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TMI Blog2009 (2) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... such perquisite granted to its em 2. The appellant prays that it be held that the expenditure incurred on transport facility given to the employees of the appellant company as drop and pick up facility from nearest railway station to office/residence of employees to office and vice versa cannot be treated as perquisites given to employees particularly in view of Explanation to s. 17(2)(iii) of the IT Act, 1961 ('the Act') and that such expenditure will not attract the provisions of TDS under s. 192 of the Act. Ground II 1. On the facts and in circumstances of the case and in law the CIT(A) erred in confirming the order of the AO treating the appellant as 'assessee in default' under s. 201(1) of the Act for alleged non-deduction of tax at source by the appellant on the expenditure incurred on transport facility given to the employees of the appellant company as drop and pick up facility from nearest railway station to office/residence of employees to office and vice versa. 2. The appellant prays that it be held that the appellant is not the assessee in default under s. 201(1) of the Act. Ground III 1. On the facts and in circumstances of the case and in law the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 800 per month provided to each employee is not in dispute, for the same was not income included in the total income by virtue of s. 10(14) of the Act. Now the dispute is revolving around the expenditure incurred by the assessee-company for the bus facility for providing pick ups and drops to its employees. He contended that s. 17(2) gives an inclusive definition of the word "perquisite" and Explanation to s. 17(2)(iii)(c) grants specific exemption with regard to value of transport facility given by the company for journey from the residence to office. He also relied on the extracts of the Budget Speech of Minister of Finance while introducing the FBT [(2005) 273 ITR (St) 56]. He contended that the expenditure incurred for the transport facility cannot be attributed as income to the employees and such attribution has been done by the AO in equal proportion to each of the employees. He stated when bus facility is enjoyed collectively by the employees, individual employee cannot be attributed to any portion of expenditure as the income of the employee, therefore, it is not possible to deduct tax at source, hence, action of the AO confirmed by the CIT(A) is wrong. 6. The finding/con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o meet his personal expenses at the place where the duties of this office or employment of profit are ordinarily performed by him or at a place where he ordinarily resides or to compensate him for the increased cost of living. Response of the assessee The transport facility provided by your appellant is a part of perquisite covered by s. 17(2) of the Act and it is not an allowance. 4. Para 6.3 of the order of the CIT(A). If for the purpose of sub-cl. (iii), the same is not regarded as benefit in the nature of perquisite, it does not mean that the same is restricted to be an income in the nature of an allowance or benefit as per sub-cls. (iiia) and (iiib) of s. 2(24) of the IT Act. Response of the assessee: As the transport facility given to the employees for commuting between residence to home and office/nearest railway station is well covered within the meaning of perquisite, then it cannot be covered within the sub-cls. (iiia) and (iiib) of s. 2(24) of the IT Act. 5. Para 6.3 of the order of the CIT(A) The r. 2BB has further provided that the exemption will not be allowed in a case where the conveyance is provided by an employer. Response by the assessee: The r. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifically excludes the perquisite within the meaning of cl. (2) of s. 17 of the Act. The transport expenditure incurred by the employer is part of perquisite as covered by s. 17(2) of the Act and hence is not covered by s. 10(14)(i) of the Act. 8. Para 6.4 of the order of the CIT(A) Further the contention of the appellant that CBDT Circular No. 6 of 2004, dt. 6th Dec., 2004 [(2005) 193 CTR (St) 18] clarifies the exemption of both the transport allowance and conveyance facility provided by employer from being taxed in the hands of the employees, is misdirected and misquoted to the extent that the benefit like travel on tour and transfer, leave travel, daily allowance to meet tour expenses as prescribed, medical facilities subject to conditions, are only referred to, which would continue to exempt. Response by the assessee: Your appellant has not all referred the said CBDT circular in its submission before the AO or CIT(A). In any case the relevant para XV of the said CBDT circular reads as under: "XV. Residual clause-A benefit or amenity not included in the rule shall be valued at the cost under an arm's length transaction to the employer where the employer pays for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), 17(2)(iii), 17(2)(iii)(c), Explanation to s. 17(2)(iii)(c). Those provisions read: "Sec. 2(24) Income includes- (i) to (ii) ........... (iii) the value of any perquisite or profit in lieu of salary taxable under cls. (2) and (3) of s. 17; (iiia) any special allowance or benefit, other than perquisite included under sub-cl. (iii), specifically granted to the assessee to meet expenses wholly, necessarily and exclusively for the performance of the duties of an office or employment of profit; (iiib) any allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at a place where he ordinarily resides or to compensate him for the increased cost or living; Sec. 17. 'Salary', 'perquisite' and 'profits in lieu of salary' defined-For the purposes of ss. 15 and 16 and of this section,- (1) 'Salary' includes- (i) to (iii) ........... (iv) any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages; Sec. 17 (2) 'perquisite' includes- (i) to (ii) ............ (iii) the value of any benefit or amenity granted or provided f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erquisite under s. 2(24)(iii). What is taken into consideration is the value of any perquisite taxable under cl. (2) of s. 17. In the absence of the Explanation to sub-cl. (2) to s. 17 the value of the bus service provided free of cost is taxable; whereas under the Explanation to sub-cl. (2) to s. 17, for the removal of doubts, it is declared that the use of any vehicle provided by a company or an employer for journey by the assessee from his residence to his office or other place of work, or from such office or place to his residence, shall not be regarded as a benefit or amenity granted or provided to him free of cost or at concessional rate for the purposes of this sub-clause. 15. For the above reasons reliance on sub-cl. (iiia) of s. 2(24) and on s. 10(l4)(i) by the CIT(A) is misplaced. 16. For the above conclusion we also draw support from the recent decision of the Hon'ble Gujarat High Court in the case of CIT vs. Reliance Industries Ltd. (2009) 221 CTR (Guj) 175 : (200B) 14 DTR (Guj) 150 wherein their Lordships held as follows: "under the relevant Explanation any expenditure incurred by the employer for journey of the employee from residence to the office or other plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cing FBT made an observation on this issue which is reproduced herebelow: "I have looked into the present system of taxing perquisites and I have pointed that many perquisites are disguised as fringe benefits, and escape tax. Neither the employer not the employee pays any tax in these benefits which are certain1y of considerable material value. At present, where the benefits are fully attributable to the employee they are taxed in the hands of the employee; that position will continue. In addition, I now propose that where the benefits are usually enjoyed collectively by the employees and cannot be attributed to individual employees, they shall be taxed in the hands of the employer. However, transport services for workers and staff and canteen services in an office or factory will be outside the tax net." From the above, it is abundantly clear that the "transport service for workers and staff" is collectively enjoyed benefit which is neither taxed as salary nor as FBT even after introduction of FBT in Chapter XII-H of the Act. 18. For the above reasons the orders of AO and CIT(A) are not correct and hence we reverse the same. Therefore, the grounds raised by the assessee in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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