TMI Blog2006 (1) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 1,24,720 and income from other sources of Rs. 15,241. During the assessment proceedings, the Assessing Officer required the assessee to show cause why the contribution of employer to pension fund, insurance fund and other schemes should not be taxed as perquisites under section 17(2) of the Act. The assessee vide letter dated 22nd December, 1998 filed a detailed reply. In this regard, the assessee submitted that GE Capital, as a policy contributes to GE Expatriate Pension Plan which is in the nature of a social security plan. An employee, who has continuously served for more than 5 years, becomes eligible to the benefit of pension fund contribution made by GE. It was also submitted that the pension is receivable only after the retirement subject to vesting in the plan. The contribution to these funds has been claimed as exempt from taxation. The Assessing Officer did not find any merit in the above submissions of the assessee and took the view that the contribution made by the employer towards pension plan is a perquisite under section 17(2)( v ) of the Act. The Assessing Officer has relied on the decision of Patna High Court in the case of CIT v. J.G. Keshwani [1993] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act when read together do not in any way detract from the fact that deferred/contingent benefits (to the extent not due) are not liable to be charged under the head "Income from salary". It was specifically argued by the assessee before the CIT(A) that the provisions of section 17(2)( v ) of the Act seek to tax any sum paid in order to effect a contract for "annuity" on the assessee. The assessee also submitted before the CIT(A) that a reading of section 17(2) alongwith section 15 would make it clear that in order that a benefit or payment may be termed as perquisite, a right is conferred on an employee in respect of that perquisite to receive it from his employer. One cannot be said to allow a perquisite to an employee if the employee has no right to the same. It was specifically pleaded before the CIT(A) by the assessee that it cannot apply to contingent payment to which the assessee has no right till the contingency occurs. Thus, the employee must have a vested right therein. 5. The assessee also submitted before the CIT(A) that the reliance placed by the Assessing Officer on the judgment of Hon ble Patna High Court is misplaced as the facts of the case were entirely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards 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. The learned CIT(A) has also held that the reliance placed by the Assessing Officer on the judgment of the Patna High Court in the case of J.G. Keshwani ( supra ) is misplaced as the facts of that case were entirely different. He observed that in the Patna High Court case, the assessee was holding the employment as the director of the company and in terms of the compensation package, he was entitled to receive commission as a percentage of the net profits computed in the manner laid down under the Company s Act subject to a maximum ceiling. Subsequently, the terms of the appointment of the assessee were varied and the company instead of paying commission decided to purchase deferred policies from the Life Insurance Corporation on the life of assessee as per the annuity plan, the annuity payment would commence from the date of retirement. The Assessing Officer had held that the arrangement was merely a change in the mode of payment of the commission to the assessee. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... precise nature of the contribution to the GE Expatriate Pension Plan (GEPP) as under : "GEPP is in the nature of Social Security Plan. The employer contributes to the plan to provide for target pension to the employee after his retirement. The employee benefit changes according to the increase in salary, service years and age. If any employee leaves the organization before he becomes entitled to the pension, then the contributions made by the employer on his behalf are forfeited unless the employee has been vested in the plan and then these contributions accrue to the benefit of the existing employees. In order to become vested in the plan, the employee must complete 5 years of continuous service within the GE System (means GE, its affiliates and/or correspondent companies) including at least one year of expatriate service. As per the terms of the plan, the employee is entitled to receive the benefit from the plan only after the retirement subject to vesting in the plan as stated above. Normal retirement age is 65. If employee retires earlier and he fulfils certain other conditions, he would be entitled to receive pension but at a reduced amount. This reduced amount is again d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether paid or not; ( b )any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him; ( c )Any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income tax for any previous year." Section 17(2)( v ) of the Income-tax Act provides as under : "For the purposes of sections 15 and 16 and of this section, (1)****** (2) perquisite includes ( i ) to ( iv )****** ( 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 Employee s 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;" Section 15 provides that salary is taxable on due or receipt basis, whichever is earlier and the same is the charging section for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Their Lordships further concluded that at best he was having a contingent right therein and the same will not be taxable. The learned DR was not able to point out as to what is the material difference in between section 7(1) of Income-tax Act, 1922 and the provisions of sections 15 to 17 of Income-tax Act, 1961 on this point. Fact remains that assessee was not going to get any benefit under the welfare pension scheme till he attains the age of 65 years or in the case of death. Both these eventualities alone will be making assessee or his survivors as the case may be, entitled to get the benefit. Before these eventualities the assessee is not getting any vested right and the assessee/employee at the most have contingent right and in the absence of any vested right to receive the amount, the same cannot be made taxable under section 17(2)( v ) of the Act. The view taken by the Assessing Officer and the CIT(A) is contrary to the view of the Hon ble Supreme Court referred to above and thus not sustainable. It is concluded that amount of employer s contribution towards welfare pension scheme was not perquisite under section 17(2)( v ) of the Act." 12. In the case of Thomas William ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the present case. The Hon ble Supreme Court has held (Head note) as under : " Held , ( i ) that until an employee attained the age of superannuation he did not acquire any vested right in the employer s share of the contributions towards the premiums; at best he had a contingent right therein; ( ii ) that the expression perquisites which are allowed to him by a or are due to him, whether paid or no, from, or are paid by or on behalf of, . . . a company in section 7(1) of the Indian Income-tax Act, 1922, applied only to such sums in regard to which there was an obligation on the part of the employer to pay and a vested right on the part of the employee to claim; it could not apply to contingent payments to which the employee had no right till the contingency occurred. The employer s contribution towards the premiums were not perquisites allowed to the employee by the employer or amounts due to him from the employer within the meaning of section 7(1) read with clause ( v ) of the Explanation thereof." In view of the decision of the Hon ble Supreme Court in the case of L.W. Russel ( supra ), it can be safely held that in the instant case, assessee is having only c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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