2011 (7) TMI 1192 - AT - Income Tax

Tribunal affirms CIT(A) decision to delete demand under Income-tax Act

Income Tax Officer Versus Cadila Healthcare Ltd.

The Tribunal upheld the CIT(A)'s decision to delete the demand raised by the Assessing Officer under sections 201(1) and 201(1A) of the Income-tax Act for ... - Issues Involved:1. Deletion of order passed u/s 201(1) and interest charged u/s 201(1A) of the IT Act.2. Whether the CIT(A) should have upheld the order of the Assessing Officer (AO).Summary:Issue 1: Deletion of Order Passed u/s 201(1) and Interest Charged u/s 201(1A)Facts in brief, as per relevant orders, are that a survey was undertaken in the premises of M/s Cadila Healthcare Ltd. on 08-07-2008 when it was noticed that the assessee paid Rs. 1,01,90,400/- in FY 2007-08 and Rs. 25,20,400/- in FY 2008-09 to Sodexo Pass Services (India) Pvt. Ltd. for purchase of Sodexo Lunch Coupons for use by their employees. The ITO-TDS-1 (AO) was of the opinion that the tax was required to be deducted by the assessee on these payments, the coupons having been provided to the employees by way of perquisites in terms of provisions of section 17(2) of the Income-tax Act, 1961 (Act). The assessee replied that Sodexo Lunch Coupons given to the employees were not in the nature of perquisites as provided u/s 17(2) of the Act and fell within the scope of the provisions of section 115WB of the Act, dealing with 'Fringe Benefits'. The AO did not accept these submissions and concluded that the amount on which FBT had not been paid was required to be treated as perquisite and formed part of the salary. Accordingly, demand of Rs. 31,58,922/- u/s 201(1) for FY 2007-08 and Rs. 7,81,299/- for FY 2008-09 was raised besides levy of interest u/s 201(1A) of Rs. 6,72,566/- for FY 2007-08 and Rs. 1,66,346/- for the FY 2008-09.On appeal, the learned CIT(A) allowed the claim of the assessee for the FY 2007-08, stating that the exclusion of food vouchers from Rule 3(7)(vii) of IT Rules and insertion thereof for the purposes of FBT clearly shows the intention of the legislation to keep such expenditure of the companies within the ambit of FBT only. The AO's observations were not based on correct appreciation of law, and no instance of misuse of such vouchers by the recipient employees of the appellant company during the relevant period was brought on record. The CIT(A) directed the AO to delete the demand raised by him against the assessee on such amount under the provisions of sec.201(1) and 201(1A) of the Act. Similar view was taken in the FY 2008-09.The Revenue appealed against the findings of the learned CIT(A). The learned DR supported the order of the AO while the learned AR on behalf of the assessee relied on the findings of ld. CIT(A) and the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Reliance Industries Ltd. [2008] 175 Taxman 367 (Guj) and the decision of the Hon'ble Supreme Court in the case of CIT vs. Larsen and Toubro Ltd. [2009] 313 ITR 1 (SC).The Tribunal, after hearing both parties and reviewing the facts, upheld the findings of the learned CIT(A). It was noted that the AO did not bring any material on record that Sodexo Lunch Coupons were misused by the employees. The Tribunal relied on the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Reliance Industries Ltd., which stated that the primary liability to offer the amount for tax is that of the employee concerned, and the employer cannot be called upon to presume misuse of the facility to warrant deduction of tax at source. Therefore, ground no.1 in the appeal was dismissed.Issue 2: Whether the CIT(A) Should Have Upheld the Order of the AOGround nos. 2 and 4 in these appeals, being general in nature and no submissions having been made before the Tribunal on these grounds, did not require any separate adjudication. No additional ground was raised before the Tribunal in terms of residuary ground no.3 in these appeals, and therefore, all these grounds were dismissed.In the result, these two appeals were dismissed.Order pronounced in the court today on 29.7.2011.