Dear Sirs
I am working with NTPC ltd.We have a defined pension scheme started in 2007. In the scheme Employer contributes an amount to the superannuation fund of each employee.But in case of resignation and dismissal employee will not get contribution by employer.Employee will get employer contribution only after superannuation or retirement.As per income tax rules any contribution beyond one lakh per annum is taxable.So the employer has shown the amount contributed by employer over 1 lakh as taxable income on the form 16 of employee as perqusite. I have gone through the advance ruling by AAR which say that"The amount standing to the credit of the funds like the pension and fund account, social security of medical or health insurance would continue to remain invested till the assessee becomes entitled to receive it. The vesting right to receive the amount under the scheme or plan did not occur. We are of the opinion that the judgment of the Hon’ble Supreme Court in CIT vs. L.W.Russel AIR 1965 SC 49 applies to the facts of the present case. There, it was held that one cannot be said to allow a perquisite to an employee if the employee has no right to the same. It cannot apply to contingent payments to which the employee has no right till the contingency occurs. The employee must have a vested right in the amount. In this context, the decision of the Delhi High Court in CIT v. Mehar Singh Sampuran Singh Chawla [1973] 90 ITR 219 (Delhi) can be noted, where it was held that the contribution made by the employee towards a fund established for the welfare of the employees would not be deemed to be a perquisite in the hands of the employees concerned as they do not acquire a vested right in the sum contributed by the employer. Similar view was expressed in Yoshio Kubo v. Commissioner of Income Tax (2013 ) 36 Taxman Con. 1. The Hon’ble Supreme Court in Russel’s case (supra) spelt out a wider and fundamental principle, i.e. when the amount does not result in a direct present benefit to the employee who does not enjoy it, but assures him a future benefit, in the event of contingency, the payment made by the employer, does not vest in the employee. We are of the opinion that the new Act does not make any significant departure from this aspect. In view of above ruling ,Is it correct that additionof amount over 1 lakh to the employee perquisite which causes higher tax liability to employee. Aneesh Kumar
CAclubindia
