Statutory Contribution by the Employer to “Pension Fund” is Not a “Fringe Benefit”, Hence Not Taxable in the Hands of the Employer
The Income Tax Appellate Tribunal, in a recent ruling, held that the statutory contribution made by the employer towards “Pension Fund” is not a Fringe Benefit and hence it is not taxable in the hands of the employer u/s 115WB(1) of the Income Tax Act.
The assessee e-filed its return of fringe benefit along with the return of income u/s 139(1)/ 115WB(1) of the Income Tax Act on 28.11.2006 declaring total fringe benefit at Rs. 30,58,38,466/-. The assessee although revised the return of income on 28.02.2007 but did not revise the return of fringe benefit. The AO issued notice u/s 115WE(2) to the assessee on 27.09.2007 and ask to furnish details. In response the assessee furnished the tax audit report giving month wise details of its contribution towards pension received by the trust.
The Assessing Officer vide its Order determined that statutory contribution to Pension Fund in a sum of Rs. 471,43,65,330/- and opined that it is a fringe benefit provided by the company to the employees in terms of section 115WB(1) of the Income Tax Act, 1961 and thereby computed the value of fringe benefits at Rs. 502,01,03,796/- as against the returned value of Rs. 30,58,38,466/-. The appellant prayed that the action being most arbitrary, palpably erroneous and grossly unlawful, must be quashed with directions for appropriate relief to the appellant.
The claim of the assessee was that the contributions to approved Pension Fund of Rs. 431 crore were not liable to fringe benefit tax (FBT) and accordingly no provision for FBT on such contribution was considered necessary. The AO also found that the assessee had not paid FBT u/s 115 WB(1)(C) on any contribution by the employer to any approved superannuation fund for employees.
The Tribunal was of the view that in the present case, nothing is brought on record to substantiate that the contribution in the Pension Fund of the assessee bank was over and above the contributions to gratuity and provident fund. Moreover, in the absence of the Pension Scheme, the assessee would have continued to contribute the stipulate amount to the Provident Fund account of the employees and such stipulated contributions present case, nothing is brought on record to substantiate that the contribution in the Pension Fund of the assessee bank was over and above the contributions to gratuity and provident fund. Moreover, in the absence of the Pension Scheme, the assessee would have continued to contribute the stipulate amount to the Provident Fund account of the employees and such stipulated contributions would not have attracted fringe benefit tax. In our opinion, the contributions made by the assessee bank to the “Pension Fund Scheme” is only to secure pension payments which is its statutory obligation. Therefore, the assessee bank has established a superannuation Scheme for the purpose of providing pension to its eligible employees. In the present case, the assessee bank made a contribution of Rs. 471.42 crores to the Pension Fund for all its employees who were governed by the “Pension Fund Scheme” taken together based on the acturial valuation provided by the Actuarial Valuer appointed by the bank.
The Tribunal applied the decision in Andhra Bank, Hyderabad vs. DCIT Circle 1, (1) Hyderabad, to the instant case since the facts of both the cases are similar to each other. Accordingly, the Court directed the Assessing Authorities to accept the claim of the assessee and not to consider the impugned contribution of the assessee to the “Pension Fund” as a Fringe Benefit provided by the assessee to its employees.
Read the full text of the order below.
