TMI Blog2011 (10) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... stituted by the assessee is directed against the order of CIT(A)-LTU, Bangalore dated 21.10.2010. The relevant asst. year is 2007-08. The order of the CIT(A) emanates from the order of Dy. CIT passed u/s 115WE(3) of the Act. 2. The grounds of appeal raised in this appeal reads as follows:- (i) That the learned CIT(A)-LTU erred in upholding the action of the AO in including the payments of Rs. 1,46,36,685/- made to approved hospitals on behalf of the employees and the reimbursements given to employees against the payments made by them to the approved hospitals in the value of fringe benefits. (ii) That the learned CIT(A) erred in holding that the payments made to approved hospitals on behalf of the employees and the reimbursements given to employees against the payments made by them to the approved hospitals fall under the scope of clause (E) of sub-section (2) of section 115WB. (iii) That the learned CIT(A) ought to have accepted the appellant's plea that the payments made towards hospital expenses are not liable to fringe benefit tax as per section 115WB(3) because such payments are taxable perquisites u/s 17(2)(vi) on which tax would have been payable by the employees bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate authority. 5. The assessee, being aggrieved, is in appeal before us. The Ld. A.R, during the course of hearing, reiterated what was portrayed before the first appellate authority. In furtherance, it was contended that - - the staff welfare expenses incurred included Rs.1.46 crores which represented the payments made to approved hospitals on behalf of the employees and the amounts reimbursed to the employees against the payments made by them to the approved hospitals; - that those were perquisite within the meaning of s.17(2), however, as per clause (ii) of the first proviso to s.17(2), perquisite does not include any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family in respect of the diseases or ailments of any member of his family in respect of the prescribed diseases or ailments in any hospital approved by the CCIT having regard to the prescribed guidelines; - that those perquisites were taxable in the hands of the employees, but, for the proviso to s. 17(2) and, thus, they do not fall within the purview of 'privilege, service, facility or amenity' as specified u/s 115 WB(1) rws 115 WB(3) b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h both the parties have placed their respective faith. 7.1 At the outset, we would like to reiterate that the core issue for consideration is as to whether the payments made to approved hospitals on behalf of the employees and the reimbursements given to the employees against the payments made by them to the said hospitals does falls within the sphere of clause (a) of sub-section (1) of s.115WB of the Act? 7.2 When the assessee was queried by the AO for its claim, the assessee contended that the payments to approved hospitals on behalf of the employees or the amounts reimbursed to those who have directly paid to such hospitals were 'perquisites' within the meaning of s.17 (1) of the Act and since it was treated as a perquisite in the hands of the employees, the same cannot be treated as FB in the case of the assessee. Contrary to the assessee's contentions, the AO took a view, by extensively quoting the provisions of s.115WB(1)(a) as well as 115WB(3) of the Act, that - "5.3 Payment to approved hospitals on behalf of the employees is a privilege/service/facility or amenity provided by the employer to the employees. Therefore, provisions of s.115WE (1) are applicable to such pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidence." 7.4.1 In this connection, further, we recall the budget speech of Hon'ble Finance Minister as reported in 273 ITR (St.) 25 that - "I have looked into the present system of taxing perquisites and I have found that many perquisites are disguised as fringe benefits, and escape tax. Neither the employer nor the employee pays any tax on these benefits which are certainly of considerable material value. At present where the benefits are fully attributable to the employee they are taxed in the hands of the employee; that position will continue. In addition, I now propose that where the benefits are usually enjoyed collectively by the employees and cannot be attributed to individual employees, they shall be taxed in the hands of the employer." In the Memorandum explaining the proviso to the Finance Bill, it was stated as - "Therefore, it is proposed to adopt a two pronged approach for the taxation of fringe benefits under the Income-tax Act. Perquisites which can be directly attributed to the employees will continue to be taxed in their hands in accordance with the existing provisions of section 17(2) of the Income-tax Act and subject to the method of valuation outlined i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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