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TMI Blog2014 (5) TMI 630X X X X Extracts X X X X X X X X Extracts X X X X ..... uation scheme ('the Scheme') for the purpose of providing pension to its eligible employees. The aforesaid Scheme, which is a defined benefit plan has been approved by the Commissioner of Income-Tax under Rule 2(1) of the Part B of the Fourth Schedule of the Act, on 26 December 1975. Employees who have joined the Applicant up to 31 December 2004 are eligible for the pension benefit under the aforesaid Scheme. Employees, who have completed 10 years of continuous services, are eligible for pension on resignation/ retirement. Superannuation schemes adopted by various enterprise are categorized as "defined contribution schemes" and "defined benefit schemes". Both these types of superannuation schemes are provided by various insurance companies. Accounting Standard 15 ('AS-15') on Employee Benefits issued by the Institute of Chartered Accountants of India which provides the accounting treatment for employment benefits defines the "defined contribution scheme" and "defined benefit scheme" as follows: Defined contribution scheme AS-15 defines 'defined contribution schemes' as post-e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erannuation fund (for an amount exceeding one lakh rupees per employee) as perquisite and where the same is not so deducted, whether the Applicant would be treated as a 'assessee in default'? 2) If the answer to question 1 is yes, where the Applicant was to bear income- tax on behalf of the employees, whether the tax so borne by the Applicant should be taxed again in the hands of the employees and the grossing up provision as applicable under Section 195A of the Act should be applicable? 4. Elaborating the factual position the applicant has stated as follows: Actuarial valuation report does not have employee wise detail of contribution. In the present case, the Applicant makes a single contribution to the superannuation fund for all its employees taken together, based on the actuarial valuation provided by the actuarial valuer for a period of time, and the same is not identifiable to any particular employee. In respect of such a 'single' contribution made under the 'Defined Benefit Scheme' (as distinct from the contribution made under the 'Defined Contribution Scheme'), details of the contribution pertaining to each employee are not av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion paid by the Applicant is mainly made up of two components, firstly to meet the cost of the accruing benefits during the year and secondly, an adjustment for any deficit or surplus in the scheme at the time for the past year(s). Accordingly, in view of the above arguments and given the nature of the 'Defined Benefit Scheme', it is not possible to derive the contribution on a per employees basis which may be used for income -tax purposes 5. In response the Revenue has submitted inter-alia as follows: The Indian Branch of the above mentioned Non-resident assessee has established a superannuation scheme for providing pension to its eligible employees. As stated by the assesseee in its application, the superannuation scheme is a 'defined benefit plan'. The assessee's contention is that the actual contribution in respect of an employee is not discernible in this case for the purpose of section 192(1A) of the Act. The assessee has not indicated in its application whether any of the employees to whom such benefits would be provided are non-residents. It is further seen that the issues involved in this case relate to Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te for the purpose of payment of annuity, pension, etc. to the employee as retirement benefits. Merely because the contributed amount is not directly paid to the employee at the first instance, it cannot be said that the perquisite arising to the employee out of such contribution has not been provided by way of monetary payment. Therefore, once the perquisite in question stands provided by way of monetary payment, tax on such perquisite even if borne by the employer cannot be held to be exempt under Section 10(10CC) of the Act, Section 192(1A) cannot be pressed into service and the grossing up provision as applicable under Section 195A will fully apply in the case. 6. For a proper appreciation of the controversy which calls for decision, the relevant provisions which have to be considered for the purpose of this judgment, are extracted below. Section 10 (10CC) states that: "10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included. (10CC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 right till the contingency occurs. The employee must have a vested right in the amount. In this context, the decision of the Delhi High Court in CIT v. Mehar Singh Sampuran Singh Chawla [1973] 90 ITR 219 (Delhi) can be noted, where it was held that the contribution made by the employee towards 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. Similar view was expressed in Yoshio Kubo v. Commissioner of Income Tax (2013 ) 36 Taxman Con. 1. The Hon'ble Supreme Court in Russel's case (supra) spelt out a wider and fundamental principle, i.e. when the amount does not result in a direct present benefit to the employee who d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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