TaxTMI 
TaxTMI 
2013 (9) TMI 239
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.... There was a survey operation in the premises of the assessee company on 31.1.2011 by the Income-tax Officer (TDS), Ward 16(2), Bangalore [the AO]. The AO had considered the assessee as 'assessee in default' u/s 201(1) of the Act in respect of certain item of 'salary' payments made to its employees. The AO also levied interest u/s 201(1A) of the Act on tax not deducted from the dates on which the taxes ought to have been deducted till the dates on which the taxes ought to be paid over to the Government Exchequer. The details of items and demand raised year-wise are as under: Allowances/benefits 2007-08 (Rs.) 2008-09 (Rs.) 2009-10 (Rs.) 2010-11 (Rs.) Total (Rs.) Medical allowance 4148462 3990413 4152237 4044739 LTA 719771 902062 1077953 871387 Fuel reimbursement 4394729 4954305 5757687 2555543 Conveyance 403926 301565 263351 202180 Telephone 3066260 3558074 4057193 4890901 Car maintenance 55275 49355 92186 158237 Sodexo-meal vouchers - - - 11899895 Total 12788423 13755774 15400607 ....
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.... etc. in certain cases In suppression of Circular No. 376 dt. 6th Jan., 1984, Circular No. 445 dt. 31st Dec., 1985, Circular No. 481 dt. 20-02-1987 (all reproduced earlier), and all other instructions on the subject, the CBDT have decided that the value of the perquisite arising by way of payment or reimbursement by an employer of expenditure on medical treatment incurred by his employee on himself or on his spouse, children or parents, including the provision of free medical treatment or treatment at a concessional rate, will not be included in the taxable salary of the employee in the following cases: (i) Where the medical treatment is availed at hospitals, clinics, etc., maintained by the employer; (ii) Where the medical treatment is availed at hospitals maintained by the Government or local authorities or hospitals approved for the purposes of the Central Government Health Schedule or Central Medical Scheme (a list of such hospitals furnished by the Ministry of Health and family welfare on....
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....sp; 4.7. There is, therefore, no case for taking action u/s 201(1) and 201(1A) of the Act. Hence, the demand raised and interest charged u/s 201(1) and 201(1A) are uncalled for and they are, therefore, cancelled." 4.1 Similarly, the findings of the CIT (A) with regard to cancellation of demand in respect of non-deduction of tax for payments made on account of LTA reads as follows: "3.3. I have carefully considered the facts, the appellant's submissions and perused the elaborate order. The summary of the AO's observations is that LTA is paid to an employee irrespective or whether or not an employee: (i) Has any intention to proceed on leave; (ii) Has any intention to travel; (iii) Has already availed the benefit in the previous calendar year/financial year and thereby disentitling him to the exemption from tax. 3.4. The appellant has stated in its submissions as under: (i) the LTA is a fixed sum per annum paid as reimbursement or at the request of the employee in the beginning of the financi....
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....d benefit would clearly fit into the meaning of 'assistance' in sum and substance. As can be seen from the submissions made by the appellant, care has been taken by the employer to see that there is no irregularity in making payments under the LTA Scheme. In my opinion, the AO was not justified in treating the appellant as an 'assessee-in-default'. Hence, the demand raised and interest charged u/s 201(1) and 201(1A) are uncalled for and they are, therefore, cancelled." 4.2 The finding of the CIT (A) in regard to meal vouchers (AY 2010-11) are as follows: "9.5. I have considered the issues. The fact is that: i) Food Vouchers issued per meal per employee is within the present rates as per I.T. Rules read with the I.T. Act. ii) The employer has ensured that the coupons are non transferable and valid for ready to eat items. ii) If used at departmental stores, it is for food products. No instance has been brought on record otherwise. iv) No specific instance of misuse has been brought on record by the AO. &n....
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....d any material so as to enable to take a different view in the matter, the order of the CIT (A) is upheld". 9.7 In view of the discussions made in the preceding paragraphs, I hold that the disbursement of the meal coupons made by the appellant employer in the present case to its employees did not attract TDS u/s 192 and the action of the AO in raising demand u/s 201(1) and charging interest u/s 201(1A) is uncalled for and delete the same". 4.3 With regard to telephone bills reimbursements, vehicle maintenance, fuel consumption, conveyance allowance etc., the findings of the CIT (A) are as follows: "10. For telephone (bills)reimbursements, vehicle maintenance, fuel consumption, conveyance allowance as discussed above at Paras 5,6,7 and 8 respectively, the reimbursements are supported by actual expenditure (bills or vouchers) and are within the limits provided under the relevant provisions of the I.T. Act. Moreover, wherever the amounts are paid without any supporting evidence of having been incurred by the employee concerned, these are treated as taxable allowance and tax is deducted at source on the same at the end of the same financial year. Mere....
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....see on 5.10.2010. Based on the findings in the course of survey show cause notice dated 3.2.2011 was issued by the AO. The contents of this show cause notice throws light on the exact grievance of the AO and therefore the same is being reproduced. "To The Principal Officer, M/s Infosys BPO Ltd., Electronics City, Hosur Road, Bangalore-560 100 Sir, Sub: Show cause notice u/s 201(1) in your case F.Y 2006-07 to 2010-11 - reg. A survey u/s 133A of the Income-tax Act was conducted at the premises of M/s Infosys Technologies, Hosur Road, Bangalore on 05.10.2010 to verify the compliance of TDS provisions. Based on the findings, the salary structure of the employees of M/s Infosys BPO was also examined. Based on the same issues, certain information was called for from your company relating to the receipt of pay and other allowances by your employees. It was noticed that the employees were in receipt of pay and other allowances. It was explained t....
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....f IT Act and out of which they have considered the medical bills presented by employees as exemption u/s 17(2). Since any amount received u/s 17(1) do not constitute for exemption u/s 17(2), the claim of the employees had to be disallowed. This would not come under the purview of medical reimbursement as per the terms and conditions laid down in the Act. It is proposed to bring these amounts also to tax." 21. A perusal of the show cause notice clearly shows that the fact that bills/evidence to substantiate incurring of expenditure on medical treatment up to Rs.15,000/- and the availing of the LTC by the employees and the fulfillment of the conditions contemplated by Sec.10(5) of the Act for availing exemption by the employees so availing LTC, have not been disputed by the AO. The grievance of the AO appears to be that 40% of the pay to the employees constitutes allowance and that the allowance so given every month is not earmarked for any particular purpose but the employee was free to use the allowance in any manner and later claim that the allowance was used for LTC or medical reimbursement. Therefore, according to the AO, at the time of payment the allowances wou....
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.... a) the employee has any intention to proceed on leave or not b) the employee has any intention to travel or not c) the employee has already availed the benefit in the previous calendar year or financial year Therefore, undisputedly and admittedly the disbursement of leave travel allowance is a lump sum monetary benefit provided to the employee without any nexus to any of the statutory or prescribed conditions. The only precondition is that the employee ought to have opted for this allowance at the beginning of the Financial Year. The subsequent occurrence of an event of travel which may or may not occur and even if it occurs, may or may not fulfill the conditions such as once in two calendar years etc., would in no way alter the nature of payment that has been effected. Therefore, an allowance such as the one granted in the instant case would not be a concession or assistance. Therefore, the reliance placed on the Circular is misplaced and is in fact against the case of the deductor." 23. The AO has also taken a stand that there is a differe....
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.... 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. 26. 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 Rs.15,000/- and the availing of the LTC by the employees and the fulfillment of the conditions contemplated by Sec.10(5) of the Act for availing exemption by the employees so availing LTC, 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 of the taxes deducted during the earlier months of the previous year is entitled to give effect to the deductions permissible under proviso (iv) to Sec.17(2) or exemption u/s.10(5) of the Act....
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....mal 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) 28. In the present case, as already detailed, the exemption in respect of medical expenditure and leave travel 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 rule 2B are fulfilled. The details filed before the TDS officer explains the policies adopted to fulfill th....
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....201(1) and 201(1A) of the Act. As far as the grievance regarding finding that there was no dispute that the Assessee has satisfied itself that the employees were entitled to exemption u/s.10(5) as well as relief under proviso (iv) to Sec.17(2) of the Act, we have already reproduced the show cause notice issued by the AO u/s.201(1) & 201(1A) of the Act, in which the AO has not disputed these facts. In our view the relevant grounds have no basis and cannot be factually sustained. 31. Arguments were advanced that employees have filed their returns of income and offered to tax income under the head salaries received from the Assessee and therefore 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) = (2009-TII-01-SC-INTL) 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 asses....