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TMI Blog2014 (4) TMI 1203X X X X Extracts X X X X X X X X Extracts X X X X ..... re directly attributable to each employee distinctly and it is not in the nature of collective benefit enjoyed by the employees. The medical reimbursement is definitely a perquisite as per Sec. 17(2) of the Act , though a threshold limit of exemption is provided under clause (v) at ₹ 15,000/-, nevertheless medical reimbursement expenditures are taxable as perquisites. The Circular No. 8 issued by CBDT appears to be in contradiction to the legislative intent on this specific issue. The Coordinate Bench in the case of Bosch Ltd. [2011 (10) TMI 383 - ITAT BANGALORE ] has considering a similar issue, has held that such payments do not attract Fringe benefit tax in the light of the budget speech of the Hon’ble Finance Minister on the floor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich were specifically exempt under other provisions of the Act. Medical reimbursement upto ₹ 15,000/- are specifically exempt in the hands of the employee by virtue of proviso (v) below section 17(2). Hence, the same cannot be taxed in the hands of the employer as the purpose of FBT was never to tax such exempt perquisites. 4. The submission of the assessee did not find favour with the AO who , relying upon the CBDT Circular No. 8/2005 dt. 29.8.2005 , was of the opinion that 20% of the amount of ₹ 50,52,962/- deserves to be added to the value of Fringe Benefit. He accordingly added ₹ 10,10,593/- as Fringe Benefit relating to medical allowance. 5. The assessee carried the matter before the Ld. CIT(A) but without any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to a Special Bench. 8. We have carefully perused the orders of the lower authorities and the relevant material evidence brought on record and the judicial decisions relied upon by both sides. The objective behind the introduction of the levy of Fringe Benefit Tax on the value of certain Fringe Benefit was explained by the CBDT in its Circular No. 8/2005 dt. 29.8.2005 which read as under: 2.1 The taxation of perquisites or fringe benefits is justified both on grounds of equity and economic efficiency. When fringe benefits are under-taxed, it violates both horizontal and vertical equity. A taxpayer receiving his entire income in cash bears a higher tax burden in comparison to another taxpayer who receives his income partly in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance method was withdrawn by the Finance Act, 1997. However, the withdrawal of the provisions relating to taxation of fringe benefits by the employer-based disallowance method resulted in significant erosion of the tax base. The Finance Act, 2005 has introduced a new levy, namely, the FBT as a surrogate tax on employer, with the objective of resolving the problems enumerated in para 2.1 above, expanding the tax base and maintaining equity between employers. 9. A perusal of the objectives clearly suggests that there are certain benefits which cannot be individually attributed to employees particularly when such benefits are enjoyed collectively. Secondly, many perquisites are disguised as reimbursement or other miscellaneous expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the case on hand, tax is payable on medical advance and in certain cases tax has been paid. Only where bills have been produced by the employee to the employer it was a case of reimbursement and to the extent of the benefit given in Sec. 17(2) proviso (v) the employee need not pay tax. This is not a case where the attribution of personal benefits directly to an employee poses problem or a case where it is not feasible to tax the benefit in question in the hands of the employee. It is only a case where a benefit above a certain specified amount only is liable to be taxed in the hands of the employee. Such case, in our humble opinion, does not constitute fringe benefit as defined in S. 115WB of the Act. Thus we agree with the submission ..... X X X X Extracts X X X X X X X X Extracts X X X X
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