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TMI Blog2011 (10) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... m 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 but for first proviso to section 17(2) (which specifically excludes above payments from the definition of 'perquisites'). 3. Briefly stated the facts are as follows:- The assessee is a limited company. It is engaged in the business of manufacture of fuel injection equipment, auto electric items, portable electric power tools, etc. The assessee company filed its return of fringe benefits for the concerned asst. year on 26.10.2007 declaring Rs. 14,07,69,193/- as the taxable value of fringe benefits. The assessment was taken up for scrutiny and statutory notice u/s 115WE(2) was issued to assessee on 8.9.2008. 3.1 The staff welfare expenses incurred by the assessee included a sum of Rs. 1,46,36,685/-, which represented the payments made to approved hospitals on behalf of the employee and als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) because s. 115 WB (3) stipulates that 'privilege, service, facility or amenity' does not include perquisites in respect of which tax was payable by the employee; that because the employee was liable to pay tax on above perquisite, but, for the proviso to s. 17(2), the payments to approved hospital and amounts reimbursed to employees against the payments made to approved hospitals fall within the scope of s. 115WB(3) and, hence, not liable to FB tax; - that the Revenue's philosophy - it is irrelevant that the benefit was not a taxable perquisite by virtue of the proviso, but, not under the main section and since the employee ultimately does not pay any tax on these perquisites, the same should be subjected to FB tax - doesn't stand to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 payments. That the benefit is not a perquisite by virtue of the Proviso and not the main section is totally irrelevant. A Proviso is always part of the section. The provisions of a section will have to be read in conjunction with the explanation, provisos etc., to that section. Contents of such explanation or proviso cannot be read in isolation. Therefore by the normal yardstick the payment by the employer to approved hospitals is a perquisite. However, due to the specific provision in the proviso to the section, it is not so. Net result of this is that the employees are not liable to pay any tax on such payments. Consequently, such payments attract fringe benefit tax." 7.3 On further appeal, the Ld. CIT (A) by taking refuge on the Board's Instru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 in rule 3 of the Income-tax Rules. In cases, where attribution of the personal benefit poses problems, or for some reasons, it is not feasible to tax the benefits in the hands of the employee, it is proposed to levy a separate tax known as the fringe benefit tax on the employer on the value of such benefits provided or deemed to have been provided to the employees." 7.4.2 Keeping the assertion of the Hon'ble Finance Minister on the floor of the august body in view, it is unambiguously clear that where perquisites/benefits which are fully attributable to the employee and are taxed in their hands, would be continued to be taxed under the existing provisions of s.17(2) of the Act. However, in a case where the benefits are usually enjoyed col ..... X X X X Extracts X X X X X X X X Extracts X X X X
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