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The case involves an appeal by Biswas Manik against the order of the Commissioner of Income Tax (Appeals), which confirmed the additions made by the Assessing Officer regarding the taxability of an amount paid by the employer to LIC for an annuity policy. The Tribunal examined whether the contribution made by the employer to LIC for the annuity, which was payable in future, could be considered a perquisite and thus taxable in the hands of the assessee in the Assessment Year 2018-19. The Tribunal concluded that since the assessee had no vested right over the amount in the relevant year, it could not be taxed as income or a perquisite.
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 713548 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
08-08-2025
Appeal Filed By
Assessee
Order Result
Allowed
Assessment Year
2018-2019
Judgement Text
" IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE DR. BRR KUMAR, VICE PRESIDENT & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. No.770/Ahd/2025 (Assessment Year: 2018-19) Biswas Manik, C/o. J N Goyal & Company, C-162, Ranjeet Nagar, Bharatpur, Rajasthan-321001 Vs. Income Tax Officer, Ward-4(2)(4), Vadodara [PAN No.AODPB1929C] (Appellant) .. (Respondent) Appellant by : None Respondent by: Shri Pratik Sharma, Sr. DR Date of Hearing 05.08.2025 Date of Pronouncement 08.08.2025 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 02.08.2024 passed for A.Y. 2018-19. 2. At the outset, we observe that the appeal is time barred by 162 days. The delay of 162 days is condoned on due consideration of facts of assessee’s case and owing to causing no perceptible prejudice to other side. 3. The assessee has raised the following grounds of appeal: “1. The Ld. Commissioner of Income-tax (Appeals) failed to provide an opportunity for a personal hearing via video conferencing, despite the appellant’s specific request. Printed from counselvise.com ITA No. 770/Ahd/2025 Biswas Manik vs. ITO Asst.Year –2018-19 - 2– 2. The Ld. CIT(Appeals) erred in failing to establish that the Ld. FAO’s assessment was based on non-existent facts and a misinterpretation of the law. 3. The facts and circumstances of the case were not adequately considered by the Ld. Commissioner of Income-tax (Appeals) concerning the appellant’s legal claim. 4. The Learned NFAC erred in disposing of the appeal without recognizing that the same income was already offered for taxation, resulting in double taxation. 5. The actions of the Ld. Assessing Officer and Ld. Commissioner of Income-tax (Appeals) disregard established legal principles, judicial precedents and constitutional tenets. 6. The Assessee craves leave to add, alter or delete any grounds before or at the time of hearing before the Hon’ble Tribunal.” 4. The brief facts of the case are that for Assessment Year 2018-19, the assessee submitted before the Assessing Officer that a sum of ₹20,00,000/- paid by the employer to LIC under a Voluntary Retirement Scheme (VRS) to purchase an annuity policy on behalf of the assessee was exempt from tax. The assessee further submitted that he had already included the annuity instalments (with respect to this policy) of ₹1,40,727/- received from LIC as income in the return, which were not reflected in Form 16 or 26AS. The assessee submitted that the employer made errors in computing the taxable salary and failed to apply applicable exemptions, leading to inflated figures in Form 16. The assessee placed reliance on judicial precedents to support his claim that tax paid by the employer on behalf of the employee is a non-monetary perquisite and hence exempt. To verify the claims, the Assessing Officer (AO) issued notice under Section 133(6) of the Act to the employer, who clarified that the company paid ₹20,00,000/- to LIC on behalf of the assessee and grossed it up with tax of ₹5,87,515/-, totalling ₹25,87,515/- which was included as taxable salary in Form 16 issued to the assessee. Based on this, the AO held that the amount Printed from counselvise.com ITA No. 770/Ahd/2025 Biswas Manik vs. ITO Asst.Year –2018-19 - 3– paid to LIC formed part of salary under Section 17(2)(v) of the Act, being a perquisite in the nature of a contract for an annuity. However, exemption under Section 10(10CC) was allowed only to the extent of ₹5,87,515/-, which was the actual tax borne by the employer. Accordingly, the AO recomputed the assessee’s salary income. 5. In appeal, CIT(Appeals) dismissed the appeal of the assessee with the following observations: “6.1 The assessees services were terminated by the employer company GE Power India Ltd. under VRS approved by the Central Govt. The employer company had taken Annuity policy from LIC in favour of the retiring employees. Employer had paid a sum of Rs. 20 lac directly to LIC (not to the assessee) for allotment of Annuity policy in his favour and the sum of Rs. 20 lac is documented in full and final statement of settlement of account (section Deduction) as other deduction issued by the employer to the assessee. 6.2 As per annuity fetches fixed income to buyer of policy and accordingly the appellant received sum of Rs.1,40,727/- which was offered to tax by the appellant. 6.3 The Ld. AO treated payment of Rs.20 lakhs to LIC as perquisite and added to total income. 6.4 The appellant contested that the purchase of annuity plan on behalf of employee will not amount to perquisite. 6.5 The contention of the appellant is not found to be acceptable. Provision of Section 17 (2) defines Perquisites as under: \"1 7: For the purpose of sections 15 and 16 and of this section- (2) \"perquisite\" includes- (v) :any sum payable by the employer, whether directly or through a fund, other than a recognized provident fund or an approved superannuation fund or a Deposit-linked Insurance Fund established under section 3G of the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 (46 of 1948), or , as the case may be, section 6C of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), to effect an assurance on the life of the assessee or to effect a contract for an annuity;\" 6.6 In this context, reference is also drawn to a judgement of Patna High Court in the case of CIT Vs. J.G. Keshwani [1993] 202 ITR 391 (Patna). In this case, it was Printed from counselvise.com ITA No. 770/Ahd/2025 Biswas Manik vs. ITO Asst.Year –2018-19 - 4– held that amounts spent by the company to purchase deferred annuity policies from LIC on the life of the director, was assessable as salary in the hands of the director under section 15 r.w. sections 17(1)(iv) and 17(2)(v) of the Income-Tax Act, 1961. 6.7 In view of the above, it is very clear that any sum payable by employers on behalf of emoplyee is clearly defined as perquisite in hand of the employee. Therefore, the addition carried out by the Ld. AO is found to be appropriate and being upheld. 6.8 Accordingly, the appeal of the appellant is disposed on merits and based on information/documents available on records.” 6. The assessee is in appeal before us against the decision of CIT(Appeals) confirming the additions made by the Assessing Officer. Before us, none appeared on behalf of the assessee. From the case records, we observe that the case of the assessee is that the sum of Rs. 20 lakhs paid by the employer to LIC to purchase an annuity on his behalf cannot be taxed for this Assessment Year i.e. AY 2018-19, as it does not represent any amount received, due, or vested in him during that year. The annuity was structured to be paid to the assessee only after four years, in the form of monthly instalments from LIC. Since the assessee had no access to, or right over, the amount in AY 2018-19, it cannot be considered part of his salary or perquisite income for that year under section 15 or 17 of the Act. The assessee further submitted before CIT(Appeals) that he has already offered the annuity instalments actually received from LIC (amounting to Rs. 1,40,727/-) to tax under the head \"salary\" in his return for AY 2018-19. Therefore, if the entire Rs. 20 lakhs is also taxed in the same year merely because the employer paid it to LIC, and the same sum is again taxed in the future when the annuity installments are received, it would clearly amount to double taxation of the same income-once at the stage of employer’s contribution and Printed from counselvise.com ITA No. 770/Ahd/2025 Biswas Manik vs. ITO Asst.Year –2018-19 - 5– again at the time of actual receipt. In support of this, the assessee had earlier placed reliance on the Supreme Court judgment in CIT vs. L.W. Russel, which held that employer contributions towards annuity policies cannot be taxed in the employee’s hands unless a vested right has accrued to the employee. Until such time as the employee has a vested right-i.e., the amount becomes due or receivable-no tax can be levied. Since in the present case the assessee had no such vested right in AY 2018-19, the taxability cannot arise merely because of the employer’s contribution. Since the amount has not been received or become due, and will be taxed in future years when the annuity is actually paid out, it must not be added to income in the current year. 7. We have carefully considered the case of the assessee, the documents on record, and the applicable legal position. The issue for adjudication is whether the contribution of Rs. 20,00,000/- made by the employer to LIC for purchasing an annuity policy in the name of the assessee-payable in future-can be taxed as a perquisite in the hands of the assessee in AY 2018-19 under section 17(2)(v) of the Act. Section 17(2)(v) of the Act includes within the definition of perquisite any sum paid by the employer to effect a contract for an annuity, subject to certain exclusions. However, in order for such a payment to be taxed in the hands of the employee, it is essential, as per section 15 of the Act, that the amount is either due, paid, or allowed to the employee. The law is well settled that a contingent benefit or a non-vested future entitlement cannot be brought to tax in the year of payment by the employer unless the employee acquires Printed from counselvise.com ITA No. 770/Ahd/2025 Biswas Manik vs. ITO Asst.Year –2018-19 - 6– a vested right in the amount. The Hon’ble Delhi High Court, in Yoshio Kubo vs. CIT [2013] 357 ITR 452 (Del), dealt with an identical issue where employer contributions towards a pension fund or annuity were held to be not taxable as perquisites in the year of contribution. The Court held that when the amount does not result in a direct present benefit to the employee and the employee has no vested right over the same, the payment made by the employer does not amount to a perquisite under section 17(2)(v) of the Act. Further, the Hon’ble Supreme Court in CIT vs. L.W. Russel [1964] 53 ITR 91 (SC) clarified that amounts paid by the employer towards pension/annuity schemes are not taxable in the hands of the employee unless the employee acquires a vested right in the sum so paid. In the present case, the assessee acquired no such vested right in AY 2018– 19, and the annuity payments commenced only four years thereafter. Moreover, from the records it is observed that the assessee has in fact offered to tax, on accrual/receipt basis, the annuity income received from LIC in this year under the head “Income from Salary.” Therefore, taxing the employer's payment of Rs. 20,00,000/- in AY 2018-19 would amount to taxing the same amount twice-once at the stage of employer’s contribution and again at the time of annuity receipts-resulting in double taxation, which in our view is impermissible in law. The Department’s reliance on Form 16 and Form 26AS is erroneous, as these do not override the substantive legal provisions under the Act. Moreover, the employer’s payment to LIC was not made on behalf of the employee nor credited to his account; hence, it cannot be treated as income due, paid or allowed to him in that year. We also note that the identical position has been upheld Printed from counselvise.com ITA No. 770/Ahd/2025 Biswas Manik vs. ITO Asst.Year –2018-19 - 7– in several cases by the Hon’ble Delhi High Court, including in CIT vs. Mehar Singh Sampuran Singh Chawla [1973] 90 ITR 219 (Del), where it was held that the employee must acquire a vested right in the employer’s contribution for it to be taxed as a perquisite. In view of the above discussion and binding judicial precedents, we hold that the addition of Rs. 20,00,000/- made by the Assessing Officer in the hands of the assessee for AY 2018-19 is not sustainable in law. The assessee did not acquire any vested or enforceable right over the said amount in the relevant assessment year, and it cannot be taxed merely because the employer chose to contribute to LIC to effect an annuity for the future benefit of the employee. 8. Accordingly, the addition of Rs. 20,00,000/- is directed to be deleted. 9. In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 08/08/2025 Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 08/08/2025 TANMAY, Sr. PS TRUE COPY आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ(अपील) / The CIT(A)- 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad Printed from counselvise.com "
