The word עליו definitely means that the apple is in physical contact with him. So it's either on top of his head (as in William Tell) or it was found on his person (as in the police searching someone and finding... an apple).
"Above" can mean that there is some distance between him and the apple. In that case the proper Hebrew word is me'alav: מעליו, a combination of מעל + הוא
The Hebrew words don't have to translate to "on top" right? The apple could be taped to his side and the Hebrew sentence would still be perfectly valid. I assume that this particular translation could hold true under certain conditions (for instance if it were understood that the apple was on his head), but I feel like it is inferring something that just isn't here without context.