2013 (2) TMI 325 - AT - Income Tax

Non deduction of TDS from cost of uniform items, stitching charges, washing expenses etc., reimbursed to the employees - demand raised by u/s. 201(1) & 201(1A) - assessee contested of paying FBT on the same - Held that - As decided in assessee s own case in 2013 (2) TMI 303 - ITAT AHMEDABAD This is not in dispute that FBT was paid by assessee-company on this expenditure and this is also admitted position that this expenditure is in the nature of employees welfare. As per sub-section 2 of section 115WB, it is provided that fringe benefit shall be deemed to have been provided by the employer to its employee if the employer has in the course of business incurred any expenditure on or made any payment for various purpose which includes employees welfare. As per clause-E of this sub-section, it does not come out that it has to be enquired and looked into whether the employee has incurred the amount given to him by the employer for the same purpose for which it was given to the employee. Thus for this reason the employer has paid FBT on a particular expenditure, it is considered as payment of income tax only on deemed income of the employee out of various expenditures incurred by the employer and hence, this is not relevant as to whether the employee has actually incurred those expenditures as intended by the employer in view of this fact that FBT was actually paid by the assessee-company on the impugned expenditure on uniform, washing allowance etc., the same cannot be considered as perquisites in the hands of the employees and therefore, there is no liability of the assessee-company to deduct TDS therefrom. See R & B Falcon (A) Pty Ltd. Versus Commissioner of Income Tax 2008 (5) TMI 2 - SUPREME COURT - in favour of assessee. Non deduction of TDS on conveyance, maintenance, reimbursement expenditure (CMRE) to its employees every month based on their status, designation - Held that - Employer is paying fringe benefit tax on CMRE cannot be ignored. Regarding this expenditure also this could not be shown or established by Revenue that FBT is not payable on this expenditure. This expenditure is also not incurred to fulfill any statutory obligation or to mitigate occupational hazards or fall in any other exclusion as specified in Explanation to clause-E of sub-section-2 of section 115WB. This also is an admitted fact that FBT was paid by the assesseecompany on this expenditure also there is no liability of the assessee-company to deduct TDS therefrom - in favour of assessee. Holiday home reimbursement - whether payments made reveals the case of the assessee company not covered under FBT & the same payment is a remuneration in addition to the salary taxable u/s 17(1)(iv) - Held that - As there is no dispute about the fact that FBT was paid by the assessee company on this expenditure also the same cannot be considered as perquisites in the hands of the employees and therefore, there is no liability of the assessee-company to deduct TDS therefrom - in favour of assessee.

Summary

Issues Involved:
1. Non-deduction of tax at source from reimbursements made to employees.
2. Deletion of order passed u/s 201(1) and interest charged u/s 201(1A) related to conveyance, maintenance, and reimbursement expenditure (CMRE).
3. Deletion of order passed u/s 201(1) and interest charged u/s 201(1A) related to holiday home reimbursements.

Issue-wise Detailed Analysis:

1. Non-deduction of tax at source from reimbursements made to employees:

The assessee contested the CIT(A)'s decision upholding the ACIT (TDS)'s order, which held the appellant as an assessee in default for not deducting tax at source from reimbursements such as uniform costs, stitching charges, and washing expenses. The Tribunal noted that this issue was previously resolved in favor of the assessee in the assessee's own case for A.Y. 2009-10. The Tribunal reiterated that since the Fringe Benefit Tax (FBT) was paid on these expenditures, they could not be considered perquisites under section 17(2)(vi) of the Income Tax Act. Consequently, there was no liability for the assessee to deduct TDS from these expenses. The Tribunal thus allowed this ground of the assessee's appeal.

2. Deletion of order passed u/s 201(1) and interest charged u/s 201(1A) related to conveyance, maintenance, and reimbursement expenditure (CMRE):

The Revenue appealed against the CIT(A)'s decision to delete the order passed u/s 201(1) and interest charged u/s 201(1A) concerning CMRE payments. The Tribunal referred to the previous decision in the assessee's case for A.Y. 2009-10, which held that CMRE payments were reimbursements for actual expenses incurred by employees in maintaining and using their vehicles for official duties. The Tribunal found that these reimbursements were not part of the salary and thus did not attract TDS. The Tribunal upheld the CIT(A)'s decision and dismissed the Revenue's appeal on this ground.

3. Deletion of order passed u/s 201(1) and interest charged u/s 201(1A) related to holiday home reimbursements:

The Revenue also appealed against the CIT(A)'s decision to delete the order passed u/s 201(1) and interest charged u/s 201(1A) concerning reimbursements under the Holiday Home Scheme. The Tribunal noted that during the FBT regime, such reimbursements were liable to FBT and were not considered perquisites under section 17(2)(vi). The CIT(A) had observed that these reimbursements were for the benefit of employees and were not taxable as salary, provided they were fully utilized for the intended purpose. The Tribunal found no reason to interfere with the CIT(A)'s decision and dismissed the Revenue's appeal on this ground as well.

Conclusion:

The Tribunal allowed the assessee's appeals, holding that no TDS was required on reimbursements for uniforms, washing charges, and CMRE payments. The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s decisions that these reimbursements did not constitute taxable salary and were not subject to TDS. The Tribunal's decision was pronounced in open court on 11.1.2013.