It is well settled by many case laws that Personal accident insurance premium paid by employer is not a perquisite if a)the policy is taken out by employer & not by employee on his own voluntarily b)the benfits will acrue to employee in future i.e. contingent.[CIT V Lala Shri Dhar (1972)84 ITR 192,Delhi & P.Newcome v CIT (1962)45 ITR 52,Kerala.
Query:-(i)What will be the legal position if life insurance premium is paid by employer on life policies taken out by employer himself on lives of one or more employee?Note that employee has not himself made proposal to LIC ,it is done by employer himself to protect his busines interest and staff welfare measure.
ii)Whether it will be added to salary as perquisite?
iii)What will happen if life policy is assigned to employee after 3 to 5 yrs to employee ?
3 Replies
Rajesh
(13 Points)
Replied 10 May 2007
The benefits from an accident cover are different from that of life insurance cover. Under the logic that the employee stands to benefit from this payment, I should think it is a perquisite.
Goongan
(Student)
(450 Points)
Replied 10 May 2007
According to me following points should be consider for above query,
> it is true that LIC of employees of is different from accidental insurance of employees so provision regarding accidental group insurence should not applied to LIC.
> generally employer taken accidental insurance instance of LIC of employees, since he allowed deducation which is benefit for employer as well as business.
> whan LIC premium of employees paid by employer, it is oblication of employees paid by employer, which is perquisite u/s 17(2)(III) .
>
> it is true that LIC of employees of is different from accidental insurance of employees so provision regarding accidental group insurence should not applied to LIC.
> generally employer taken accidental insurance instance of LIC of employees, since he allowed deducation which is benefit for employer as well as business.
> whan LIC premium of employees paid by employer, it is oblication of employees paid by employer, which is perquisite u/s 17(2)(III) .
>
Smehta
(CA Practice )
(85 Points)
Replied 10 May 2007
Thanks for the views.In CIT v Lala Shri Dhar (1972)84 ITR 192(Delhi)though it pertains to per.accident insurance but principal settled is that (i)when employer himself takes out the policy on his own initiative to protect the interest of employees(i.e proposal forms etc are signed by employer) and (ii) when no immediate benefit accrues to employees and the benefit is contingent on fulfilling of certain conditions and (iii) the employee had not voluntarily taken out the policy and employee was not obliged to pay premium if employer had stopped paying it.Till the date when policy is assigned by employer in favour of employee all benefir will accrue to employe.In case of death before assignment ,maturity proceeds will go to employer.
The above grounds also holds true in case of life insuranc premium paid by employer under"employer-employee" scheme of LIC of India.Pl.give your opinion.
What would happen when policy is assigned after 3 to 5 yrs?
The above grounds also holds true in case of life insuranc premium paid by employer under"employer-employee" scheme of LIC of India.Pl.give your opinion.
What would happen when policy is assigned after 3 to 5 yrs?
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