2013 (11) TMI 220 - HC - Income Tax

TDS u/s 192 - inclusion of certain prerequisite and allowances in Salary - Exemption u/s 10(14) - Non deduction of TDS on uniform allowance and conveyance maintenance reimbursement expenditure (hereinafter referred to as the CMRE ) - Non deduction of TDS on the scheme named holiday homes floated for the benefit of employees - Assessee in default under section 201(1)/201(1A) - Held that - eventually for any shortcoming of employees, the employer cannot be found fault with. As this question concerns the respondent to a limited extent as to whether tax was to be deducted at source for being taxable receipts and the issue since is squarely covered by the decision of this court in the assessee s own case, the present tax appeals on this issue deserve no consideration - Following the decision in 1998 (11) TMI 3 - GUJARAT High Court decided in favor of assessee. Regarding holiday home scheme - Held that - as far as the assessment years 2006-07 and 2007-08 are concerned, the expenditure incurred by the employer for holidays enjoyed by the employees was not prescribed as fringe benefit for the purpose of section 17(2)(iv) of the Act and the same was not taxed as perquisite in the employees hands and wherever not actual and fully utilised, the same would constitute taxable salary. However, for the assessment years 2008-09 and 2009-10, the holiday home scheme could not be considered as perquisite under section 17(2)(iv) of the Act in the hands of the employees, was held rightly acceptable. This was essentially on account of the introduction of rule 3(7)(ii) of the Income-tax (Fourteenth Amendment) Rules, 2007, with effect from April 1, 2008, in respect of those employers who were not liable to pay FBT under Chapter XII-H of the Act. Payment in question towards the holiday home scheme if not utilised actually, the same can be held to be taxable salary of the employees. In these appeals, concerned essentially is the taxable receipts and not the payment of tax by the employer. Moreover, till the FBT regime was in existence, the respondent-assessee has already paid the FBT under section 115WB of the Act. Therefore, rightly no default was considered on the part of the respondent-assessee under section 201(1) of the Act Decided against the Revenue.

Summary

Issues Involved:
1. Whether the payment of Conveyance Maintenance Reimbursement Expenditure (CMRE) is liable for fringe benefit tax (FBT) or should be treated as additional salary attracting TDS provisions.
2. Whether the payment under the Holiday Home Scheme for non-official and private purposes is liable for FBT or should be considered additional salary attracting TDS provisions.

Detailed Analysis:

Issue 1: Conveyance Maintenance Reimbursement Expenditure (CMRE)
The Revenue challenged the Tribunal's decision, arguing that the CMRE paid to employees should be considered additional salary under Section 17(1)(iv) of the Income-tax Act, 1961, and thus subject to TDS. The Tribunal had upheld the Commissioner of Income-tax (Appeals)'s decision, which favored the respondent-assessee, stating that CMRE was not taxable as salary since it was meant for official purposes and was paid based on declarations by employees. The Tribunal noted that the employer had paid FBT on CMRE, which indicated it was not part of the salary. The Tribunal referenced the Gujarat High Court's decision in CIT v. ONGC, which held that CMRE, being reimbursement for official duties, was not taxable as salary. The High Court affirmed this view, stating that the Tribunal correctly applied the law, and the CMRE scheme did not attract TDS provisions.

Issue 2: Holiday Home Scheme
The Revenue contended that reimbursements under the Holiday Home Scheme were for private purposes and should be treated as additional salary under Section 17(1)(iv), thus attracting TDS. The Tribunal and the Commissioner of Income-tax (Appeals) had ruled in favor of the respondent-assessee, stating that such reimbursements were subject to FBT and not taxable as salary. The Commissioner of Income-tax (Appeals) noted that during the FBT regime, such reimbursements were not considered perquisites under Section 17(2)(iv) if the employer paid FBT. The High Court agreed, stating that the Holiday Home Scheme reimbursements were not taxable as salary if they were used for their intended purpose. The Court emphasized that the employer had paid FBT, and thus, there was no default under Section 201(1).

Conclusion:
The High Court dismissed the Revenue's appeals, affirming that:
1. CMRE paid to employees is not taxable as salary and does not attract TDS provisions, as it is reimbursement for official purposes and subject to FBT.
2. Reimbursements under the Holiday Home Scheme are not taxable as salary if used for their intended purpose, and the employer's payment of FBT absolves them from TDS obligations.