TMI Blog2013 (8) TMI 1106X X X X Extracts X X X X X X X X Extracts X X X X ..... cal reimbursements of up to ₹ 15,000/- each paid to its employees and also on meal vouchers (SODEXHO COUPONS). The aggregate income attributable to these allowances, demand raised u/s.201(1) and interest charged u/s.201(1A) are as follows : A.Y Perquisites 201(1) Rs. 201(1A) Rs. Total Rs. 2008-09 46,86,892 15,77,608 8,28,241 24,05,849 2009-10 1,30,65,862 43,97,969 23,08,906 67,06,875 03. Section 192(1) of the Act casts an obligation on the part of person responsible for paying income chargeable under the head salaries to deduct tax at source, at the time of payment. Section 192 (1) of the Act reads as under:- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts is in the nature of perquisite falling with the definition of perquisites as given in sec.17(2) (iv) proviso (v) of the Act. 06. As far as Medical reimbursement is concerned, if the amount paid by an employer to the employee for medical treatment of the employee or his family is ₹ 15,000 or less per annum, then the same will not be perquisite as laid down in Sec.17(2) proviso (v) of the Act and therefore need not be considered as part of salary for the purpose of deducting tax at source at the time of payment by the employer to the employee. In other words, expenditure actually incurred on medical treatment to the extent of ₹ 15,000/- is exempt and the remaining is taxable. 07. The payments to employees of the assessee include a component towards medical expenditure. Towards this, employees are paid a sum every month. This sum, when paid is considered as part of taxable salary. If the employee submits proof of having incurred the expenditure towards medical treatment, the sum spent towards medical treatment or ₹ 15,000/-, whichever is less, is excluded from salary. The exclusion is on the basis of the proviso (v) to section 17(2) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught to be considered as perquisite. In coming to the above conclusion, the CIT(A) relied on the Circular of the CBDT, viz., Circular No.603 dated 6.6.1991, wherein the CBDT has opined that the value of the perquisite arising by way of payment or reimbursement by an employer of expenditure on medical treatment will not be included in the taxable salary of the employee. The following were the relevant observations of the CIT(A):- 3. MEDICAL REIMBURSEMENT . 3.3 I have carefully considered the appellant s submissions and perused the AO s order. The employees are paid up to ₹ 15,000/- per annum which is paid as advance at ₹ 1,250/- every month for the sake of administrative convenience. This amount is treated as exempt under the provisions of I.T.Act only if supported by bills. Wherever bills are (not) provided the amount is treated as a taxable salary and tax is deducted during the financial year end. 3.4 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... road of one attendant, to the extent permitted by the Reserve Bank of India, subject to the 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 ₹ 1,00,000. (emphasis supplied) 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 ₹ 15,000/- per employee per annum is too small draw any other inference. 4.6 It is clear, therefore, that in effect there is no infringement of the tax provisions allowable to the employees 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in not considering the distinction drawn by the Assessing Officer on the issue of Sodexo coupons as against the facts in the said case. 12) The Commissioner of Income-tax (Appeals) has erred in providing weightage to the administrative convenience of the employer against the cost to the exchequer. 13) The Commissioner of Income-tax (Appeals) has erred in not appreciating the fact that all employees would then be entitled for exemption in respect of food expenses as they are applied from the salary income of the employee. 14) The CIT(A) has erred in not appreciating the fact that the employer has itself not considered these amounts as perquisites in the Form 12BA issued to the employees. 15) The CIT(A) has erred in not taking cognizance of the fact that the employer cannot consider a disbursement as a perquisite only for the purpose of exemption, and not for the purposes of Form 12BA. 16) The CIT(A) has erred in not considering the fact that every contention of the deductor has been addressed elaborately while the AO s contentions and findings have not been reasoned against. 17) The CIT(A) has erred in passing an orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-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 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. 16. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment precedes the incurrence of expenditure. The requirements/conditions of 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 (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enquiries regarding the manner in which the Sodexho coupons which are also known as meal vouchers were used. The Assessing Officer found that there was no proper system prevailing and he smelt scope for misuse of these coupons, as the identity of users could not be verified. In view of these, the Assessing Officer disallowed the claim for each assessment year as given below : Assessment year Amount in Rupees 2008-09 36,54,000 2009-10 1,12,26,000 Aggrieved with the above disallowance, the assessee went in appeal before the Commissioner of Income-tax (Appeals). 22. It was contended by the assessee before the Commissioner of Incometax (Appeals) that meal vouchers which are provided to the employees are not taxable. The Commissioner of Income-tax (Appeals) in his order has dealt with this issue also at length. While doing so, he has considered the provisions of Rule 3(7)(iii) of the IT Rules, 1962 which has been reproduced in his order. In para 4.6, the Commissioner of Income-tax (Appeals) has observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 Commissioner of Income-tax (Appeals) is upheld. 4.7. 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 employees did not attract TDS u/s.192 and the action of the A O in raising demand u/s.201(1) and charging interest u/s.201(1A) is uncalled for and delete the same. 24. Aggrieved with the same, the Revenue is in appeals before this Tribunal with the grounds of appeal reproduced elsewhere in this order. 25. We have heard the rival submissions and perused the materials on record. Before us the learned DR reiterated the stand of the revenue as reflected in the grounds of appeal and relied on the order of the AO. The learned counsel for the Assessee reiterated the stand of the Assessee as put forth before AO and CIT(A) and relied on the order of the CIT(A). 26. We find that the Commissioner of Income-tax (Appeals) has rightly adjudicated the issue in favour of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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