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Taxability of commuted amount of annuity from lic

This query is : Resolved 
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12 August 2013 Our trust has taken superannuation policy from LIC under which Employer contribute 15% of basis salary.
After serving for more than 18 years, LIC commuted one third of the amount of pension i.e. annuity and started paying pension( annuity)to Employee directly. Commuted amount was paid to trust for onward making payment to Employee. Now the Employer wants to deduct income tax on the commuted amount received from LIC ( U/s 10 (13) whereas retired employee is of the opinion that commuted amount is not subject to Income Tax under section 10(10A)iii.

I request expert for their comments as to what is correct status.
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CA PARAS BAFNA

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CA PARAS BAFNA (Expert)
12 August 2013 I also support you view.
.
Only, Monthly pension payments are taxable.
1/3rd of the commuted value is exempt.
.
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