TMI Blog2018 (11) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... & 2008-09 on account of medical reimbursement expenses to the extent of 50% only. For AYs 2007-08 and 2008-09 also entire addition is liable to be deleted. So, ground against the Revenue. Addition of 50% in the value of FBT on account of medical expenses for treatment in approved hospitals - Held that:- We allow 85% of the amount incurred by the assessee on account of medical expenses for treatment in the approved hospitals for the reason that possibility of 15% of such cases being overlooked cannot be ruled out for AYs 2007-08 & 2008-09. Even otherwise, the ld. Representative for the assessee has shown his inability to produce old record for verifications. Addition to the value of FBT on account of maintenance expenses of township - no such amount is being taxed as prerequisites in the hands of employees and treated the same as deemed FBT u/s 115WB(2)(E) - Held that:- When the assessee is responsible for upkeep and maintenance of the townships, the same cannot be said to have erected for the welfare of the employees rather it is a necessity for the assessee to run the business in the remote areas as well as to enable the employees to serve in the remote places. So, we are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Ld. Commissioner of Income Tax (Appeals) erred, in law and on the facts and circumstances of the case, in directing the AO to allow 50% of ₹ 2077.14 lakh which was included by the AO in the value of Fringe Benefits on account of Medical expenses for treatment in Hospitals. ITA NO.4851/DEL/2010 (AY 2007-08) 1. On the facts and circumstances of the case, the Ld. CIT (A) erred in law as well as on merits in deleting the addition of ₹ 467.40 lacs being 50% of ₹ 934.81 lacs made by the AO to the value of Fringe Benefits on account of medical reimbursement expense. 2. On the facts and circumstances of the case, the Ld. CIT (A) erred in law as well as on merits in deleting the addition of ₹ 1684.17 lacs being 50% of ₹ 3368.35 lacs made by the AO to the value of Fringe Benefits on account of medical expenses for treatment in hospitals. ITA NO.3261/DEL/2011 (AY 2008-09) 1. On the facts and circumstances of the case, the Ld. CIT (A) erred in law and merit of the case in directing the AO to allow relief of ₹ 385.24 lacs (50%) out of total medical reimbursement expenses of ₹ 770.48 lacs. 2. On the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of the addition of ₹ 4828.40 [770.48 + 4057.92] lacs on account reimbursement of medical bills and payment to referral hospitals on reference by Hospitals run by the company instead of deleting only 50% despite it being excluded by Section 115WB[E] read with Section 17[2]. [Para 4.3-page 4 of order] 1.2 The authorities below should have accepted the illustrative evidences submitted on test check basis in view of voluminous nature of evidences. 2 The authorities below have erred in mixing up the provisions regarding tax exemption limit of ₹ 15,000 for domiciliary treatment with hospitalization charges covered by Section 17[2] read with Rule 3A and arriving at erroneous conclusions / decisions. 3. That the CIT [A] has erred in confirming the action of the AO treating the Maintenance of Townships [8 Nos.] expenses of ₹ 1233.36 lakhs as Employee Welfare Expenses for the purposes of Fringe Benefit Tax ignoring the fact that the factories of the company are huge and that they are deemed as townships for which the company is responsible. 4. The appellant, ACIT, Circle 9 (1), New Delhi (hereinafter referred to as the Revenue ) by filing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.3261/Del./2011 (AY : 2008-09) GROUND NO.3 IN REVENUE S APPEAL ITA NO. 3793/Del./2010 (AY : 2006-07) GROUND NO.2 IN REVENUE S APPEAL ITA No.4851/Del./2010 (AY : 2007-08) ITA No.3261/Del./2011 (AY : 2008-09) GROUNDS NO.1 2 IN ASSESSEE S APPEAL ITA NO.3285/DEL/2010 (AY 2006-07 ITA No.4689/Del./2010 (AY : 2007-08) GROUNDs NO.1.1, 1.2 2 IN ASSESSEE S APPEAL ITA No.2699/Del./2011 (AY : 2008-09) 8. AO has disallowed reimbursement of medical expenses by invoking the provisions contained u/s 17(2)(vi) of the Act and held the same taxable in the hands of employees subject to certain exemptions and held that the amount taxable in the hands of the employees was not subjected to FBT u/s 115WE of the Act. It is contended by the ld. AR for the assessee that the said medical reimbursement expenses are taxable in the hands of employees and as such are not includible for FBT and relied upon the decisions rendered by coordinate Bench of the Tribunal in (i) Godrej Properties Ltd. Vs. Addl.CIT 135 TTJ 426 (Mum.); (ii) Vijay Bank vs. JCIT 14 taxman.com 65 (Bangl.); (iii) Bosch Ltd. vs. DCIT 15 taxman.com 187 (Bang.) . 9. Before proceeding further prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leted the entire addition made by AO to the value of FBT on account of medical reimbursement expenses of 100% in AY 2006-07 and 50% in AYs 2007-08 2008-09 on the ground that since the reimbursement of medical expenses is taxable in the hands of the employees, the same cannot be includible for FBT. Likewise, ld. CIT (A) deleted 50% of the addition made by the AO in the value of FBT on account of medical expenses for treatment in hospital in all three assessment years. 11. So far as question of addition made by AO/CIT (A) to the value of FBT on account of medical reimbursement expenses is concerned, when undisputedly reimbursement of medical expenses are prerequisite in the hands of the employees, the same cannot be treated as FBT in the hands of the assessee. 12. Identical issue has been dealt with by the coordinate Bench of the Tribunal in Vijaya Bank vs. JCTI (2010) 14 taxmann.com 65 (Bangalore-Trib) in favour of the assessee by returning following findings :- 3.2 The learned counsel for the assessee, apart from reiterating the submissions made before the Income Tax Authorities, also relied on the order of the Mumbai Tribunal in the case of Godrej Properties Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 . 3.7 In the memorandum explaining the proviso to the Finance Bill, it is stated as follows:- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision rendered by the coordinate Bench of the Tribunal in Vijaya Bank (supra) which is squarely applicable to the facts and circumstances of the case, we are of the considered view that medical reimbursement expenses is prerequisites in the hands of employees and is taxable as such, even if medical expenses are in excess of ₹ 15,000/- and as such cannot be subjected to FBT because once the item as prerequisites is exempted in the hands of individual employee, the same cannot be subjected as FBT. So, ld. CIT (A) has rightly deleted the addition made by the AO in AY 2006-07 to the value of FBT on account of medical reimbursement expenses. However, the ld. CIT A) has erred in deleting the addition in AYs 2007-08 2008-09 on account of medical reimbursement expenses to the extent of 50% only. For AYs 2007-08 and 2008-09 also entire addition is liable to be deleted. So, ground no.1 of AYs 2006-07, 2007-08 2008-09 in Revenue s appeal are determined against the Revenue. 14. So far as question of deleting the addition of 50% in the value of FBT on account of medical expenses for treatment in approved hospitals for AYs 2006-07, 2007-08 2008-09 is concerned, undisputedly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No.2699/Del./2011 (AY : 2008-09) in assessee s appeal are partly determined in favour of the assessee. GROUND NO.2 IN REVENUE S APPEAL ITA NO. 3793/Del./2010 (AY : 2006-07) GROUND NO.3 IN ASSESSEE S APPEAL ITA No.4689/Del./2010 (AY : 2007-08) ITA No.2699/Del./2011 (AY : 2008-09) 18. Undisputedly, assessee has been maintaining townships situated in the vicinity of its plants all over the country. It is also not in dispute that in the township constructed and maintained by the assessee are being used by its employees only. 19. AO made addition to the value of FBT on account of maintenance expenses of township of the assessee on the ground that no such amount is being taxed as prerequisites in the hands of employees and treated the same as deemed FBT u/s 115WB(2)(E). The ld. CIT (A) confirmed the addition in AYs 2007-08 2008-09 but deleted this addition in AY 2006-07 on the ground that maintenance and administrative township expenses are necessity and not a benefit being given to the employees as townships are located in remote area and as such cannot be taxed in the hands of the assessee to the value of FBT. 20. Ld. AR for the assessee submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n approved hospitals to the tune of ₹ 2077.14 lacs ₹ 3368.35 lacs for AYs 2006-07 2007-08 respectively; and to the tune of ₹ 797.13 lacs ₹ 863.43 lacs for AYs 2006-07 2007-08 respectively on account of township expenses; and consequently 20% of 1038.75 lacs i.e. ₹ 207.71 and ₹ 934.81 lacs i.e. ₹ 196.96 lacs for AYs 2006-07 2007-08 respectively on account of medical reimbursement expenses; 20% on account of ₹ 2077.14 lacs i.e. ₹ 415.43 lacs ₹ 3368.35 i.e. ₹ 673.67 lacs for AYs 2006-07 2007-08 respectively on account of medical expenses for treatment in approved hospitals; and ₹ 797.13 lacs ₹ 863.43 lacs for AYs 2006-07 2007-08 respectively on account of township expenses have been treated as taxable FBT by the AO. 24. The ld. CIT (A) confirmed the addition of 50% on account of reimbursement of medical expenses. AO declining the contentions raised by the assessee that its case does not attract the provisions contained u/s 271(1)(d) of the Act proceeded to hold that since the assessee has failed to prove that the said amount is given for treatment in approved hospitals and as such has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reimbursement was above ₹ 15,000/- to its employees and similarly in case of payment to the approved hospitals, no details have been supplied that the payment was below ₹ 15,000/- nor detail of hospital has been brought on record, the assessee was having reasons to claim the deductions. Moreover, in Vijaya Bank (supra) case, identical issue has been decided in favour of the assessee by deleting the addition made by the AO and confirmed by the CIT (A) to the value of FBT on account of medical reimbursement expenses and on account of medical expenses sought treatment form the approval hospitals. 30. So far as question of addition on account of maintenance expenses of townships of the assessee are concerned, this addition has been held to be not sustainable as per our findings in the preceding paras no.14, 15, 16 17. So, when main addition is not sustainable, penalty is also not sustainable. 31. Moreover, in AY 2006-07, ld. CIT (A) has herself deleted the township expenses being not employee welfare expenses and the said order has been confirmed by the Tribunal as discussed in the preceding paras. 32. Furthermore, when the assessee company has specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. 34. So, in view of what has been discussed above, we are of the considered view that firstly, the Revenue has failed to make out the case of concealment of particulars of fringe benefits or furnishing of inaccurate particulars of such fringe benefits and secondly, addition made by the AO and confirmed by the ld. CIT (A) has been deleted by the Tribunal, provisions contained u/s 271(1)(d) of the Act are not attracted, hence penalty levied by the AO is not sustainable and the ld. CIT (A) has rightly deleted the same. Both the appeals filed by the Revenue being ITA No.4928/Del./2012 (AY: 2006-07) ITA No.4929/Del./2012 (AY: 2007-08) are dismissed. 35. Resultantly, the appeals filed by the Revenue in ITA No.3793/Del./2010 (AY: 2006-07), ITA No.4851/Del./2010 (AY: 2007-08) ITA No.3261/Del./2011 (AY : 2008-09) are dismissed; appeals filed by the assessee in ITA No.3285/Del./2010 (AY: 2006-07), ITA No.4689/Del./2010 (AY : 2007-08) ITA No.2699/Del./2011 (AY : 2008-09) are partly allowed; and appeals filed by the Revenue u/s 271(1)(d) of the Act in ITA No.4928/Del./2012 (AY: 2006- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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