1. SALEEM AKTHAR, J. -These four references relating to charge years 1967-68, 1968-69, 1969.70 and 1970-71 have been filed by the applicant/assessee and shall be disposed of by this judgment.
2. The applicant was the Manager of Pakistan Branch of the National Cash Register Company Ltd, a company incorporated in Payton in Ohio State of United States of America. During the financial year 1966-67 the applicant was en titled to a salary of Rs. 6,400per month andRs 640 as "expense allowance" per month. During this year the applicant also owned a car but its running and maintenance expenses were met by the employer Company. The employer Company was maintaining a ---pension plans in United Kingdom for the benefits of its overseas employees.
3. According to the applicant in terms of the Trust Deed governing the pension plan the employer Company was to contribute certain percentage of the salary towards the pension fund. The applicant was entitled to received no part of this fund at any time before he finally left the service or retired. For the assessm ent year 1967-68 the income-tax Offices added the employers contribution to the 'pension fund' and the amount of "expense allowance'' in the taxable income of the applicant on ground that such a contribution is neither recognised not exempted under the Income-tax Act arid the applicant being a resident and ordinary resident in Pakistan" is liable to tax on all income wherever it may have accrued. The Income-tax Officer also added the whole amount received by the applicant as 'expense allowance' on the ground that it was not entertainment allowance but an additional amount which is a part and parcel of the salary. The sum of Rs. 2,400 was also added as the value of free car which was paid to the applicant. The applicant filed an apnea: to the Income-tax Appellate Tribunal, challenging the correctness of these additions made by the Income--tax Officer but the learned Tribunal rejected the applicant's appeal relating to the aforesaid three additions and confirmed the findings of the Income-tax Officer. In these circumstances the applicant filed these applications under section 66(1) of the Income-tax, Act refering the following questions in all the four cases: -
(1) Whether in the facts and circumstances of the case the Tribunal is night in holding that employers contribution to the 'pension 'plan' maintained in the United Kingdom is income which accrued to the applicant and is liable to be included in the applicant's taxable income?
(2) Whether in the facts and circumstances of the case the Tribunal is right in holding that the amount received by the applicant as expenses allowance is not entertainment allowance and is part and parcel of the applicant's salary?
(3) Whether in the facts and circumstances of the case, the Tribunal is right in holding that the addition of Rs. 2,400 as value of free car was justified?
4. Mr. Ali Athar the learned counsel has not pressed question No. 2. We will, therefore, deal and reply only questions Nos. 1 and 3.
5. The learned counsel has contended that considering the nature of the `pension fund', the applicant was not entitled to receive it except on happen--ing of certain contingencies which may be the retirement or death, and before the amount paid by the Company towards the 'pension fund' was not an amount due to the applicant and could not be treated as the income of tae applicant. The details of the funds created by the employer Company do not seem to be available oil record. It teems that before the Income-tax Officer erg well as before the learned Tribunal, the applicant has been pressing his claim, seeking exemption of the amount paid by the employer Company towards pension fund' mainly on the ground that the fund may be treated ax recognised under the Income-tax Act. This impression is gathered from toe order passed by the Income-tax Officer, as well as by the learned Tribunal. The exemption was not allowed mainly on the ground that the pension fund was not recognized by the Board of Revenue as provided by the Income-tax Act.
6. Tribunal has quoted in extenso the observation of the learned Income-tax Officer and agreed with the views expressed by him. However, it seems that this question was agitated by the applicant during the assessm ent year 1965-66 which is subject-matter of Income-tax Reference No. 154/74.
7. In that preceding year the Income tax Officer has included the contribution of the Company to the pension fund in the salary of the applicant which was resisted by him on the plea that the receipts were of contingent nature. It was further contended that income from such receipts can accrue and arise when the same are received by the applicant. It seems that after considering the nature of the fund and the contribution made by the employer Company, the learned Tribunal by its order, dated 16-4-1974 observed as follows: - "We are of the opinion that the employers contribution is definitely contingent on certain conditions. So far as its receipt by the employee is concerned the contribution of the employer would be payable to the employee only in the event of the completion of his specified period of service or upon the conduct etc. Of the employee. Therefore, there will be no title to the employee till be has fulfilled these stipulated conditions and any payment on his behalf to these funds would give him only a contingent title. These would not, therefore, constitute his income."
8. The Tribunal, therefore, found that the contribution paid by the employer Company was of a contingent nature not payable to the employee immediately but on happening of certain events which included the retirement, death, dismissal or conduct of employee. In fact in these impugned orders the approach of the learned Tribunal was completely different and restricted to the contention that no exemption could be granted, as the 'pension fund' was not recognized. The crux of the matter has properly been dealt within the learned Tribunal's order quoted above.
9. Mr. Ali Athar while referring to this finding in respect of the contribu--tion made by the employer Company during the preceding years referred to section 7(1) of the Income-tax Act and contended that the amount of contribution paid by the employer is not due to the applicant immediately on its payment by the employer. Its payment to the applicant is subject to certain conditions which have to be fulfilled before it becomes due and payable to the applicant. Section 7(1) has been framed in very, wide and broad language. Under the bead "Salaries" tax shall be payable on any salary, wage, annuity, pension gratuity, fee, perquisites and benefits in lieu of or in addition to the wage and salary which are due to the employee whether received by him or not: For the purposes of interpreting this section and applying it to the facts of this case word "due" seems to be the key words. In Black's Law Dictionary the meaning of the word "due" has been given as follows: - "Due, which is proper, regular, lawful, sufficient, remained unpaid, reasonable, owing, payable, justly owed, that which law or justice require to be paid or done."
10. In Stroud's Judicial Dictionary IVth Edition meaning of the word "due" is "immediately payable" (it is common signification). The word "due" signifis a fixed and settled obligation or liability which has to be determined in each case from its own context and usually is neither contingent no dependent on any happening.
11. Keeping these meanings in mind it seems that under section 7 an is liable to pay tax under the bead 'salaries' in respect of any salary, wages pension, annuity, gratuity, perquisites, fee, benefits and profit if it is due to him whether paid or not. The main criterion is that all such amount which fall under the head 'salaries' shall be subjected to tax provided they are due to the assessee. If the amount is not due to him, tax is not payable under section 7. In the present case, the contribution paid by the employee Company in the 'pension funds' does not become due and- payable to the applicant immediately on its payment by the employer Company. It is the obligation of the employer Company to pay regularly which is payable to the applicant only on the happening of certain contingencies may be retirement, termination of service or death. It is also possible, in certain circumstances that although this amount has been paid by the employer Company in the fund, it may not be payable to the applicant at all. As the payment of pension fund to the assesses is dependent on happening of certain contingencies or complying with certain conditions which have neither happened no complied with during the charge year it cannot be termed as an amount due and payable and, therefore, cannot be included under the head 'salaries' four the purpose of charging tax. The tax will be charged if it is due and, payable during the charge year, though not paid or received by the assesses.
12. The learned counsel for the applicant has referred to Edwards H. M. Inspector of Taxes v. Roberts 19 Taxation 618 where the respondent was employed by a Company under an agreement which provided inner alia that in addition to his salary he should have an interest in a 'conditional fund' which was to be created by the Company by payment after the end of each financial year of a sum out of its profit to the Trustees of the fund to be invested by them in the purchase of the Company shares or debenture stock. The respondent was entitled to receive the 'income at the expiration of each financial year and to receive part of the capital of the fund at the expiration of five financial years and of each succeeding year, and on death while in Company's service or on the termination of his employment by the Company receive the whole amount then standing to the credit of the capital account of the fund.The respondent resigned in September, 1927 and at that date the Trustees transferred to bill-, the shares which they had purchased out of the payment made from the years 1922 to 1927. The Income-tax Authorities assessed the respondent to tax for 1927-2d on the amount of current market value of the share at the date of transfer. The respondent appealed against that order on the ground that in the scheme of things he would be liable to tax only in the year of payment and not when the assesses received the amount. This objection was rejected on the ground that in the circumstances of the case "they could not be said to have accused to this employee a vested interest in these successive sums placed to his credit, but only that he had a chance of being plea sum at the end of six years if all went well."
13. The next case relied upon by Mr. Ali Athar is Commissioner, Income --tax, Kuala v. L. W. Russel (1964) 53I T R 91. In that case the question was whether contribution paid by the employer providing pension benefit to employee can be taxed in the end of the year unless a vested interest accrues to .The employee. The facts were that a Society incorporated in England had established' a superannuation scheme for the benefits of its employees employed in India, Cylone and Africa.
14. Every employee had to become of the scheme as condition of service. The terms of benefit were incorporated in a trust deed. The trustee had to effect policy of insurance ensuring an annuity to every employee on his attaining age of superannuation or happening of a specified contingency.
15. Under the scheme the Society bad to contribute every month 1/3 of the premium payable by such employee. If the employee left his service or was dismissed or died during the service of Society he was entitled only to be repaid the total amount of the premium paid by him. The Trustees could in their discretion under certain circumstances give him a portion of the premium paid by the Society.
16. The employee was entitled to Surrender the right and receive the amount paid by him and by the Society. In 1955-57 the Society contributed Rs. 3,333 towards the premium payable by, the respondent. The Income-tax Officer included this amount in the taxable income of the respondent which was challenged by him. Relying on Edwards v. Robberts the Supreme Court of India observed as follows :- "The principle laid down by the Court of appeal namely that unless a vested interest in the sum accuses to an employee it is not taxably equally applies to the present case."
17. In all these authorities the principle has been enunciated that where the benefit to the assessee under any scheme is only contingent and indeterminate and the right to recover/receive is dependent upon happening of certain event or on future date no vested interest in the sum is created and, therefore, the amount cannot be said to have accrued or become due to the assesses before happening of the contemplated contingency. An amount which is payable on the happening of certain contingency cannot be claimed by an assessee as a matter of right as it will become payable only when precondition attached to it are fully satisfied. Applying the principle to the facts of the present case we find from the observations made by the learned Tribunal that the amount of contribution paid by the employer would be payable to the employee only in the event of completion of a specified period of service. This is not the case of the Department that the amount included in the income of the applicant is payable in the accounting year in terms of the scheme under which the employers contribution is made. In these circumstances' the contribution paid by the employer Company in the pension fund could not treated as a salary of the respondent under section 7 of the Income-tax Act.
18. Mr. Awan, the learned counsel for the Department in view of the sub---sequent finding of the Tribunal in 1. T. R 154/74 was unable to distinguish it with the facts of the present case. In the result we reply the question No.1 in the negative.
19. As question No. 2 has not been pressed we will now consider question No. 3. The Income-tilt Oar has subjected to tax Rs. 2,400 being the value of free car or conveyance allowance as termed by the learned Tribunal. It was convessed before the Assessing Officer and Tribunal that only Rs. 1;200 should have been taken each year for purpose of taxation as provided by rule 39(4)(b)(l)(bb) of prequisite Rules because the conveyance was not exclusively used by the assessee. It was used by other members of the staff of the Company also. Mr. Ali Athar has contended that the Income tax Officer and the Tribunal have wrongly plate the burden upon the applicant to establish that the car was not exclusively used by him. The applicant/assessee was seeking exemption oat the aforestated ground. It was, therefore, the duty of assesses to prove the facts on the basis of which he was seeking exemption. It is well-settled that if an assesses wants to take benefit of any, exemption then the burden is upon him to establish that he is entited to it. It is true that burden is upon the Department to establish that the income is liable to tax under a statute but the onus of showing that a particular class or part of an income is exempt from taxation is upon the assessee.
20. Reference can be made to C. I. T. v. Maharaj Visemeswar Singh 1935 I T R 216, Karen Kayemeth v. I. R.
21. 17 T C 27, 58 It has been found that the assessee was not able to establish that the car was also used by the staff' members of the Company and was thus riot exclusively used by him. On the facts and circumstances of the case the learned Tribunal has taken a correct view. We, therefore, answer question No. 3 in the affirmative.