Where the employer paid a sum to LIC under a Voluntary Retirement Scheme (VRS) for allotment of annuity policy in favour of an employee payable in instalments in future, such sum cannot be taxed as perquisite in the hands of the employee in the year of purchase of annuity since the employee did not acquire any vested or enforceable right over the said amount in the relevant assessment year.

51. (2025) 177 taxmann.com 369 (Ahd Trib)

Biswas Manik vs. ITO

A.Y.: 2018-19 Date of Order: 08.08.2025 Section : 17

Where the employer paid a sum to LIC under a Voluntary Retirement Scheme (VRS) for allotment of annuity policy in favour of an employee payable in instalments in future, such sum cannot be taxed as perquisite in the hands of the employee in the year of purchase of annuity since the employee did not acquire any vested or enforceable right over the said amount in the relevant assessment year.

FACTS

The employer-company had taken annuity policy from LIC under a Voluntary Retirement Scheme (VRS) in favour of the retiring employees, including the assessee. The employer had paid a sum of ₹20 lakhs directly to LIC (not to the assessee) for allotment of annuity policy in the name of the assessee. The annuity was structured to be paid to the assessee only after four years, in the form of monthly instalments from LIC. The assessee claimed that since he had no access to, or right over, the amount in AY 2018-19, it cannot be considered part of his salary or perquisite income for that year under section 15 or 17 and that he had offered the annuity instalments received from LIC