaining pensionable age or surviving service conditions) do not constitute perquisites or income under section 7(1) or paragraph (v) of Explanation 1 to section 7(1) of the Income-tax Act.

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