Biswas Manik Vs ITO (ITAT Ahmedabad)
Future Annuity benefits not taxable until received – Relief for VRS retirees from ITAT Ahmedabad- Employer’s Rs 20 Lakh VRS Annuity payment not taxable in year of contribution – No vested right, Avoids Double Taxation
Ahmedabad ITAT deleted an addition of Rs 20 lakhs made as a perquisite u/s 17(2)(v), holding that an employer’s contribution to LIC for purchasing an annuity under a VRS scheme is not taxable in the year of payment if the employee has no vested right over the amount in that year.
For Assessment Year 2018-19, Assessee submitted before AO that a sum of Rs 20 lakhs paid by the employer to LIC under a Voluntary Retirement Scheme (VRS) to purchase an annuity policy on behalf of Assessee was exempt from tax. Assessee further submitted that he had already included the annuity instalments (with respect to this policy) of Rs1,40,727/- received from LIC as income in the return, which were not reflected in Form 16 or 26AS. Assessee submitted that the employer made errors in computing the taxable salary & failed to apply applicable exemptions, leading to inflated figures in Form 16. To verify the claims, AO issued notice u/s 133(6) to the employer, who clarified that the company paid Rs 20 lakhs to LIC on behalf of Assessee & grossed it up with tax of Rs5,87,515/-, totalling Rs25,87,515/- which was included as taxable salary in Form 16 issued to Assessee. Based on this, the AO held that the amount paid to LIC formed part of salary u/s 17(2)(v), being a perquisite in the nature of a contract for an annuity. However, exemption u/s 10(10CC) was allowed only to the extent of Rs5,87,515/-, which was the actual tax borne by the employer. CIT(A) uhheld the addition.
