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Facts
The assessee filed an income tax return for AY 2018-19. The Assessing Officer (AO) disallowed a claim for LIC annuity payment of Rs.15,00,000/-, along with associated tax of Rs.4,50,000/-, treating it as taxable income. The Commissioner of Income Tax (Appeals) subsequently partly allowed the assessee's appeal.
Held
The Tribunal, relying on a previous Coordinate Bench order, held that an employer's contribution to an LIC annuity policy is not taxable as a perquisite under Section 17(2)(v) if the employee does not acquire a vested right in the amount in the assessment year. Since the assessee had no such vested right in AY 2018-19 and had already offered the annuity income on an accrual/receipt basis, taxing the contribution would amount to impermissible double taxation. The employer's payment was not considered income due, paid, or allowed to the employee.
Key Issues
Whether an employer's contribution to an LIC annuity policy, where the employee has no vested right in the assessment year, constitutes a taxable perquisite in the hands of the employee.
Sections Cited
142(1), 17(2)(v), 15
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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: DR. B.R.R. KUMAR, VICE- & SHRI SENTHIL KUMAR
PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-
Delay condoned. This appeal is filed by the Assessee against the appellate order dated 17/01/2024 passed by the Commissioner of Income Tax(A), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “the Ld. CIT(A)”] relating to the Assessment Year (AY) 2018-19.
The assessee has raised the following grounds of appeal:
“1. In light of the facts and circumstances of the case, it is contended that the Ld. Commissioner of Income-tax (Appeals) erred in neglecting to address the issue concerning the failure of the Ld. Assessing Officer to afford the appellant an opportunity to be heard.
Furthermore, it is submitted that, both on the merits and in accordance with established legal principles, the Ld. Commissioner of Income-tax (Appeals) erred in not facilitating the Dileepkumar Bankeylal Pradhan vs. ITO AY : 2018-19 2 provision of a video conferencing opportunity to the appellant, thereby impeding the proper presentation of his case.
The appellate order is non-explanatory, lacking rationale, failing to address pertinent grounds, and neglecting to adjudicate relevant issues.
The facts and circumstances of the case were not duly considered by the learned Commissioner of Income Tax (Appeals) regarding the appellant's legal claim. 5 The learned Commissioner of Income Tax (Appeals) imposed irrelevant conditions while granting the appellant's claim, overlooking the pertinent facts and circumstances of the case. 6. The actions of both the learned Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) appear to disregard established legal principles, judicial precedents, and fundamental tenets enshrined in the Constitution.”
The brief facts of the case are that the assessee is an individual and has filed his return of income on 19/08/2018 declaring total income at Rs.11,49,980/- for the year under consideration. As per the notice issued to the assessee u/s.142(1) of the Act, the assessee was required to furnish the details on 07/02/2020. On 09/04/2020, the assessee furnished the salary details of Rs.13,80,427/- . The Assessing Officer (AO) assessed to tax by disallowing the claims made by the assessee with respect to the LIC annuity paid amounting to Rs.15,00,000/- and the tax of Rs.4,50,000/-.
In appeal, the Ld.CIT(A) partly allowed the appeal of the assessee.
Before us, the Ld. Counsel for the assessee submitted that the issue involved in this appeal is squarely covered by the order of the Coordinate Bench of this Tribunal passed in for AY 2018-19 vide order dated 05/08/2025. The operative portion of the said order of the Tribunal is as under:
“7. We have carefully considered the case of the assessee, the documents on record, and the applicable legal position. The issue for adjudication is whether the contribution of Rs. 20,00,000/- made by the employer to LIC for purchasing an annuity policy in the name of the assessee-payable in future-can be taxed as a Dileepkumar Bankeylal Pradhan vs. ITO AY : 2018-19 3 perquisite in the hands of the assessee in AY 2018-19 under section 17(2)(v) of the Act. Section 17(2)(v) of the Act includes within the definition of perquisite any sum paid by the employer to effect a contract for an annuity, subject to certain exclusions. However, in order for such a payment to be taxed in the hands of the employee, it is essential, as per section 15 of the Act, that the amount is either due, paid, or allowed to the employee. The law is well settled that a contingent benefit or a non-vested future entitlement cannot be brought to tax in the year of payment by the employer unless the employee acquires a vested right in the amount. The Hon'ble Delhi High Court, in Yoshio Kubo vs. CIT [2013] 357 ITR 452 (Del), dealt with an identical issue where employer contributions towards a pension fund or annuity were held to be not taxable as perquisites in the year of contribution. The Court held that when the amount does not result in a direct present benefit to the employee and the employee has no vested right over the same, the payment made by the employer does not amount to a perquisite under section 17(2)(v) of the Act. Further, the Hon'ble Supreme Court in CIT vs. L.W. Russel [1964] 53 ITR 91 (SC) clarified that amounts paid by the employer towards pension/annuity schemes are not taxable in the hands of the employee unless the employee acquires a vested right in the sum so paid. In the present case, the assessee acquired no such vested right in AY 2018-19, and the annuity payments commenced only four years thereafter. Moreover, from the records it is observed that the assessee has in fact offered to tax, on accrual/receipt basis, the annuity income received from LIC in this year under the head "Income from Salary." Therefore, taxing the employer's payment of Rs. 20,00,000/- in AY 2018-19 would amount to taxing the same amount twice-once at the stage of employer's contribution and again at the time of annuity receipts- resulting in double taxation, which in our view is impermissible in law. The Department's reliance on Form 16 and Form 26AS is erroneous, as these do not override the substantive legal provisions under the Act. Moreover, the employer's payment to LIC was not made on behalf of the employee nor credited to his account; hence, it cannot be treated as income due, paid or allowed to him in that year. We also note that the identical position has been upheld in several cases by the Hon'ble Delhi High Court, including in CIT vs. Mehar Singh Sampuran Singh Chawla [1973] 90 ITR 219 (Del), where it was held that the employee must acquire a vested right in the employer's contribution for it to be taxed as a perquisite. In view of the above discussion and binding judicial precedents, we hold that the addition of Rs. 20,00,000/- made by the Assessing Officer in the hands of the assessee for AY 2018- 19 is not sustainable in law. The assessee did not acquire any vested or enforceable right over the said amount in the relevant assessment year, and it cannot be taxed merely because the employer chose to contribute to LIC to effect an annuity for the future benefit of the employee:”
In the absence of any change in factual matrix and legal proposition brought to our notice, the appeal of the assessee is hereby allowed.
4 8. In the result, the appeal filed by the assessee is allowed. The order is pronounced in the open Court on 11/02/2026
Sd/ Sd/ Sd/- Sd/ Sd/ Sd/ Sd/- Sd/ (T.R. SENTHIL KUMAR T.R. SENTHIL KUMAR) (DR. B.R.R. KUMAR) (DR. B.R.R. KUMAR) T.R. SENTHIL KUMAR T.R. SENTHIL KUMAR (DR. B.R.R. KUMAR) (DR. B.R.R. KUMAR) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE VICE VICE-PRESIDENT VICE PRESIDENT PRESIDENT PRESIDENT