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TMI Blog2014 (1) TMI 1428X X X X Extracts X X X X X X X X Extracts X X X X ..... y dismissed. 3. What is, therefore, left for adjudication before us are the appeals in ITA Nos.744 to 749/Bang/2013 pertaining to Assessment Year 2008-09 and 2010-11. In view of the fact that the original appeals by revenue in ITA Nos.1407 to 1409/Bang/2012 were filed in time, no delay can be attributable to the revenue for the subsequent in filing of the appeals in ITA Nos.744 to749/Bang/2013 as they were done at the behest of the Bench. These appeals in ITA Nos.744 to 749/Bang/2013 were heard together and since common issues are involved, they are being disposed off by way of a common order. 4. The facts of the case, in brief, are as under : 4.1 The assessee is a company engaged in the design and development of computer software, engineering services, visual computing labs and systems integration. A survey under section 133A of the Income Tax Act, 1961 (herein after referred to as 'the Act') was conducted at the business premises of the assessee on 15.12.2010 whereby it came to light that the assessee has been remunerating its employees with a pre-determined salary consisting of Basic pay and Medical Allowance, etc. The assessee follows the cost to company (CTC) approach to mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cost to the company. 7. The CIT (Appeals) has erred in holding that the order was based on narrow and technical interpretation in respect of a welfare measure. 8. The CIT (Appeals) has erred in holding that a component of the salary paid on month to month basis could form part of salary which would be exempt under proviso to section 17(2). 9. The CIT (Appeals) has erred in being guided by the quantum of exemption granted per employee rather than the entitlement as per law. 10. The CIT (Appeals) has erred in not appreciating the fact that the employer has itself not considered these amounts as perquisite in the Form 12BA issued to the employees. 11. The CIT (Appeals) has erred in not taking cognizance of the fact that an employer cannot consider a disbursement as a perquisite only for the purpose of exemption, and not for the purposes of Form 12BA. 12. The CIT (Appeals) has erred in not considering the fact that every contention of the deductor has been addressed elaborately while the Assessing Officer's contentions and findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (b) Kanoi Industries (P) Ltd. v. CIT, 261 ITR 488 (Cal) 2003. Unlike S 201(1), S 201(1A) does not contain any restriction, such as reasonable cause for non-deduction or non-payment. Therefore, interest under section 201(1A) is automatic and mandatory. This means, it continues until it is either paid or recovered through any other mode. Liability under section 201(1) arises immediately upon each default and can be computed with reference to the law as it then stood. The payment of simple interest under section 201(1A) is mandatory and is not a penal provision. There is therefore no question of waiver of such interest on the basis the default is not intentional or on any other basis. 2. For the above and other grounds that may be raised during the course of appeal." 6. From the details on record, it is seen that the salary structure of the employees of the assessee was examined by the officials carrying out the survey under section 133A on 15.12.2010, in the light of the obligations of the assessee as an employer to deduct tax at source at the time of making payment of salaries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lling within the definition of perquisites as per the provisions of section 17(2) (v) of the Act. 7.2 In respect of "Medical Allowance", if the amount paid by an employer to the employee for medical treatment of the employee or his family is Rs.15,000 or less per annum, then the same will not be a perquisite as laid down in section 17(2)(v) of the Act and therefore need not be considered as part of "Salary" for the purpose of deducting tax at source at the time of payment by the employer to the employee. In other words, expenditure incurred on medical treatment to the extent of Rs.15,000 is exempt and the remaining is taxable. In the case on hand, the assessee remunerates its employees with a predetermined salary consisting of basic pay and other allowances including Medical Allowances. 7.3 As per the facts on record, the scheme of the assessee was that its employees was paid upto Rs.15,000 per annum, split into monthly disbursements. This amount was treated as exempt under the provisions of the Act, only if supported by bills. Whenever bills are not submitted, the amount is treated as taxable salary and tax is deducted at the end of the financial year. The Assessing Officer was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in certain cases In supersession of Circular no.376, dated 6.1.1984, Circular no.445, dated 31.12.1985, Circular No.481 dated 20.2.1987 (a l 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 govt. or local authorities or hospitals approved for the purose of the Central Government Health Scheme or Central Medical Scheme; ( a list of such hospitals furnished by the Ministry of Health and Family Welfare on 11.4.1991 in assessed). (iii) where the expenditure is on medical insurance premia; &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l on record. It is seen that the A.O. noted that in respect of Medical Allowance, in addition to the reimbursement of medical expenses supported by medical bills furnished by an assessee, he/she is paid a cash allowance, the entire payment being limited to Rs.15,000 per annum and that production of bills for claiming reimbursement is not a pre-condition for disbursement. The total amounts of Medical Allowance observed by the Assessing Officer on this count, year-wise are as under : (1) Assessment Year 2008-09 Rs. 82,41,824 (2) Assessment Year 2009-10 Rs. 76,69,788 (3) Assessment Year 2010-11 Rs. 74,52,186. 7.5.2 From the details on record, as observed by the learned CIT(Appeals), the fact that bills / vouchers to substantiate incurring of expenditure on medical treatment upto Rs. 15,000 by the employees in fulfilment of the conditions stipulated for availing exemption, has not been disputed by the Assessing Officer. The Assessing Officer's view is that the allowances so given is not earmarked for any particular purpose leaving the employee freedom to use this allowance in any manner and later claim that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such income without making any deduction there from at the time when such tax was otherwise deductible under the provisions of sub-section (1). (1B) For the purpose of paying tax under sub-section (1A), tax shall be determined at the average of income-tax computed on the basis of the rates in force for the financial year, on the income chargeable under the head "Salaries" including the income referred to in sub-section (1A), and the tax so payable shall be construed as if it were, a tax deductible at source, from the income under the head "Salaries" as per the provisions of sub-section (1), and shall be subject to the provisions of this Chapter. (2) Where, during the financial year, an assessee is employed simultaneously under more than one employer, or where he has held successively employment under more than one employer, he may furnish to the person responsible for making the payment referred to in sub-section (1) (being one of the said employers as the assessee may, having regard to the circumstances of his case, choose), such details of the income under the head "Salaries" due or received by him from the other employer or em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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" below the amount that would be so deductible if the other income and the tax deducted thereon had not been taken into account. (2C) A person responsible for paying any income chargeable under the head "Salaries" shall furnish to the person to whom such payment is made a statement giving correct and complete particulars of perquisites or profits in lieu of salary provided to him and the value thereof in such form and manner as may be prescribed. (2) The person responsible for making the payment referred to in sub-section (1) or sub-section (1A) or sub-section (2) or sub-section (2A) or sub-section (2B) may, at the time of making any deduction, increase or reduce the amount to be deducted under this section for the purpose of adjusting any excess or deficiency arising out of any previ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the word "actually paid" is not relevant while ascertaining the quantum of tax that has to be deducted under section 192 of the Act. As far as the assessee is concerned, his obligation is only to make an "estimate" of the income under the head "Salaries" and such estimate has to be a bona fide estimate. 7.5.7 The primary liability of the payee to pay tax remains and section 191 confirms this. In a situation of an honest difference of opinion, it is not the deductor that has to be proceeded against but the payee of the sums. The payment by the employer towards medical expenditure and leave travel is made keeping in view employee welfare. The exclusion in respect of payment towards medical expenditure and leave travel is considered only after verifying the details and evidence furnished by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th 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 reimbursement paid by the assessee satisfies the conditions contemplated by the proviso (iv) to section 17(2) of the Act, would it be correct for the Assessing Officer to deny the employees in their assessment exemption / relief under the proviso (iv) to section 17(2) of the Act ? The answer is admittedly 'No', since the Assessing Officer does not dispute the fulfilment of conditions for allowing exemption under the proviso (iv) to section 17(2) of the Act. It is true that 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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