Insurance Premiums & Annuity Deposit Interest: Not Taxable Perquisites; Court Rules in Favor of Assessee on Deductibles.

The court upheld the Tribunal's decision that insurance premiums paid by the employer for accident insurance covering air travel were not taxable perquisites under Sec. 17(2) of the Income Tax Act, 1961, for the assessment years 1965-68. Additionally, the court affirmed the Tribunal's ruling that interest paid on borrowed money for annuity deposits during 1966-68 qualifies as a deductible expense under "other sources," reversing the initial rejection by the ITO and AAC. Consequently, the court ruled in favor of the assessee, directing the Commissioner to bear the costs of the reference.

---

---

Issues involved: Interpretation of perquisites u/s 17(2) of the Income Tax Act, 1961 and deduction of interest paid on borrowed money for annuity deposits.

Perquisites u/s 17(2) of the Income Tax Act, 1961:
The judgment pertains to the assessment years 1965-66, 1966-67, and 1967-68, involving the treatment of insurance premiums paid by the employer for accident insurance covering air travels as perquisites u/s 17(2) of the Income Tax Act, 1961. The Tribunal held that the premiums were not taxable perquisites, relying on a previous court decision. The court affirmed the Tribunal's decision, stating that the premiums were not perquisites under the law and hence not taxable.

Deduction of Interest on Borrowed Money for Annuity Deposits:
In the assessment years 1966-67 and 1967-68, the assessee borrowed money to make annuity deposits and paid interest on the borrowed amounts. The claim for deduction of this interest was initially rejected by the ITO and the AAC but was allowed by the Appellate Tribunal. The court upheld the Tribunal's decision, reasoning that the interest paid on borrowed money for annuity deposits qualifies as expenditure laid out to derive income assessable under the head "other sources." Therefore, the interest paid was considered an admissible deduction. The court ruled in favor of the assessee, directing the Commissioner to pay the costs of the reference.

---