2013 (7) TMI 1027 - AT - Income Tax

Summary

Issues Involved:
1. Obligation to deduct tax at source on Leave Travel Concession (LTC).
2. Obligation to deduct tax at source on Medical Reimbursement.
3. Obligation to deduct tax at source on expenditure incurred on meal vouchers.

Summary:

Issue 1: Obligation to deduct tax at source on Leave Travel Concession (LTC)
The Assessing Officer (AO) considered the assessee company as an "assessee in default" u/s 201(1) for not deducting tax on LTC payments. The CIT (A) cancelled the demands and interest charged u/s 201(1) and 201(1A), stating that the employer deducted tax wherever the benefit was not backed by bills or exceeded the allowable amount under the I.T. Act. The Tribunal upheld this view, noting that the AO did not dispute the fulfillment of conditions for exemption u/s 10(5) and that the employer's estimate of taxable salary was bona fide.

Issue 2: Obligation to deduct tax at source on Medical Reimbursement
The AO also considered the assessee in default for not deducting tax on medical reimbursements. The CIT (A) found that the reimbursements fit within the exemption provided u/s 17(2) and that no instance was brought forth where the benefit was disbursed without TDS if not backed by actual expenditure. The Tribunal agreed, stating that the employer's actions were in line with the provisions of the I.T. Act and that the AO's interpretation was too narrow and technical.

Issue 3: Obligation to deduct tax at source on expenditure incurred on meal vouchers
For the assessment year 2010-11, the AO raised a demand for non-deduction of tax on meal vouchers. The CIT (A) held that the meal vouchers issued were within the rates as per I.T. Rules, non-transferable, and valid for food products, with no misuse recorded. The Tribunal supported this view, referencing a similar case (Cadila Healthcare Ltd), and concluded that the disbursement of meal coupons did not attract TDS u/s 192.

Conclusion:
The Tribunal dismissed the Revenue's appeals, affirming the CIT (A)'s order that the assessee was not an "assessee in default" for non-deduction of tax on LTC, Medical Reimbursement, and meal vouchers, as the employer's estimates and actions were in compliance with the I.T. Act.