TMI Blog2013 (9) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of the person on whose behalf tax at source is deducted. The AO has ignored this aspect and has proceeded to pass the order u/s.201(1) and 201(1A) of the Act. His order was rightly held to be unsustainable by the CIT(A) - Following decision of Infosys BPO (2013 (9) TMI 205 - ITAT BANGALORE), Decided against Revenue. Salaries - TDS on Free meal coupons u/s 192 – taxability as perquisite within the rule 3(7) (iii) – deduction of tax at source - coupons were not utilized by employee for purchasing meals at an eating joints but were mis-used to purchase grocery items, cosmetics items, etc., from shops/super stores – Held that employer is not expected to presume misuse of coupons to warrant deduction of tax at source – further, conveyance allowance in respect of vehicles owned by employees cannot be treated as perquisite - expenditure incurred on disbursement of meal coupons by the employer to the employees did not attract the provisions of s. 192 - Decided against Revenue. - ITA Nos.1304 to 1307/Bang/2012 & 949 to 952/Bang/2012 - - - Dated:- 23-8-2013 - N Barthvajasankar and George George K, JJ. For the Appellant : Shri Vimal Anand, DR For the Respondent : Shri K R Va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 071 5252874 Total payable 2,56,49,233 4. On appeals, the CIT (A) cancelled the demands raised u/s 201(1) and also the interest charged u/s 201(1A) of the Act. The relevant portions of the findings of the CIT (A) with regard to the deletion of the demands for all the AYs under dispute in respect of non-deduction of tax for medical reimbursement read as follows: 4.3. I have carefully considered the appellant s submissions and perused the AO s order. The employees are paid up-to Rs.15000/- per annum split into monthly disbursements. This amount is treated as exempt under the provisions of I.T. Act only if supported by bills. Wherever bills are provided the amount is treated as a taxable salary and tax is deducted during the financial year-end. 4.4. On the facts of the case, I find that: (a) No instance has been brought on record to suggest that, in the case of any employee, the benefit or allowance has been allowed without TDS during the financial year, if it is not backed by actual expenditure. b) In such a case, the benefit provided clearly fits into the ambit of the exemption provided u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e condition that the amount qualifying for such tax exemption would not include expenditure incurred on travel in the case of employees whose gross total income, as computed under the IT Act without considering the amount paid or reimbursed for expenditure in connection with medical treatment abroad, exceeds Rs. 1,00,000. 2. The contents of this circular will be applicable in relation to the assessment year 1991- 92 and the subsequent years (d) Moreover, in the present case, the amount of Rs.15,000/- per employee per annum is too small for any other interpretation. 4.5. It is clear, therefore, that in effect there is no infringement of the tax provisions allowable to the employees under the I.T. provisions in disbursing salaries by the by the employer appellant. Merely because the same is taken into account at the beginning of the year or at the time of deciding his/her salary, which itself is in terms of cost to company , it cannot be said that it ceases to be a perquisite and, therefore, not entitled to exemption u/s 17(2). Perquisite in any case also forms part of taxable salary. The employer has clarified that, wherever the said disbursement is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the employer has not availed of actual travel or has availed of the allowance over and above the exemption in the financial year and, therefore, is disentitled to the benefit of exemption; tax has been deducted at source. No instance has been brought on record by the AO that the employer has disbursed the amount without deduction of tax in cases where the benefit is not backed by bills or in excess of amount allowable under the I.T. Act. The only case of the AO is that the intention of employer is to disburse the said sum irrespective of whether an exemption will be allowed to an employee or not and, therefore, it is simply an allowance and not a concession or assistance as envisaged in the I.T.Act. 3.7. In my view, the basic requirements of the I.T. Act read with the relevant rules are met i.e., (i) No disbursement not backed by bills/proof is treated is not taxable; (ii) No disbursement in excess of I.T. Rules has been treated as exempt during the financial year. 3.8. The interpretation of the AO is too narrow and technical and the said benefit would clearly fit into the meaning of assistance in sum and substance. As can be seen from the submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions relating to FBT by the Finance Act, 2005 with effect from 01.04.2005, the relevant provisions of Rule 3(7)(iii) of the IT Rules, 1962 relating to valuation of any perquisite in the nature of provisions of food provided by the employer were amended. As per clause (ii) of section 115WB(2)(B) of the Act, even FBT was not payable by the employer on the expenditure incurred through paid food vouchers which were not transferrable and usable only at eating joints or outlets. Since the AO did not bring any material on record that Sodexo Lunch Coupons were misused by the employes, the learned CIT (A) while relying upon the decision of the Hon'ble jurisdictional High Court in the case of CIT vs. Reliance Industries Ltd concluded that the assessee was not liable to deduct tax at source on expenditure incurred on sodexo lun ch coupons given to the employees of the company. Revenue having not placed any material so as to enable to take a different view in the matter, the order of the CIT (A) is upheld . 9.7 In view of the discussions made in the preceding paragraphs, I hold that the disbursement of the meal coupons made by the appellant employer in the present case to its emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. It was, further, submitted that the expenditure incurred for meal vouchers, the issue of TDS on the same is squarely covered in favour of the assessee by the findings of the Hon ble Ahmedabad Bench of the Tribunal in the case of Cedilla Health Care reported in 2011-TIOL-582- ITAT-AHM. 6. We have heard the rival submissions and perused the relevant materials on record. The issues raised in these appeals regarding TDS on LTA and medical reimbursement are identical to the issues considered by the earlier Bench of this Tribunal in the case of M/s. Infosys BPO (supra). The relevant findings of the Tribunal read as follows: 20. We have considered the rival submissions. We shall first see the sequence of events that lead to the passing of the order u/s.201(1) and 201(1A) of the Act. There was a Survey u/s.133A of the Act at the business premises of the Assessee on 5.10.2010. Based on the findings in the course of survey show cause notice dated 3.2.2011 was issued by the AO. The contents of this show cause notice throws light on the exact grievance of the AO and therefore the same is being reproduced. To The Principal Officer, M/s Infosys BPO Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006-7 2381842.77 2381842.77 F.Y. 2007-08 4294568.00 4294,568.00 F.Y. 2008-09 691129.00 691129.00 F.Y 2009-10 4897131.00 4897131.00 F.Y 2010-11 691129.00 691129.00 TOTAL 1,29,55,799.77* * Amount on which tax is to be deducted. Further the company is extending the benefit of Medical allowance, which forms 25% of basket of allowance and allowed exemption u/s 17(2) of IT Act on medical bills submitted by your employees up to a maximum of Rs.15000/- as perquisite exempt u/s 17(2). The employees are in receipt of medical allowance u/s 17(1) of IT Act and out of which they have considered the medical bills presented by employees as exemption u/s 17(2). Since any amount received u/s 17(1) do not constitute for exemption u/s 17(2), the claim of the employees had to be disallowed. This would not come under the purview of medical reimbursement as per the terms and conditions laid down in the Act. It is proposed to bring these amounts also to tax. 21. A perusal of the show cause notice clearly shows that the fact that bills/evidence to sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uately evidence with medical bills could be reduced from the taxable salary of an employee. In fact the Board Circular concisely puts across the provisions of the statute which have been articulated at length in this order to drive home the fact that no application of fund could determine the taxability or exemption of any income let alone salary. Therefore, the Circular is in fact in support of the view taken and doesn t lend any credence to the arguments of the deductor. 6.2.2.3 in the instant case, the leave travel allowance is disbursed to an employee irrespective of the fact as to whether: a) the employee has any intention to proceed on leave or not b) the employee has any intention to travel or not c) the employee has already availed the benefit in the previous calendar year or financial year Therefore, undisputedly and admittedly the disbursement of leave travel allowance is a lump sum monetary benefit provided to the employee without any nexus to any of the statutory or prescribed conditions. The only precondition is that the employee ought to have opted for this allowance at the beginning of the Financial Year. The subsequent occurrence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion various deductions permitted under the Act under Chapter VIA of the Act, as also exempt income under Sec.10 of the Act. Rebate available under sections 88 and 88B can be considered by the employer. Employer should obtain the proof of investment made by the employee and should not rely on simple declaration or oral assurance. Certain employees who are entitled to relief under section 89(1) can furnish the information in prescribed form to the employer, and in such cases employer can adjust the amount of TDS by allowing relief available under section 89. It is for the employer to prove the allowances and perquisites given to the employee are tax-free and not to be included in the salary. 26. It is no doubt true that TDS is to be made at the time of payment of salary and not on the basis of salary accrued. Sec.192(3) of the Act permits the employer to increase or reduce the amount of TDS for any excess or deficiency. We have already noticed that the fact that bills/evidence to substantiate incurring of expenditure on medical treatment up to Rs.15,000/- and the availing of the LTC by the employees and the fulfillment of the conditions contemplated by Sec.10(5) of the Act for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditions of section 10(5) and proviso to section 17(2) are meticulously followed before extending the deduction/ exemption to an employee. No tax can be recovered from the employer on account of short deduction of tax at source under section 192 if a bona fide estimate of salary taxable in the hands of the employee is made by the employer, is the ratio of the following decisions. CIT vs. Nicholas Piramal India Ltd (2008) 299 ITR 0356 (BOMBAY) CIT v. Semiconductor Complex Ltd [2007] 292 ITR 636 (P H) CIT vs. HCL Info System Ltd. [2006] 282 ITR 263 (Del) CIT v Oil and Natural Gas Corporation Ltd [2002] 254 ITR 121 (Guj) ITO v Gujarat Narmada Valley Fertilizers Co. Ltd [2001] 247 ITR 305 (Guj) CIT v Nestle India Ltd (2000) 243 ITR 0435 (DEL) Gwalior Rayon Silk Co. Ltd. v. CIT [1983] 140 ITR 832 (MP) ITO v G. D. Goenka Public School (No. 2) [2008] 306 ITR (AT) 78 (Del) Usha Martin Industries Ltd. V. ACIT (2004) 086 TTJ 0574 (KOL) Nestle India Ltd. v. ACIT (1997) 61 ITD 444 (Del) Indian Airlines Ltd. v ACIT (1996) 59 ITD 353 (Mum) 28. In the present case, as already detailed, the exemption in respect of medical expenditure and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and LTC which was actually paid to employees and that which was considered not forming part of salary by the employee on production of evidence by the employee. In fact, the figures so given are the same figures on the basis of which the AO has passed order u/s.201(1) and 201(1A) of the Act. As far as the grievance regarding finding that there was no dispute that the Assessee has satisfied itself that the employees were entitled to exemption u/s.10(5) as well as relief under proviso (iv) to Sec.17(2) of the Act, we have already reproduced the show cause notice issued by the AO u/s.201(1) 201(1A) of the Act, in which the AO has not disputed these facts. In our view the relevant grounds have no basis and cannot be factually sustained. 31. Arguments were advanced that employees have filed their returns of income and offered to tax income under the head salaries received from the Assessee and therefore no order u/s.201(1) 201(1A) of the Act can be passed against the Assessee. In this regard our attention was drawn to the following decisions: Hindustan Coco Cola Beverage Pvt.Ltd. Vs. CIT 293 ITR 226 (SC) CIT Vs. Eli Lilly Co. 312 ITR 225 (SC) = (2009-TII-01-SC-I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .The fact remains that only the amount allowable u/s 17(2) of the Act read with rule 3(7)(ix) proviso of I.T. Rules and supported by vouchers is treated as a non-taxable perquisite. No instance is brought on record by the AO to suggest that there is any violation in this regard. For the reasons discussed above and at Para 10 below, there is no case for taking action u/s 201(1) and 201(1A) of the Act. Hence, the demand raised and interest charged u/s 201(1) and 201(1A) are uncalled for and they are, therefore, cancelled. For identical reasoning, the CIT (A) had also cancelled the demand raised and interest charged u/s 201(1) and 201(1A) in respect of vehicle maintenance, fuel consumption and conveyance allowance. 8.1. Interestingly, even at the time of hearing before us, no documentary evidence has been brought on record by the Revenue to contradict the CIT (A) s version on the above issues. In view of the above, we find no infirmity in the findings of the CIT (A) warranting our interference. In substance, these issues are decided against the Revenue for all the AYs under consideration. 9. Before parting with, we would like to point out that the Revenue had, in its identical g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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