2013 (8) TMI 1106 - AT - Income Tax

Summary

Issues Involved:
1. Obligation to deduct tax at source on medical reimbursements.
2. Obligation to deduct tax at source on meal vouchers (Sodexho coupons).

Summary:

1. Obligation to deduct tax at source on medical reimbursements:

The assessee, M/s. Cisco Systems Asia Services, Bangalore, was found not to have deducted tax at source on medical reimbursements up to Rs. 15,000 each paid to its employees during a survey u/s.133A(1). The Assessing Officer (AO) considered the assessee as an "Assessee in default" u/s.201(1) for not treating the medical reimbursements as part of the taxable salary. The AO also levied interest u/s.201(1A) on the tax not deducted. The CIT(A) cancelled the AO's order, holding that the amount paid as reimbursement ought to be considered as perquisite and relied on CBDT Circular No.603 dated 6.6.1991. The Tribunal upheld the CIT(A)'s order, stating that the exemption in respect of medical expenditure is considered after verifying the details and evidence furnished by the employees. The Tribunal cited several judicial precedents to support the view that 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.

2. Obligation to deduct tax at source on meal vouchers (Sodexho coupons):

The AO disallowed the claim for meal vouchers (Sodexho coupons) provided to employees, suspecting misuse as the identity of users could not be verified. The CIT(A) overturned the AO's decision, stating that these benefits are provided as welfare measures aimed at ensuring better productivity from employees and are well within the ambit of the provisions of the IT Act. The CIT(A) relied on the ITAT, Ahmedabad Bench's decision in the case of Cadila Healthcare Ltd., which held that meal vouchers used at specified eating joints or outlets do not attract TDS u/s.192. The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal on this issue.

Conclusion:

Both appeals filed by the Revenue were dismissed. The Tribunal upheld the CIT(A)'s decisions, confirming that the assessee was not in default for not deducting tax at source on medical reimbursements and meal vouchers. The order was pronounced in the open court on 08.08.2013.