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2018 (10) TMI 725 - AT - Income TaxTDS u/s 192 - Addition u/s 17(2(v) - income from salary - perquisite - expenditure incurred for medical treatment of an employee incurred outside India - AO invoked the provisions of section 192 and held that the assessee is liable to deduct TDS @ 30% - Held that - CIT(A) has deleted the additions on the ground that, Since RBI allows remission of medical expenses of the amount involved in the appellant s case, the AO s case that no permission of RBI existed in the instant case is not correct. As regards employees having gross total income equal to or exceeding 2,00,000/- the exclusion from the exemption as provided in Proviso(vi) to Section.17(2) applies only to travel expenses and not to medical expenses. Both the reasons cited by the AO for holding the appellant liable for TDS are not relevant. The AO, therefore, is not correct to hold that the appellant is liable to deduct TDS u/s.192 from medical expenses. In case the payee Mr. Dugar is not treated as a bonafide employee then the expense paid by the-appellant cannot be termed as perquisite. In that case the liability u/s. 192 cannot be brought upon the appellant. - Order of CIT(A) confirmed - Decided against the Revenue.
Issues Involved:
1. Deletion of addition made on account of payment for medical expenses. 2. Deletion of addition made on account of non-deduction of TDS. Issue-Wise Detailed Analysis: 1. Deletion of Addition Made on Account of Payment for Medical Expenses: The primary issue revolves around the deletion of an addition made by the Assessing Officer (AO) concerning medical expenses amounting to ?1,93,36,000/- incurred by the assessee for the treatment of an employee in a foreign hospital. The AO treated this expenditure as a perquisite under section 17(2)(iv) of the Income Tax Act, 1961, and held the assessee liable to deduct TDS @ 30%, adding ?57,96,300/- to the total income of the assessee. The Revenue argued that the expenditure should be excluded from perquisite only to the extent permitted by the RBI, and the assessee failed to produce any RBI permission. The CIT-A, however, held that no RBI permission was required and the assessee was not liable for TDS under section 192 of the Act. The Revenue contended that the CIT-A violated Rule 46A of the IT Rules 1962 by not sending fresh evidence for AO's examination. The assessee countered by referring to RBI Circular No. 603 dt. 6-6-1991 and subsequent amendments, arguing that the expenditure on medical treatment and stay abroad is covered under section 17(2)(vi) of the Act and should not be treated as a perquisite. The assessee also cited FAQs and RBI Circulars allowing remittance for medical treatment abroad without specific RBI permission. Upon hearing rival submissions and examining the records, it was found that the expenditure was supported by an estimate from the concerned hospital abroad. The CIT-A's decision that no RBI permission was required was upheld, and the addition made by the AO was deleted. The Tribunal found no violation of Rule 46A and dismissed the Revenue's grounds. 2. Deletion of Addition Made on Account of Non-Deduction of TDS: The second issue pertains to the deletion of an addition made due to non-deduction of TDS on interest payments. The AO observed that the assessee paid ?67,92,425/- as interest to Convent Height Developers without deducting TDS, raising a demand of ?6,79,290/-. The assessee argued that there was a netting of interest, with ?85,14,711/- receivable from Convent Height Developers, resulting in a net interest of ?18,12,286/-. The assessee also contended that the firm had taken the interest into account in its income and paid taxes, and thus, the assessee should not be held liable for non-deduction of TDS. The Tribunal found that no evidence was provided to show that the firm recognized the interest as its income and paid taxes. Consequently, the matter was remanded to the AO for examination, requiring the assessee to produce relevant details. Conclusion: The appeal by the Revenue was partly allowed for statistical purposes, with the matter of non-deduction of TDS remanded for further examination. The cross-objection by the assessee was dismissed as not pressed. The Tribunal upheld the CIT-A's decision regarding the medical expenses, finding no requirement for RBI permission and no violation of Rule 46A.
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