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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 ..... Act or proviso (iv) to Sec.17(2) of the Act. The liability of the person deducting tax at source cannot be greater than the liability of the person on whose behalf tax at source is deducted. The AO has ignored this aspect and has proceeded to pass the order u/s.201(1) and 201(1A) of the Act. His order was rightly held to be unsustainable by the CIT(A) - Following decision of Infosys BPO (2013 (9) TMI 205 - ITAT BANGALORE), Decided against Revenue. Salaries - TDS on Free meal coupons u/s 192 – taxability as perquisite within the rule 3(7) (iii) – deduction of tax at source - coupons were not utilized by employee for purchasing meals at an eating joints but were mis-used to purchase grocery items, cosmetics items, etc., from shops/super stores – Held that employer is not expected to presume misuse of coupons to warrant deduction of tax at source – further, conveyance allowance in respect of vehicles owned by employees cannot be treated as perquisite - expenditure incurred on disbursement of meal coupons by the employer to the employees did not attract the provisions of s. 192 - Decided against Revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... have carefully considered the appellant's submissions and perused the AO's order. The employees are paid up-to Rs.15000/- per annum split into monthly disbursements. This amount is treated as exempt under the provisions of I.T. Act only if supported by bills. Wherever bills are provided the amount is treated as a taxable salary and tax is deducted during the financial year-end. 4.4. On the facts of the case, I find that: (a) No instance has been brought on record to suggest that, in the case of any employee, the benefit or allowance has been allowed without TDS during the financial year, if it is not backed by actual expenditure. b) In such a case, the benefit provided clearly fits into the ambit of the exemption provided u/s 17(2) proviso which states: "(v) any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family other than the treatment referred to in clauses (1) and (ii); so, however, that such sum does not exceed *fifteen thousand rupees, in the previous year;" [increased from 'ten thousand rupees' with effect from 1/4/1999] c) The Board's Circular No.603 dated 6/6/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.5. It is clear, therefore, that in effect there is no infringement of the tax provisions allowable to the employees under the I.T. provisions in disbursing salaries by the by the employer appellant. Merely because the same is taken into account at the beginning of the year or at the time of deciding his/her salary, which itself is in terms of 'cost to company', it cannot be said that it ceases to be a perquisite and, therefore, not entitled to exemption u/s 17(2). Perquisite in any case also forms part of taxable salary. The employer has clarified that, wherever the said disbursement is not backed by bills, it is liable to TDS and this liability is not denied or infringed. 4.6 Therefore, in my view, the view of the AO is a very narrow and technical interpretation and in relation to a welfare measure to the employees across the salaried strata cannot be the correct interpretation. 4.7. There is, therefore, no case for taking action u/s 201(1) and 201(1A) of the Act. Hence, the demand raised and interest charged u/s 201(1) and 201(1A) are uncalled for and they are, therefore, cancelled." 4.1 Similarly, the findings of the CIT (A) with regard to cancellation of demand in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce' as envisaged in the I.T.Act. 3.7. In my view, the basic requirements of the I.T. Act read with the relevant rules are met i.e., (i) No disbursement not backed by bills/proof is treated is not taxable; (ii) No disbursement in excess of I.T. Rules has been treated as exempt during the financial year. 3.8. The interpretation of the AO is too narrow and technical and the said benefit would clearly fit into the meaning of 'assistance' in sum and substance. As can be seen from the submissions made by the appellant, care has been taken by the employer to see that there is no irregularity in making payments under the LTA Scheme. In my opinion, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee was not liable to deduct tax at source on expenditure incurred on sodexo lun ch coupons given to the employees of the company. Revenue having not placed any material so as to enable to take a different view in the matter, the order of the CIT (A) is upheld". 9.7 In view of the discussions made in the preceding paragraphs, I hold that the disbursement of the meal coupons made by the appellant employer in the present case 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order u/s.201(1) and 201(1A) of the Act. There was a Survey u/s.133A of the Act at the business premises of the Assessee on 5.10.2010. Based on the findings in the course of survey show cause notice dated 3.2.2011 was issued by the AO. The contents of this show cause notice throws light on the exact grievance of the AO and therefore the same is being reproduced. "To 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of medical reimbursement as per the terms and conditions laid down in the Act. It is 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 expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 its later application for purposes which are exempt will only be application of income and therefore accrual of income in the form of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, then, even though the payment would not form part of taxable salary of an employee, the employer has to deduct tax at source treating it as part of salary, is contrary to the provisions of Sec.19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 the requirements of section 192. The assessee is not benefited by allowing employees to claim exemption. The order passed by the AO under section 201(1) & 201(1A) is therefore bad in law and rightly quashed by the CIT(A). 29. In the light of the admitted position that the conditions for grant of exemption u/s.10(5) of the Act to the employees in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustan 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 & 1391/Bang/2012 dated 28.06.2013 we follow the Coordinate Bench order of the Tribunal and decide the issue of TDS on payments made to employee for LTC and Medical Reimbursement in favour of the assessee. 7. With regard to the disbursement of mean coupons made by the assessee - employer to its employees, the CIT (A) held that the action of the assessee did not attract TDS u/s 192 of the Act. The CIT (A) took the above stand by following the findings of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. It also appears that the authorised representatives of the assessee have attended the hearing(s) on the appointed date(s) on the strength of the hearing notice(s). Such being the actual facts, we find no substance in the grievance of the Revenue and, accordingly, ground Nos. 1 to 4 of the Revenue is dismissed. 10. In the result, the Revenue's appeals for the AYs 2007-08 to 2010-11 [u/s 201(1) and u/s 201(1A) of the Act] are dism ..... X X X X Extracts X X X X X X X X Extracts X X X X
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