TMI Blog2013 (7) TMI 1026X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 2007-08 and 2008-09. The Assessing Officer also levied interest u/s 201(1A) of the Act on tax not deducted from the date on which the tax ought to have been deducted till date on which the tax ought to be paid over to the government account. 4. On appeal the CIT (A) cancelled the demands raised and interest charged u/s 201(1) and 201(1A) of the Act. The relevant findings of the CIT (A) in regard to cancellation demand in respect of non deduction of tax for medical reimbrusement read as follows: 3.6 I have considered the appellant s submission and the AO's observations. My views are: a) No intsance has been brought on record to suggest that in the case of any employee, the benefit or allowacne has been disbursed without TDS 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/s 17(2) proviso which states: (v) any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family other than the treatment referred to in clauses (1) and (ii); so, however, that such sum does not exceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble in relation to the assessment year 199192 and the subsequent years d) Moreover, in the present case, the amount of ₹ 15,000/- per employee per annum is too small to attribute any other motive or to imagine a situation as envisaged in Para 6.3.1.1.3 of the assessment order. 3.7 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 backed by bills, it is liable to TDS and this liability is not denied or infringed. 3.8 Therefore, in my view, the view of the AO is a very narrow and technical interpretation and in relation to a welfare measure to the employees across the salaried strata cannot be the correct interpretation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from salary for purpose of section 192 of the Act. 4.6 Therefore, once again, the interpretation of the AO is very narrow and technical and as held at Para 3.8 for medical reimbursement, cannot be the correct interpretation. In my opinion, the AO was not justified in treating the appellant as an assessee-in-default . Hence, the demands raised and interest charged u/s 201(1) and 201(1A) are uncalled for and they are, therefore, cancelled . 5. Aggrieved by the order of the CIT (A), the Revenue is in appeal before the Tribunal raising 23 grounds. The learned DR supported the order of the Asstt. CIT passed u/s 201(1) and 201(1A) of the Act. 5.1 The learned AR on the other hand submited the issue in question is squarely covers by the order of the Tribunal in the case of ACIT (TDS) vs. M/s Infosys BPO in ITA Nos.1390 1391/Bang/2012 dated 28.06.2013. 6. We have heard the rival submissions and perused the relevant material on record. The issue raised in this appeal is identical to the issue considered by the Tribunal in ITA Nos.1390 and 1391/Bang/2012 (Supra). The relevant findings of the Tribunal reads as follows: 20. We have considered the rival submissions. We s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... connection with his proceeding on leave. The allowance provided by a company is a fixed monetary benefit which an employee is entitled to irrespective of the fact as to whether any leave is sanctioned or not. Such an allowance forms part of salary and is not a benefit or reimbursement provided in addition to salary. Therefore exemption u/s 10(5) provided to LTA cannot be justified and the entire allowance is to be brought to tax. Year Allowance Exemption F.Y 20067 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 Medica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) on leave to any place in India; (b) to any place in India after retirement from service or after the termination of his service, shall be the amount actually incurred on the performance of such travel , found in Sec.10(5) of the Act. 22. The Assessee in this regard, among other things, relied on CBDT Circular No.603 dated 6.6.1991 extracted in the order of the CIT(A). The AO has however held that the said circular does not help the case of the Assessee for the following reason:- 6.2.2.2 The circular evidently makes it clear that payment or reimbursement of expenses actually incurred for medical treatment is alone exempted from the purview of taxation. The circular at no point even remotely suggest that an allowance could be granted which if adequately 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 doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l year (2) (3) The person responsible for making the payment referred to in sub-section (1) or sub-section (1A) or sub-section (2) or sub-section (2A) or sub-section (2B)] may, at the time of making any deduction, increase or reduce the amount to be deducted under this section for the purpose of adjusting any excess or deficiency arising out of any previous deduction or failure to deduct during the financial year. 25. Section 192(1) of the Act, requires tax to be deducted at average rate of income-tax in force on estimated income under the head salaries. The person making payment has to make an honest of income under the head salary payable by him to his employee at the time of payment. The person making the payment has to take into consideration 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay tax remains. Section 191 confirms this. In a situation of honest difference of opinion, it is not the deductor that is to be proceeded against but the payees of the sums. To reiterate, the payment towards medical expenditure and leave travel is made keeping in view the employee welfare. The exclusion in respect of payment towards medical expenditure and leave travel is considered after verifying the details and evidence furnished by the employees. No exemption is granted in the absence of details and/or evidence. The exemption in respect of medical expenditure is restricted to expenditure actually incurred by the employees, or ₹ 15,000/- whichever is lower. The exemption is granted even if the payment precedes the incurrence of expenditure. The requirements/conditions 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on deducting tax at source cannot be greater than the liability 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). 30. In the grounds of appeal raised by the revenue, we find that among other grounds there are grievances regarding lack of opportunity to the AO before CIT(A) and grounds challenging the finding that there is 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. As far as lack of opportunity is concerned, we find that the CIT(A) has only called for break-up of the figures regarding medical reimbursement 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 satis ..... 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