TMI Blog2013 (7) TMI 1027X X X X Extracts X X X X X X X X Extracts X X X X ..... sing 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. The details of items and demand raised yearwise are as under: Allowances/ Benefits AY 2007-08 AY 2008-09 AY 2009-10 AY 2010-11 Total LTA 54,87,839 52,62,445 72,41,422 50,76,495 2,30,68,202 Medical Reimbrusement 5,74,14,926 6,71,22,245 8,04,69,008 8,30,48,858 28,80,55,037 Sodexho- Meal Vouchers - - - 9,80,62,350 9,80,62,350 Total 6,29,02,765 7,23,84,690 8,71,10,430 18,61,87,703 40,91,85,589 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eatment or treatment at a concessional rate, will not be included in the taxable salary of the employee in the following cases: (i) Where the medical treatment is availed at hospitals, clinics, etc., maintained by the employer; (ii) Where the medical treatment is availed at hospitals maintained by the Government or local authorities or hospitals approved for the purposes of the Central Government Health Schedule or Central Medical Scheme (a list of such hospitals furnished by the Ministry of Health and family welfare on 11-4-1991 is annexed). (iii) Where the expenditure is on medical insurance premia; (iv) Where the medical treatment is availed of from any doctor outside the institutions/schemes mentioned in (i) to (iii) above, an expenditure of up to ₹ 10,000 in a year, in the aggregate; and (v) Where the medical treatment is availed of in a hospital outside India and the expenditure is incurred for treatment (including on travel and stay abroad in connection with such treatment) as also on travel and stay abroad of one attendant, to the extent permitted by the Reserve Bank of India, subject to the condition that the amount qualifying for such tax ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... salary. 4.5 The fact remains that, whenever an amount is paid, where either the employee has not availed of actual travel or has availed of the allowance over and above the exemption claimed in the immediately preceding year, therefore, si 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 allowable to an employee or not and, that such payments do not fit into the meaning of travel concession or assistance as envisaged in the I.T. Act.. 4.6 Once again, in my view, the basic requriements of the I.T. Act read with relevant rules are met i.e. i) No disbursement not backed by bills/proof is treated as not taxable. ii) No disbursement in excess of I.T. Rules has been treated as exempt. 4.7 In my opinion, the said benefit would clearly fit into the meaning of commission or assistance in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyees only at the specified eating joints or outlets. With the introduction of 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 Industreis 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 . 5.7 In view of the discussions made in the preceding paragraphs, I hold that the disbursement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... your employees. It was noticed that the employees were in receipt of pay and other allowances. It was explained that 40% of the pay constituted allowances, the break-up of which was as per the option exercised by the employee. It was explained that the basket of allowances could be changed at any point of time by the employee. Evidently a fixed amount was entered by the employee against each of the allowances irrespective of the fact as to whether such expenditure was incurred by him or not. Such allowances admittedly, would constitute part of taxable salary and the employee ought to have been subjected to provision of section 192 on this entire amount. However, it has been explained that any bills produced subsequently has been accepted to be a reimbursement and has been excluded from the purview of section 192. Verification of the returns of income filed by the employee as well as the TDS certificate issued by you do not quantify this to be taxable income resulting in taxes not being deducted at source nor being offered for taxation by the employee. As per the provisions of Income-tax Act, any allowance forms part of salary u/s 17 and such a component of salary is liable for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constitutes allowance and that the allowance so given every month is not earmarked for any particular purpose but the employee was free to use the allowance in any manner and later claim that the allowance was used for LTC or medical reimbursement. Therefore, according to the AO, at the time of payment the allowances would constitute part of salary and therefore even the allowances should be considered as part of salary for the purpose of deduction of tax at source. In other words, according to the AO, LTC and Medical reimbursement should be paid at the time the expenditure is incurred or after the expenditure is incurred by way of reimbursement and not at an earlier point of time. If it is so paid, then, according to the AO, even though the payment would not form part of taxable salary of an employee, the employer has to deduct tax at source treating it as part of salary. In support of the stand taken by the AO, she relies on the expression actually incurred in proviso (iv) to Section 17(2) which allows exemption of medical reimbursement up to ₹ 15000/- to an Assessee. As far as LTC is concerned, the AO relies on the expression value of travel concession or assistance re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular is misplaced and is in fact against the case of the deductor. 23. The AO has also taken a stand that there is a difference between Allowance and LTC and Medical Reimbursement . An allowance according to the AO can be given in advance whereas LTC and medical reimbursement are not in the nature of allowance and therefore cannot be given like an allowance before they are incurred. The AO s further case is that at the time of disbursement by the employer the same assumes the character of salary and its later application for purposes which are exempt will only be application of income and therefore accrual of income in the form of salary takes place on which tax had to be deducted at source. 24. To appreciate the stand taken by the AO, we have to look at the relevant provisions of Sec.192 of the Act in so far as the same is relevant for the present case. 192. Salary.-(1) Any person responsible for paying any income chargeable under the head Salaries shall, at the time of payment, deduct income-tax on the amount payable at the average rate of incometax computed on the basis of the rates in force for the financial year in which the payment is made on the est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble under proviso (iv) to Sec.17(2) or exemption u/s.10(5) of the Act in the later months of the previous year. What has to be seen is the taxes to be deducted on income under the head salaries as on the last date of the previous year. The case of the AO is that LTC and Medical reimbursement should be paid at the time the expenditure is incurred or after the expenditure is incurred by way of reimbursement and not at an earlier point of time. If it is so paid, then, even though the payment would not form part of taxable salary of an employee, the employer has to deduct tax at source treating it as part of salary, is contrary to the provisions of Sec.192(3) of the Act and cannot be sustained. The reliance placed by the AO on the expression actually incurred found in Sec.10(5) of the Act and proviso (iv) to Sec.17(2) of the Act, in our view cannot be sustained. In any event, the interpretation of the word actually paid is not relevant while ascertaining the quantum of tax that has to be deducted at source u/s.192 of the Act. As far as the Assessee is concerned, his obligation is only to make an estimate of the income under the head salaries and such estimate has to be a bona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in considering the exemption under section 10(5) and proviso to section 17(2). The assessee is a law abiding Company. Internal controls are in place to discharge the statutory obligation under section 192. Honest and bona fide estimate of taxable salary is made in the process of deducting tax at source under section 192. Every effort is made by the assessee to comply with the requirements of section 192. The assessee is not benefited by allowing employees to claim exemption. The order passed by the AO under section 201(1) 201(1A) is therefore bad in law and rightly quashed by the CIT(A). 29. In the light of the admitted position that the conditions for grant of exemption u/s.10(5) of the Act to the employees in respect of LTC and also the fact that up to ₹ 15,000 per employee medical reimbursement paid by the Assessee satisfies conditions contemplated by the proviso (iv) to Sec.17(2) of the Act, can the AO deny to the employee in their assessment, exemption u/s.10(5) or relief under the proviso to (iv) to Sec.17(2) of the Act? The answer admittedly is no , because the AO does not dispute non-fulfillment of conditions for allowing exemption u/s.10(5) of the Act or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terfere with the order of the CIT(A). Consequently, these appeals by the Revenue are dismissed. 33. In the result, the appeals are dismissed . 7. Since the facts of this case is identical to the facts considered by the Tribunal in the case cited above (Supra), we follow the Coordinate Bench order of the Tribunal in ITA No.1391/Bang/2012 (Supra) and decide the issue of TDS on payments made to employee for LTC and Medical Reimbursement in favour of the assessee. 8. The CIT (A) held that disbursement of meal coupons made by the assessee employer did not attract TDS u/s 192 and the action of the AO in raising demand u/s 201(1) and charging interest u/s 201(1A) is uncalled. For holding so the reasoning of the CIT (A) are under: i) The food vouchers issued per meal per employee is as per the Rules. ii) The assessee has ensured that the coupons are nontransferrable and valid for ready to eat items and for food products. iii) No instance has been brought on record indicating any violation of the Rules. 9. After hearing the rival submissions, we are of the view that the facts of the decision in the case of Cedilla Healthcare (Supra) are similar to the issue in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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