Contingent trust payments are not expenditure when the settlor retains a resulting trust if the liability never arises.

Payments placed in a pension trust to meet a possible future annuity liability were not "expenditure" under section 10(2)(xv) of the Indian Income-tax Act, 1922, because the assessee had not wholly and effectively parted with the money. The trust deed left the fund subject to a resulting trust if the contemplated contingencies did not occur, so the amount was only set aside tentatively rather than irretrievably spent. For income-tax purposes, a present expenditure requires an effective outlay, not a mere allocation against a contingent liability, and the deduction was therefore disallowed.

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Issues: Whether the payments made by the assessee to trustees under the pension trust constituted "expenditure" within the meaning of section 10(2)(xv) of the Indian Income-tax Act, 1922.

Analysis: The payments were made under a trust created to provide an annuity or pension in specified future contingencies, but the trust deed left no provision for the money if the contemplated contingencies did not occur. On the true construction of the trust deed, if the fund became incapable of being applied for the intended purpose, the unexhausted trust property would revert under the law of resulting trusts. The money was therefore not irretrievably parted with, but was only set apart tentatively to meet a possible future liability. A present expenditure under section 10(2)(xv) requires an effective outlay, not a mere allocation against a contingent future event.

Conclusion: The payments did not constitute expenditure within section 10(2)(xv), and the deduction was not allowable.

Final Conclusion: The reference was answered against the assessee, and the claim for deduction failed.

Ratio Decidendi: A sum placed in trust to meet a future contingent liability, where the trust deed leaves open a resulting trust in favour of the settlor if the contingency does not occur, is not expenditure for income-tax purposes because the settlor has not wholly and effectively parted with the money.

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