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TMI Blog2013 (7) TMI 1026X X X X Extracts X X X X X X X X Extracts X X X X ..... t for both the assessment years 2007-08 and 2008-09. The Assessing Officer also levied interest u/s 201(1A) of the Act on tax not deducted from the date on which the tax ought to have been deducted till date on which the tax ought to be paid over to the government account. 4. On appeal the CIT (A) cancelled the demands raised and interest charged u/s 201(1) and 201(1A) of the Act. The relevant findings of the CIT (A) in regard to cancellation demand in respect of non deduction of tax for medical reimbrusement read as follows: "3.6 I have considered the appellant's submission and the AO's observations. My views are: a) No intsance has been brought on record to suggest that in the case of any employee, the benefit or allowacne has been disbursed without TDS 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 doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 199192 and the subsequent years" d) Moreover, in the present case, the amount of ₹ 15,000/- per employee per annum is too small to attribute any other motive or to imagine a situation as envisaged in Para 6.3.1.1.3 of the assessment order. 3.7 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. 3.8 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 of the provisions of law." 4.1 Similarly the findings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... again, the interpretation of the AO is very narrow and technical and as held at Para 3.8 for medical reimbursement, cannot be the correct interpretation. In my opinion, the AO was not justified in treating the appellant as an "assessee-in-default'. Hence, the demands raised and interest charged u/s 201(1) and 201(1A) are uncalled for and they are, therefore, cancelled". 5. Aggrieved by the order of the CIT (A), the Revenue is in appeal before the Tribunal raising 23 grounds. The learned DR supported the order of the Asstt. CIT passed u/s 201(1) and 201(1A) of the Act. 5.1 The learned AR on the other hand submited the issue in question is squarely covers by the order of the Tribunal in the case of ACIT (TDS) vs. M/s Infosys BPO in ITA Nos.1390 & 1391/Bang/2012 dated 28.06.2013. 6. We have heard the rival submissions and perused the relevant material on record. The issue raised in this appeal is identical to the issue considered by the Tribunal in ITA Nos.1390 and 1391/Bang/2012 (Supra). The relevant findings of the Tribunal reads as follows: "20. We have considered the rival submissions. We shall first see the sequence of events that lead to the passing of the order u/s.201(1) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to irrespective of the fact as to whether any leave is sanctioned or not. Such an allowance forms part of salary and is not a benefit or reimbursement provided in addition to salary. Therefore exemption u/s 10(5) provided to LTA cannot be justified and the entire allowance is to be brought to tax. Year Allowance Exemption F.Y 20067 2381842.77 2381842.77 F.Y. 2007-08 4294568.00 4294,568.00 F.Y. 2008-09 691129.00 691129.00 F.Y 2009-10 4897131.00 4897131.00 F.Y 2010-11 691129.00 691129.00 TOTAL 1,29,55,799.77* * Amount on which tax is to be deducted. Further the company is extending the benefit of Medical allowance, which forms 25% of basket of allowance and allowed exemption u/s 17(2) of IT Act on medical bills submitted by your employees up to a maximum of ₹ 15000/- as perquisite exempt u/s 17(2). The employees are in receipt of medical allowance u/s 17(1) of IT Act and out of which they have considered the medical bills presented by employees as exemption u/s 17(2). Since any amount received u/s 17(1) do not constitute for exemption u/s 17(2), the claim of the employees had to be disallowed. This would not come under the purview ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent or reimbursement of expenses actually incurred for medical treatment is alone exempted from the purview of taxation. The circular at no point even remotely suggest that an allowance could be granted which if adequately evidence with medical bills could be reduced from the taxable salary of an employee. In fact the Board Circular concisely puts across the provisions of the statute which have been articulated at length in this order to drive home the fact that no application of fund could determine the taxability or exemption of any income let alone salary. Therefore, the Circular is in fact in support of the view taken and doesn't lend any credence to the arguments of the deductor. 6.2.2.3 in the instant case, the leave travel allowance is disbursed to an employee irrespective of the fact as to whether: (a) the employee has any intention to proceed on leave or not (b) the employee has any intention to travel or not (c) the employee has already availed the benefit in the previous calendar year or financial year Therefore, undisputedly and admittedly the disbursement of leave travel allowance is a lump sum monetary benefit provided to the employee without any nexus to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. The person making payment has to make an honest of income under the head salary payable by him to his employee at the time of payment. The person making the payment has to take into consideration various deductions permitted under the Act under Chapter VIA of the Act, as also exempt income under Sec.10 of the Act. Rebate available under sections 88 and 88B can be considered by the employer. Employer should obtain the proof of investment made by the employee and should not rely on simple declaration or oral assurance. Certain employees who are entitled to relief under section 89(1) can furnish the information in prescribed form to the employer, and in such cases employer can adjust the amount of TDS by allowing relief available under section 89. It is for the employer to prove the allowances and perquisites given to the employee are tax-free and not to be included in the salary. 26. It is no doubt true that TDS is to be made at the time of payment of salary and not on the basis of salary accrued. Sec.192(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 substantia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to expenditure actually incurred by the employees, or ₹ 15,000/- whichever is lower. The exemption is granted even if the payment precedes the incurrence of expenditure. The requirements/conditions of section 10(5) and proviso to section 17(2) are meticulously followed before extending the deduction/ exemption to an employee. No tax can be recovered from the employer on account of short deduction of tax at source under section 192 if a bona fide estimate of salary taxable in the hands of the employee is made by the employer, is the ratio of the following decisions. CIT vs. Nicholas Piramal India Ltd (2008) 299 ITR 0356 (BOMBAY); CIT v. Semiconductor Complex Ltd [2007] 292 ITR 636 (P&H) CIT vs. HCL Info System Ltd. [2006] 282 ITR 263 (Del) CIT v Oil and Natural Gas Corporation Ltd [2002] 254 ITR 121 (Guj) ITO v Gujarat Narmada Valley Fertilizers Co. Ltd [2001] 247 ITR 305 (Guj) CIT v Nestle India Ltd (2000) 243 ITR 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 44 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17(2) of the Act. As far as lack of opportunity is concerned, we find that the CIT(A) has only called for break-up of the figures regarding medical reimbursement and LTC which was actually paid to employees and that which was considered not forming part of salary by the employee on production of evidence by the employee. In fact, the figures so given are the same figures on the basis of which the AO has passed order u/s.201(1) and 201(1A) of the Act. As far as the grievance regarding finding that there was no dispute that the Assessee has satisfied itself that the employees were entitled to exemption u/s.10(5) as well as relief under proviso (iv) to Sec.17(2) of the Act, we have already reproduced the show cause notice issued by the AO u/s.201(1) & 201(1A) of the Act, in which the AO has not disputed these facts. In our view the relevant grounds 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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