Superannuation fund isn't a taxable until employee is entitled to receive it. - AAR

IT/ILT/AAA: Employer's contribution to the superannuation fund assures only future benefit to employees and they do not get any vested right at the time of making contribution to the fund - Therefore, such contribution could not be treated as taxable perquisite in the hands employee until they are entitled to receive it

Facts:

• The Royal Bank of Scotland ('Applicant') was established in Netherlands. Its Indian branch established a superannuation fund for providing pension to its eligible employees under a 'Defined Benefit Plan'.
• The applicant seeks Advance Ruling on the issue whether tax was to be deducted under Sec. 192 on the contribution made to the superannuation fund (for an amount exceeding Rs. 1,00,000 per employee) as perquisite?
• The Revenue contended that as per section 17(2)(vii), any contribution made by employer to the superannuation fund in excess of Rs. 1,00,000 to be treated as perquisite in the hands of an employee. Hence, the applicant was liable to deduct tax at source under section 192.

The Authority held in favour of applicant as under:

1. The AS-15 defines 'Defined Benefit Plan' as a plan in which amount contributed was invested to earn some return to ensure that employees would get pension as per the pre-defined formula.
2. Employer's contribution to the superannuation fund assures only future benefit to employees and they didn't get any vested right at the time of making contribution to the fund. Thus, such contribution could not be treated as taxable perquisite in the hands employee until he was entitled to receive it
3. Mere insertion of a Sec. 17(2)(vii) didn't make any significant departure from this aspect. Thus, applicant wasn't required to deduct tax at source on contribution made to superannuation fund.