TMI Blog2014 (5) TMI 630X X X X Extracts X X X X X X X X Extracts X X X X ..... oyees 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 - 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 - the new Act does not make any significant departure from this aspect – Decided in favour of Applicant. - A.A.R. No. 964 of 2010 - - - Dated:- 9-5-2014 - Dr. Arijit Pasayat and Mr. T.B.C. Rozara, JJ. For the Appellant : Mr. Girish Dave, Advocate, Mr. Amit Phulwani of SRBC For the Respondent : Mr. Rajeev P.Singh, CIT-DR(AAR),ND Mr. Vijay Kumar, DIT(IT), Kolkata RULING The applicant has filed this application for obtaining an advance ruling u/s. 245Q(1) of the Income-tax Act, 1961 (in short the Act ). 2. The factual position highlighted by the applicant is as follows: The Applicant is a Bank incorporated in Netherlands with limited liability and it has branches in India. The Indian branch of the Applicant constitutes a permanent establishment ( PE ) in Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a discounted basis because they may be settled many years after the employees render the related service. The actuarial valuation is typically based on several actuarial factors such as discounting rate, salary escalation rate, attrition rate, average mortality rate, etc., in order to provide for the future liabilities that could arise to the applicant out of the aforesaid scheme. It may be pertinent to note that the aforesaid actuarial factors are variable in nature, and may change from year to year for the same enterprise. In the Applicant s case, a lump sum contribution is made into the Scheme in respect of the pension for all eligible employees. The lump sum contribution is calculated based on the actuarial valuation which is in turn typically based on several underlying assumptions. Given the nature of the defined benefit scheme, it is not possible to derive the contribution on a per employee basis which may be used for income-tax purposes. 3. The questions on which the ruling is sought read as follows: 1) Whether on the facts and circumstances of the case and law, tax is required to be deducted at source under section 192 of the Act, by the Applicant on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by any one actuary based on the actuarial assumptions as per his professional judgment, may not be the same if recommended by another actuary, based on his own professional judgment and skill. There could be a scenario where the assets of the Scheme may be in surplus over its obligations, as per the actuarial valuation, due to various factors viz. reduction in the number of employees on the payroll of the Applicant on the last day of the financial year vis- -vis first day of that year, etc. Accordingly, the Applicant may not be required to contribute for that particular year. Likewise, in subsequent year, there could be a scenario where the obligations/ liabilities of the Scheme as per the actuarial valuation are higher than its assets and hence, Applicant would be required to contribute to the Scheme in that particular year. The actuarial risk (that benefits will cost more than expected) and investment risk fall, in substance, on the enterprise. If actuarial or investment experiences are worse than expected, the employer s obligation may increase. In view of the above, it is apparent that the contribution paid by the Applicant is mainly made up of two comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not automatic. Section 192(1A) comes into play only when the employer performs some positive act in the sense that the employer at his option pays the tax on the perquisites not provided by way of monetary payment. This requires actual payment of the tax by the employer at his option and that too, on perquisites which are not provided by way of monetary payment. In other words, if the perquisites are provided by way of some monetary payment, Section 192 (1A) cannot be pressed into service and in that case, tax on such perquisites borne by the employer will be grossed up in terms of Section 195A in computing the income of the employee concerned. The applicant has contended that the contribution to superannuation fund in respect of an employee in excess of Rs.1 lakh is a perquisite which is not provided by way of monetary payment. The applicant s contention is not tenable. Clearly, the contribution to superannuation fund in respect of an employee involves actual payment of money and the corresponding perquisite stands provided to the employee by way of monetary payment which will accumulate for the purpose of payment of annuity, pension, etc. to the employee as retirement benefits. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncessional rent accommodation, other perquisites taxable in the hands of the employee include provision of services of domestic employees, supply of amenities, for household consumption, free or concessional educational facilities for any member of the employee s household, interest free or concessional loan, and benefits resulting from the use of any moveable asset. 7. We have considered rival submissions. On analysis of the factual scenario it is clear that the applicant does not get a vested right at the time of contribution to the fund by the employer. 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 ri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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