ITAT Upholds Dismissal of Assessee's Appeals on TDS & Interest, Affirms Taxable Fixed Medical Allowance

The ITAT upheld the decision of the lower authorities, dismissing the assessee's appeals regarding the short deduction of TDS and interest under sections 201(1) & 201(1A) of the Act for assessment years 2011-2012 & 2012-2013. The fixed medical allowance provided by the employer was considered taxable salary income as employees did not submit bills for medical expenses, making it distinguishable from medical reimbursement. The CIT(A)'s ruling was affirmed due to the lack of TDS deduction on the fixed medical allowance, resulting in the dismissal of the appeals on 17/02/2020.

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Issues:
Appeals against order of CIT(A) regarding short deduction of TDS and interest u/s.201(1) & 201(1A) of the Act for assessment years 2011-2012 & 2012-2013.

Analysis:
The appeals were filed by the assessee against the order of CIT(A) confirming the addition made by the AO for short deduction of TDS and interest u/s.201(1) & 201(1A) of the Act. The case involved a cooperative society assessed for TDS verification where the ITO(TDS) found that 'cash medical benefit' was allowed exemption u/s.10 of the Act by the deductor, but it was taxable u/s.15 of the Act. The AO calculated TDS liability and interest for the respective assessment years. The CIT(A) dismissed the appeals, leading to the assessee appealing before the ITAT.

The assessee argued that the lump sum cash medical benefit is not chargeable to tax under Section 17(2) of the Act, citing a CBDT letter. However, the DR contended that the assessee should be treated as assessee-in-default for non-deduction of TDS. The ITAT observed that the medical allowance was fully taxable as it was a fixed pay provided by the employer, unlike medical reimbursement. As employees did not submit bills for medical expenses, the fixed medical allowance was considered taxable salary income. The CBDT letter did not apply to the issue, as per the CIT(A)'s order.

The ITAT upheld the orders of the authorities below, dismissing the appeals of the assessee. The fixed medical allowance was found taxable as salary income due to lack of proof of medical expenditure by employees. As TDS was not deducted on the fixed medical allowance, the CIT(A)'s decision was upheld. The appeals were thus dismissed, and the order was pronounced on 17/02/2020.

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