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TMI Blog2013 (9) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee company on 31.1.2011 by the Income-tax Officer (TDS), Ward 16(2), Bangalore [the AO]. The AO had considered the assessee as 'assessee in default' u/s 201(1) of the Act in respect of certain item of 'salary' payments made to its employees. The AO also levied interest u/s 201(1A) of the Act on tax not deducted from the dates on which the taxes ought to have been deducted till the dates on which the taxes ought to be paid over to the Government Exchequer. The details of items and demand raised year-wise are as under: Allowances/benefits 2007-08 (Rs.) 2008-09 (Rs.) 2009-10 (Rs.) 2010-11 (Rs.) Total (Rs.) Medical allowance 4148462 3990413 4152237 4044739 LTA 719771 902062 1077953 871387 Fuel reimbursement 4394729 4954305 5757687 2555543 Conveyance 403926 301565 263351 202180 Telephone 3066260 3558074 4057193 4890901 Car maintenance 55275 49355 92186 158237 Sodexo-meal vouchers - - - 11899895 Total 12788423 13755774 15400607 24600882 Tax liability 3506955 4146862 4563014 8179528 20396359 Total tax payable + int. u/s 201(1A) 5190293 5639732 5658137 9161071 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll reproduced earlier), and all other instructions on the subject, the CBDT have decided that the value of the perquisite arising by way of payment or reimbursement by an employer of expenditure on medical treatment incurred by his employee on himself or on his spouse, children or parents, including the provision of free medical treatment or treatment at a concessional rate, will not be included in the taxable salary of the employee in the following cases: (i) Where the medical treatment is availed at hospitals, clinics, etc., maintained by the employer; (ii) Where the medical treatment is availed at hospitals maintained by the Government or local authorities or hospitals approved for the purposes of the Central Government Health Schedule or Central Medical Scheme (a list of such hospitals furnished by the Ministry of Health and family welfare on 11-4-1991 is annexed). (iii) Where the expenditure is on medical insurance premia; (iv) Where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... findings of the CIT (A) with regard to cancellation of demand in respect of non-deduction of tax for payments made on account of LTA reads as follows: "3.3. I have carefully considered the facts, the appellant's submissions and perused the elaborate order. The summary of the AO's observations is that LTA is paid to an employee irrespective or whether or not an employee: (i) Has any intention to proceed on leave; (ii) Has any intention to travel; (iii) Has already availed the benefit in the previous calendar year/financial year and thereby disentitling him to the exemption from tax. 3.4. The appellant has stated in its submissions as under: (i) the LTA is a fixed sum per annum paid as reimbursement or at the request of the employee in the beginning of the financial year; (ii) Exemption can be claimed only if the employees avail at least 1 earned leave during the travel; (iii) Exemption from tax is provided subject to satisfac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO was not justified in treating the appellant as an 'assessee-in-default'. Hence, the demand raised and interest charged u/s 201(1) and 201(1A) are uncalled for and they are, therefore, cancelled." 4.2 The finding of the CIT (A) in regard to meal vouchers (AY 2010-11) are as follows: "9.5. I have considered the issues. The fact is that: i) Food Vouchers issued per meal per employee is within the present rates as per I.T. Rules read with the I.T. Act. ii) The employer has ensured that the coupons are non transferable and valid for ready to eat items. ii) If used at departmental stores, it is for food products. No instance has been brought on record otherwise. iv) No specific instance of misuse has been brought on record by the AO. 9.6 It is also to be seen that these benefits are provided to employees all across the salaried strata in the private sector in this manner and employers are dealing with a large number of employees (numbering tens of thousands) and not merely a few hundreds or thousands t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to its employees did not attract TDS u/s 192 and the action of the AO in raising demand u/s 201(1) and charging interest u/s 201(1A) is uncalled for and delete the same". 4.3 With regard to telephone bills reimbursements, vehicle maintenance, fuel consumption, conveyance allowance etc., the findings of the CIT (A) are as follows: "10. For telephone (bills)reimbursements, vehicle maintenance, fuel consumption, conveyance allowance as discussed above at Paras 5,6,7 and 8 respectively, the reimbursements are supported by actual expenditure (bills or vouchers) and are within the limits provided under the relevant provisions of the I.T. Act. Moreover, wherever the amounts are paid without any supporting evidence of having been incurred by the employee concerned, these are treated as taxable allowance and tax is deducted at source on the same at the end of the same financial year. Merely because these are pre-determined by the employer and treated as his salary component which is worked out in terms of 'cost to company', it cannot be held that the exemption provided under the Act (read with relevant rules) from the ambit of section 17(2) to certain perquisites would not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; The Principal Officer, M/s Infosys BPO Ltd., Electronics City, Hosur Road, Bangalore-560 100 Sir, Sub: Show cause notice u/s 201(1) in your case F.Y 2006-07 to 2010-11 - reg. A survey u/s 133A of the Income-tax Act was conducted at the premises of M/s Infosys Technologies, Hosur Road, Bangalore on 05.10.2010 to verify the compliance of TDS provisions. Based on the findings, the salary structure of the employees of M/s Infosys BPO was also examined. Based on the same issues, certain information was called for from your company relating to the receipt of pay and other allowances by your employees. It was noticed that the employees were in receipt of pay and other allowances. It was explained that 40% of the pay constituted allowances, the break-up of which was as per the option exercised by the employee. It was explained that the basket of allowances could be changed at any point of time by the employee. Evidently a fixed amount was entered by the employee against each of the allowances irrespective o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposed to bring these amounts also to tax." 21. A perusal of the show cause notice clearly shows that the fact that bills/evidence to substantiate incurring of expenditure on medical treatment up to Rs.15,000/- and the availing of the LTC by the employees and the fulfillment of the conditions contemplated by Sec.10(5) of the Act for availing exemption by the employees so availing LTC, have not been disputed by the AO. The grievance of the AO appears to be that 40% of the pay to the employees constitutes allowance and that the allowance so given every month is not earmarked for any particular purpose but the employee was free to use the allowance in any manner and later claim that the allowance was used for LTC or medical reimbursement. Therefore, according to the AO, at the time of payment the allowances would constitute part of salary and therefore even the allowances should be considered as part of salary for the purpose of deduction of tax at source. In other words, according to the AO, LTC and Medical reimbursement should be paid at the time the expenditure is incurred or after the expenditure is incurred by way of reimbursement and not at an earlier point of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sement of leave travel allowance is a lump sum monetary benefit provided to the employee without any nexus to any of the statutory or prescribed conditions. The only precondition is that the employee ought to have opted for this allowance at the beginning of the Financial Year. The subsequent occurrence of an event of travel which may or may not occur and even if it occurs, may or may not fulfill the conditions such as once in two calendar years etc., would in no way alter the nature of payment that has been effected. Therefore, an allowance such as the one granted in the instant case would not be a concession or assistance. Therefore, the reliance placed on the Circular is misplaced and is in fact against the case of the deductor." 23. The AO has also taken a stand that there is a difference between "Allowance" and "LTC and Medical Reimbursement". An allowance according to the AO can be given in advance whereas LTC and medical reimbursement are not in the nature of allowance and therefore cannot be given like an allowance before they are incurred. The AO's further case is that at the time of disbursement by the employer the same assumes the character of salary and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92(3) of the Act permits the employer to increase or reduce the amount of TDS for any excess or deficiency. We have already noticed that the fact that bills/evidence to substantiate incurring of expenditure on medical treatment up to Rs.15,000/- and the availing of the LTC by the employees and the fulfillment of the conditions contemplated by Sec.10(5) of the Act for availing exemption by the employees so availing LTC, have not been disputed by the AO. Even assuming the case of the AO, that at the time of payment the Assessee ought to have deducted tax at source, is sustainable; the Assessee on a review of the taxes deducted during the earlier months of the previous year is entitled to give effect to the deductions permissible under proviso (iv) to Sec.17(2) or exemption u/s.10(5) of the Act in the later months of the previous year. What has to be seen is the taxes to be deducted on income under the head 'salaries' as on the last date of the previous year. The case of the AO is that LTC and Medical reimbursement should be paid at the time the expenditure is incurred or after the expenditure is incurred by way of reimbursement and not at an earlier point of time. If it is so paid, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 0435 (DEL) Gwalior Rayon Silk Co. Ltd. v. CIT [1983] 140 ITR 832 (MP) ITO v G. D. Goenka Public School (No. 2) [2008] 306 ITR (AT) 78 (Del) Usha Martin Industries Ltd. V. ACIT (2004) 086 TTJ 0574 (KOL) Nestle India Ltd. v. ACIT (1997) 61 ITD 444 (Del) Indian Airlines Ltd. v ACIT (1996) 59 ITD 353 (Mum) 28. In the present case, as already detailed, the exemption in respect of medical expenditure and leave travel is considered after collecting and verifying the details and evidence furnished by the employees. Policies and controls are in force to ensure that the requirements of rule 2B are fulfilled. The details filed before the TDS officer explains the policies adopted to fulfill the requirements of rule 2B and the process adopted in considering the exemption under section 10(5) and proviso to section 17(2). The assessee is a law abiding Company. Internal controls are in place to discharge the statutory obligation under section 192. Honest and bona fide estimate of taxable salary is made in the process of deducting tax at source under section 192. Every effort is made by the assessee to comply with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds have no basis and cannot be factually sustained. 31. Arguments were advanced that employees have filed their returns of income and offered to tax income under the head salaries received from the Assessee and therefore no order u/s.201(1) & 201(1A) of the Act can be passed against the Assessee. In this regard our attention was drawn to the following decisions: Hindustan Coco Cola Beverage Pvt.Ltd. Vs. CIT 293 ITR 226 (SC) CIT Vs. Eli Lilly & Co. 312 ITR 225 (SC) = (2009-TII-01-SC-INTL) Decision of Hon'ble Karnataka High Court in the case of CIT Vs. Tata Elxsi ITA No.82 of 2003 dated 23.1.2008. We have not examined the above argument for the reason that the assertion of the assessee in this regard has not been examined either by the AO or CIT(A). 32. For the reasons given above, we do not find any grounds to interfere with the order of the CIT(A). Consequently, these appeals by the Revenue are dismissed. 33. In the result, the appeals are dismissed". 6.1. Since the facts of this case is identical to the facts considered by the Tribunal in the case of Infosys BPO (ITA No.1390 & 139 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 201(1) and 201(1A) in respect of vehicle maintenance, fuel consumption and conveyance allowance. 8.1. Interestingly, even at the time of hearing before us, no documentary evidence has been brought on record by the Revenue to contradict the CIT (A)'s version on the above issues. In view of the above, we find no infirmity in the findings of the CIT (A) warranting our interference. In substance, these issues are decided against the Revenue for all the AYs under consideration. 9. Before parting with, we would like to point out that the Revenue had, in its identical ground Nos. 1 to 4, aggrieved that the CIT (A) had not extended an opportunity to the AO to putforth his views on the issues and also failed to consider the submissions made by the AO vide his letters dated 20.12.2011 and again on 13.2.2012 etc. 9.1. In this connection, we would like to reiterate that the appeals were appeared to have been heard by the First Appellate Authority on 13/9/2011, 24/10/2011, 25/11/2011, 27/2/2012 and finally on 10/7/2012 [Source: CIT (A)'s order under the caption: 'Date(s) of hearing'. The hearings could have taken place only on the basis of the hearing notices issued to either of the party. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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