By K. B. Bhujle, Advocate
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[CIT v. Ranbaxy Laboratories Ltd., 334 ITR 341 (Del.)] The assessee followed the mercantile system of accounting. It had a super-annuation scheme for its employees. In order to retain managerial employees, the assessee also introduced a pension scheme for such managerial employees which was over and above the benefits available under the super-annuation scheme of the company. This scheme was non-funded and applicable to all managerial employees. The liability on this account for the A.Y. 2001-02 of Rs.3,61,63,024 was provided following AS-15 based on actuarial valuation. The assessee claimed deduction of this amount. The AO disallowed the claim relying on the provisions of section 43B of the Income-tax Act, 1961 on the ground that even if it was an ascertained liability, the deduction could not be allowed in the absence of contribution to the pension fund. The Tribunal allowed the assessee’s claim.
On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as:
“(i) The Commissioner (Appeals) correctly viewed that the pension scheme of the assessee did not envisage any regular contribution to any fund or trust or entity. The pension scheme provided that pension would be paid by the assessee to its employee on his or her attaining the retirement age or resigning after having rendered services for a specified number of years.
(ii) Thus, where the liability on this account accrued from year to year, it was payable on retirement/resignation of the eligible employees. It could not be disallowed u/s.43B.”
