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2021 (2) TMI 321 - AT - Income TaxValidity of Orders passed u/s 201(1) and 201(1A) - period of limitation - retrospective applicability of the provisions - TDS u/s 192 - non deduction of TDS on Cash medical benefit to employees - treating the assessee as, assessee in default - time limit for issue of notice u/s 201 - HELD THAT - Applying principles laid down by Hon'ble Supreme Court in number of cases and TATA TELESERVICES VERSUS UNION OF INDIA 1 2016 (2) TMI 414 - GUJARAT HIGH COURT and SODEXO SVC INDIA PVT. LTD. 2018 (4) TMI 316 - ITAT MUMBAI Orders passed by Ld.AO under section 201(1) and 201(1A) for financial year 2010-11 (assessment year 2011-12) and 1st three quarters for financial year 2011-12 (assessment year 2012- 13), expired on 31/03/2014 under unamended section 201 (3)(i) of the Act. Such orders having been passed after expiry of two years from the financial year wherein TDS statements were filed by the assessee under section 200 of the Act, is therefore barred by limitation, hence, has to be declared as null and void. TDS on medical benefits - non deduction of TDS on bonafide belief - Under section 192(1), the assessee is expected to make an honest and fair estimate of income and deduct tax at source. For assessment year 2015-16 and 2016-17, clause (2D) was applicable, however in the absence of specific requirement under Rule 26C, assessee was not obliged to collect evidence/ proof from the employees for reimbursement of medical expenditure. The assessee has sought permission from CBDT vide letter dated 20/05/2002, regarding extending the exemption under Proviso(v) to Section 17(2) of the Act, based on satisfaction of the assessee. Assessee has been following this practice since the year 1991. Further the exemption at no time exceeded ₹ 15,000/- Stand of the assessee that the Cash medical benefit were only reimbursement of the expenditure incurred by the employees, and as such they could not form part of their income, could not be said to be without any basis. Therefore, the belief of the assessee on that point was bona fide. Since the estimate made by the assessee has been held to be honest and bona fide, the assessee could not be treated as assessee in default Therefore, the Ld.AO had no jurisdiction under section 201 to demand further tax from the assessee in respect of the short deduction made concerning Cash Medical Benefit for assessment year 2015-16 2016-17. As regards charging of interest under section 201(1A), since relief, as mentioned above, had been allowed, the Ld.AO is directed to modify the quantum of interest taking into consideration the said relief for assessment year 2015-16 2016-17.
Issues Involved:
1. Jurisdiction of the Assessing Officer (AO). 2. Limitation period for passing orders under Section 201 of the Income Tax Act. 3. Treatment of Cash Medical Benefit (CMB) for TDS purposes. 4. TDS on payments made to Sodexo SVC India Pvt. Ltd. Issue-wise Detailed Analysis: 1. Jurisdiction of the AO: The assessee contended that the notice issued and the impugned orders passed by the Income Tax Officer (ITO), TDS Ward, Davangere, were without jurisdiction. The assessee argued that the Additional CIT/JCIT (TDS), Hubli, had jurisdiction over the relevant districts as per a notification dated 15/11/2014. However, there was no communication regarding the transfer of jurisdiction placed on record by the revenue. The Tribunal noted that the plea regarding jurisdiction was not raised before the Commissioner of Income Tax (Appeals) [CIT(A)] and that the assessee had participated in the assessment proceedings without raising any objection. Consequently, this ground was dismissed. 2. Limitation Period for Passing Orders: The assessee argued that the orders passed under Section 201 for the assessment years 2011-12 to 2015-16 were barred by limitation. The Tribunal examined the relevant statutory provisions and noted that the limitation period for passing orders under Section 201 was two years from the end of the financial year in which the TDS statement was filed, as per the unamended Section 201(3)(i) of the Act. The amended provision, which extended the limitation period to seven years, was applicable from 01/10/2014 and did not have retrospective effect. Therefore, the Tribunal held that the orders for the financial year 2010-11 (assessment year 2011-12) and the first three quarters of the financial year 2011-12 (assessment year 2012-13) were barred by limitation and declared them null and void. The appeals for these assessment years were allowed on this ground. However, the Tribunal dismissed the ground for the assessment year 2015-16 as the amendment was effective from 01/06/2015. 3. Treatment of Cash Medical Benefit (CMB): The Tribunal examined whether the assessee could be treated as "assessee in default" for non-deduction of TDS on CMB payments to employees. The assessee argued that the payments were made based on a bona fide estimate and in reliance on a CBDT letter dated 20/05/2002, which allowed exemption under Section 17(2) of the Act. The Tribunal noted that the CBDT letter permitted exemption for fixed medical allowance and that the assessee had obtained self-attested declarations from employees regarding the expenditure incurred. The Tribunal held that the assessee made an honest and bona fide estimate of the income under the head "salaries" and could not be treated as "assessee in default." The Tribunal also referred to various judicial decisions supporting the assessee's contention. Consequently, the Tribunal allowed the grounds related to CMB for the assessment years 2015-16 and 2016-17. 4. TDS on Payments Made to Sodexo SVC India Pvt. Ltd.: The assessee contended that the authorities had erred in treating it as "assessee in default" for deducting tax at a lower rate on payments made to Sodexo SVC India Pvt. Ltd. The assessee argued that the authorities had not considered the certificates furnished under Section 197(1) of the Act. The Tribunal noted that the CIT(A) had not given any finding on this issue and remanded the matter to the AO for reconsideration in light of the certificates furnished by the assessee. The Tribunal directed the AO to grant the assessee a proper opportunity of being heard and to consider the evidence in accordance with the law. Conclusion: The Tribunal allowed the appeals for the assessment years 2011-12 to 2014-15 on the ground of limitation and partly allowed the appeals for the assessment years 2015-16 and 2016-17 on the merits of the CMB issue and remanded the issue related to Sodexo SVC India Pvt. Ltd. for reconsideration.
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