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TMI Blog2012 (7) TMI 1093X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the assessee company on 19.11.2010. During the survey it was revealed that the assessee had not deducted tax at source on medical reimbursements of up to ₹ 15,000/- each paid to its employees The aggregate income attributable to these allowances, demand raised u/s.201(1) and interest charged u/s.201(1A) are as follows : A.Y Perquisites 201(1) Rs. 201(1A) Rs. Total Rs. 2008-09 2,24,37,933 75,52,608 29,83,280 1,05,35,888 2009-10* 79,92,924 26,90,418 10,08,967 36,99,385 2009-10 2,50,86,180 84,44,007 23,22,102 1,07,66,109 2010-11 5,20,65,489 1,75,25,244 27,16,412 2,02,41,656 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal 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. (vi) . 05. The dispute in these appeals are regarding the obligation of the assessee to deduct tax at source on medical reimbursement . It is not in dispute that the amounts paid as medical reimbursements is in the nature of perquisite falling with the definition of perquisites as given in sec.17(2) (iv) proviso (v) of the Act. 06. As far as Medical reimbursement is concerned, if the amount paid by an employer to the employee for medical treatment of the employee or his family is ₹ 15,000 or less per annum, then the same will not be perquisite as laid down in Sec.17(2) proviso (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 actually incurred on medical treatment to the extent of ₹ 15,000/- is exempt and the remaining is taxable. 07. The payments to employees of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 201(1A) of the Act, on tax not deducted, from the date on which tax ought to have been deducted till the date on which the tax not deducted is paid over to the credit of the Government. 10. On appeal by the Assessee, the CIT(A) cancelled the order of the AO treating the Assessee as an Assessee in default u/s.201(1) of the Act and also levying interest u/s.201(1A) of the Act, holding that amount paid even as reimbursement ought to be considered as perquisite. In coming to the above conclusion, the CIT(A) relied on the Circular of the CBDT, viz., Circular No.603 dated 6.6.1991, wherein the CBDT has opined that the value of the perquisite arising by way of payment or reimbursement by an employer of expenditure on medical treatment will not be included in the taxable salary of the employee. The following were the relevant observations of the CIT(A):- 3. MEDICAL REIMBURSEMENT . 3.3 I have carefully considered the appellant s submissions and perused the AO s order. The employees are paid up to ₹ 15,000/- per annum which is paid as advance at ₹ 1,250/- every month for the sake of administrative convenience. This amount is treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) Where the medical treatment is availed of from any doctor outside the institutions/schemes mentioned in (i) to (iii) above, an expenditure of upto ₹ 10,000 in a year, in the aggregate; and (v) Where the medical treatment is availed of in a hospital outside India and the expenditure is incurred for treatment (including on travel and stay abroad in connection with such treatment) as also on travel and stay abroad of one attendant, to the extent permitted by the Reserve Bank of India, subject to the condition that the amount qualifying for such tax exemption would not include expenditure incurred on travel in the case of employees whose gross total income, as computed under the IT Act without considering the amount paid or reimbursed for expenditure in connection with medical treatment abroad, exceeds ₹ 1,00,000. (emphasis supplied) 2. The contents of this circular will be applicable in relation to the assessment year 1991-92 and the subsequent years d) Moreover, in the present case, the amount of ₹ 15,000/- per employee per annum is too small draw any other inference. 4.6 It is clear, therefore, that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt under proviso to section 17(2). 10) The CIT(A) has erred in being guided by the quantum of exemption granted per employee rather than the entitlement as per law. 11) The CIT(A) has erred in not appreciating the fact that the employer has itself not considered these amounts as perquisites in the Form 12BA issued to the employees. 12) The CIT(A) has erred in not taking cognizance of the fact that the employer cannot consider a disbursement as a perquisite only for the purpose of exemption, and not for the purposes of Form 12BA. 13) The CIT(A) has erred in not considering the fact that every contention of the deductor has been addressed elaborately while the AO s contentions and findings have not been reasoned against. 14) The CIT(A) has erred in passing an order which allows employees who enjoy unintended benefits as per the existing provisions of law. 15) The CIT(A) has erred in not considering the distinctions drawn in respect of the judicial decisions relied upon by the deductor. 16) The CIT(A) has erred in not considering the fact that the AO has studied the Board s Circulars and their applicability as evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 16.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 substantiate incurring of expenditure on medical treatment up to ₹ 15,000/- for availing exemption by the employees, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de 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 444 (Del) Indian Airlines Ltd. v ACIT (1996) 59 ITD 353 (Mum) 18. In the present case, as already detailed, the exemption in respect of medical expenditure 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 the provision are fulfilled. The details filed before the TDS officer expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 following decisions: Hindustan Coco Cola Beverage Pvt.Ltd. Vs. CIT 293 ITR 226 (SC) CIT Vs. Eli Lilly Co. 312 ITR 225 (SC) 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). 22. We also find that identical issue has been considered by the Tribunal in the case of M/s. SAP Labs India Pvt. Ltd., in ITA Nos.1414 to 1416/Bang/2012, dated.15.07.2013, for the assessment years 2008-09 to 2010-11 (Wherein the undersigned are parties). 23. For the reasons given above and also following the above order of the ITAT, we do not find any grounds to interfere with the order of the CIT(A). Consequently, these appeals by the Revenue are dismissed. 24. In respect of the appeal for the assessment year 2009-10 on the order u/s.154 of the Act, since in the main appeal on the issue of demand u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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