2013 (11) TMI 220 - HC - Income Tax

Court rules Conveyance Maintenance Reimbursement not taxable; Holiday Home Scheme reimbursements exempt from tax.

Commissioner of Income-tax (TDS) Versus Oil and Natural Gas Corporation (India) Ltd.

Commissioner of Income-tax (TDS) Versus Oil and Natural Gas Corporation (India) Ltd. - [2013] 358 ITR 131 Issues Involved:1. Whether the payment of Conveyance Maintenance Reimbursement Expenditure (CMRE) is liable for fringe benefit tax (FBT) or should be treated as additional salary attracting TDS provisions.2. Whether the payment under the Holiday Home Scheme for non-official and private purposes is liable for FBT or should be considered additional salary attracting TDS provisions.Detailed Analysis:Issue 1: Conveyance Maintenance Reimbursement Expenditure (CMRE)The Revenue challenged the Tribunal's decision, arguing that the CMRE paid to employees should be considered additional salary under Section 17(1)(iv) of the Income-tax Act, 1961, and thus subject to TDS. The Tribunal had upheld the Commissioner of Income-tax (Appeals)'s decision, which favored the respondent-assessee, stating that CMRE was not taxable as salary since it was meant for official purposes and was paid based on declarations by employees. The Tribunal noted that the employer had paid FBT on CMRE, which indicated it was not part of the salary. The Tribunal referenced the Gujarat High Court's decision in CIT v. ONGC, which held that CMRE, being reimbursement for official duties, was not taxable as salary. The High Court affirmed this view, stating that the Tribunal correctly applied the law, and the CMRE scheme did not attract TDS provisions.Issue 2: Holiday Home SchemeThe Revenue contended that reimbursements under the Holiday Home Scheme were for private purposes and should be treated as additional salary under Section 17(1)(iv), thus attracting TDS. The Tribunal and the Commissioner of Income-tax (Appeals) had ruled in favor of the respondent-assessee, stating that such reimbursements were subject to FBT and not taxable as salary. The Commissioner of Income-tax (Appeals) noted that during the FBT regime, such reimbursements were not considered perquisites under Section 17(2)(iv) if the employer paid FBT. The High Court agreed, stating that the Holiday Home Scheme reimbursements were not taxable as salary if they were used for their intended purpose. The Court emphasized that the employer had paid FBT, and thus, there was no default under Section 201(1).Conclusion:The High Court dismissed the Revenue's appeals, affirming that:1. CMRE paid to employees is not taxable as salary and does not attract TDS provisions, as it is reimbursement for official purposes and subject to FBT.2. Reimbursements under the Holiday Home Scheme are not taxable as salary if used for their intended purpose, and the employer's payment of FBT absolves them from TDS obligations.