Scope of Sec.17-Insurance of pilot's license. - Income Tax - 1343/CBDT

INSTRUCTION NO. 1343/CBDT Dated: July 29, 1980 Reference is invited to boards Instruction No.985 (F.NO.200/64/74-IT(AI) dated 26-6-76 on the above subject para 4 of these instructions reads as under:- Insurance for the loss of license by pilots is taken to avoid corporations having to pay compensation to them if their licenses are withdrawn. The benefits from insurance is therefore derived by the corporations and not by the pilots. Reimbursement of the amount of premium cannot in the circumstances be treated as perquisite in the assessments of the pilots. However, if a pilot receives compensation against loss of his licence, he would be liable to pay tax on the amount as this will be hit by the mischief of section 17(3) of the I.T.Act. Appeals and references application may be conceded accordingly. 3. It has been noticed that the premia on these insurance policies is being paid by the employers. The employee having nothing to do with the insurance policy in discharging an obligation which otherwise would have been that of the employee. Therefore the insurance premia paid by the employer on behalf of the employee whether directly or through the medium of reimbursement to the employee would be a perquisite within the meaning of sec.17(2)(iv) and taxable in the hands of the pilots. In view of the decision of the Kerala High court in the case of CIT VS. B.M.Edwards (199 ITR 334) which has been accepted by the board, the completed assessments of pilots need not be re-opened in order to tax the perquisite by way of reimbursement/direct payment by the employer of the insurance premia. 4. Instruction No.985 may be treated as modified accordingly.