9911796707
TMI Blog2014 (1) TMI 1428X X X X Extracts X X X X X X X X Extracts X X X X ..... orders passed by the Assessing Officer under section 201(1) and 201(1A) is unsustainable in law and has rightly been cancelled by the learned CIT(Appeals). 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 Assessing Officer has ignored this aspect and has proceeded to pass the orders under section 201(1) and 201(1A) of the Act. Opportunity of being heard u/s 250(1) and 250(2) of the Act - Held that:- The learned CIT (Appeals) had only called for the break-up of the figures relating to medical reimbursement which was actually paid to employees and that which was considered not forming part of salary by the employees on production of evidence by the employee - These figures are the same figures on the basis of which the Assessing Officer passed orders under sections 201(1) and 201(1A) of the Act – Decided against Revenue. Exemption u/s 17(2) of the Act –As regards the grievance regarding finding that there was no dispute that the assessee has satisfied itself that the employees were entitled to exemption / relief under proviso (iv) to section 17(2) of the Act, nothing has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nitor and control cost relating to employees. It was also found that, in respect of Medical Allowance, the Assessing Officer considered the assessee to be an 'assessee in default' since it had failed to deduct tax at source from such perquisites paid to its employees. In this view of the matter, the Assessing Officer initiated action and determined the value of perquisites paid to its employees and accordingly raised tax demand by holding the assessee to be assessee in default under section 201(1) of the Act and charged interest under section 201(1A) of the Act for the tree Assessment Years 2008-09 to 2010-11. 4.2 Aggrieved by the orders under section 201(1) and 201(1A) of the Act dt.28.3.2011 for Assessment Years 2008-09 to 2010-11, the assessee preferred appeals for all three years before the CIT (Appeals) II, Bangalore. The learned CIT (Appeals) vide her order dt.22.8.2012, allowed the assessee's appeals for all the three years in respect of Medical Allowance provided by the assessee to its employees, holding them to be in accordance with provisions of the Act. 5. Aggrieved with the common order of the learned CIT (Appeals) II, Bangalore for Assessment Years 2008-09 to 2010- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in not considering the distinctions drawn in respect of the judicial decisions relied upon by the deductor. 15. The CIT (Appeals) has erred in not considering the fact that the Assessing Officer has studied the Board's Circulars and their applicability as evident from the order passed. 16. The CIT (Appeals) has erred in not considering the fact that such exempted income was not admitted by the employee on the basis of the Form 16 and 12BA issued. 17. The CIT (Appeals) has erred in not considering the fact that the provisions of section 191 also are not been followed due to such issue of erroneous certificates in Form 16 and 12BA. 18. The CIT (Appeals) has erred in not considering the term "actually incurred" in the proviso to section 17(2) of the IT Act. 19. For these and other grounds that may be urged during the course of appeal, the order of the Assessing Officer may be restored." In respect of the interest charged under section 201(1A) of the Act revenue has raised the following common grounds of demand for all three years : "1. CIT (Appeals) has erred in holding that interest under section 201(1A) is not leviable in the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the head "Salaries." - Section 16 of the Act contains the deductions to be made from salaries. - Section 17 of the Act contains an inclusive definition of 'Salary' for the purposes of sections 15, 16 and 17 of the Act which, along with other items are also separately defined therein. Section 17 of the Act which defines "Salary", "Perquisite" and "Profits in lieu of salary" in so far as it is relevant to the present appeal reads as under : For the purpose of sections 15 and 16 and of this section - (1) "Salary" includes (i) to (iii) . (iv) any fees, commission, perquisites or profits in lieu of or in addition to any salary or wages ; (v) to (viii) (2) "Perquisite" includes - (i) to (iii) . (iv) any sum paid by the employer in respect of any obligation which but for such payment, would have been payable by the assessee; and (v) to (vii) . Provided that nothing in this clause shall apply to, (i) to (iv) . (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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered the appellant's submissions and perused the Assessing Officer's order. The employees are paid up to Rs.15,000 per annum split into monthly disbursements at Rs.1,250 per month. This amount is treated as exempt under the provisions of IT Act only if supported by bills. Wherever no bills are provided, the amount is treated as a taxable salary and tax is deducted during the financial year end. 3.4 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 in the proviso to section 17(2) which says : "(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 (i) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount of Rs.15,000 per employee per annum is to small for any other interpretation. 3.5 It is clear, therefore, that in effect there is no infringement of the tax provisions allowable to the employees 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 of company, it cannot be said that it ceases to be a perquisite and, therefore, not entitled to exemption under section 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. 3.6 Therefore, in my view, the view of the A. O. is a very narrow and technical interpretation and in respect of a welfare measure to the employees across the salaried strata it cannot be the correct interpretation. 3.7 There is, therefore, no case for taking action under section 201(1) and 201(1A) of the Act. Hence, the demand raised and interest charged under section 201(1) and 201(1A) are uncalled for and they are, therefore, cancelled.' 7.5.1 We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer'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 since accrual of income in the form of salary taken place, tax has to be deducted at source thereon. 7.5.4 In order to appreciate the view taken by the Assessing Officer, we would require to look at the relevant provisions of section as are relevant for the present case. "192. Salary (1) Any person responsible for paying any income chargeable under the head "Salaries" shall, at the time of payment, deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee under this head for that financial year. (1A) Without prejudice to the provisions contained in sub-section (1), the person responsible for paying any income in the nature of a perquisite which is not provided for by way of monetary payment, referred to in clause (2) of section 17, may pay, at his option, tax on the whole or part of such income withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B) Where an assessee who receives any income chargeable under the head "Salaries" has, in addition, any income chargeable under any other head of income (not being a loss under any such head other than the loss under the head "Income from house property") for the same financial year, he may send to the person responsible for making the payment referred to in sub-section (1) the particulars of (a) such other income and of any tax deducted thereon under any other provision of this Chapter; (b) the loss, if any, under the head "Income from house property", in such form and verified in such manner as may be prescribed, and thereupon the person responsible as aforesaid shall take (i) such other income and tax, if any, deducted thereon; and (ii) the loss, if any, under the head "Income from house property", also into account for the purposes of making the deduction under sub-section (1) : Provided that this sub-section shall not in any case have the effect of reducing the tax deductible except where the loss under the head "Income from house property" has been taken into account, from income under the head "Salaries" belo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the Assessing Officer, that at the time of payment the assessee ought to have deducted tax at source, is sustainable, the assessee on a review of taxes deducted in the earlier months of previous year is entitled to give effect to the deductions permissible, under proviso (iv) to section 17(2) of the Act, in the later months of the year. What has to be seen in the taxes to be deducted on income under the head 'Salaries' on the last day of the previous year. The case of the Assessing Officer is that Medical Reimbursement should be paid at the time the expenditure is incurred or after the expenditure incurred is reimbursed and not at an earlier point in time. If this proposition put forth by the Assessing Officer is followed, then even though the payment would not form part of taxable salary of an employee, the employer would have to deduct tax at source treating it as a part of salary, which is unsustainable as it is contrary to the provisions of section 192(3) of the Act. The reliance placed by the Assessing Officer on the expression "actually incurred" found in proviso (iv) to section 17(2) of the Act, in our considered view, is unsustainable. In any case, the interpretation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details and evidences furnished by the employees in this regard as per the policies and controls put in place to ensure that the requirement of Rule 2B are fulfiled. The details filed before the Assessing Officer for TDS explains the policies adopted to ensure fulfilment of the requirement of Rule 2B and the process adopted in considering the exemption / deduction under the proviso (iv) to section 17(2) of the Act. As can be seen from the details on record, the assessee has put in place internal controls to discharge the statutory obligation under section 192 of the Act and it would appear that every effort is made to comply with the requirements of section 192 by making a bona fide estimate of taxable salary in the process of making TDS there under. By allowing the employee to claim exemption, the assessee is not benefited. In this view of the matter, we are of the considered opinion that the orders passed by the Assessing Officer under section 201(1) and 201(1A) is unsustainable in law and has rightly been cancelled by the learned CIT(Appeals). 7.5.9 In the light of the admitted position that the conditions for grant of exemption upto Rs.15,000 per employee medical reimburseme ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
