TaxTMI 
TaxTMI 
2014 (2) TMI 230
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....84/Bang/2013 by filing two separate appeals in each of the assessment years in respect of treating the respondent as an assessee in default u/s. 201(1) & also levying interest u/s. 201(1A) of the Act respectively. 3. Similarly, ITA Nos. 1218 to 1220/Bang/2012 are appeals filed by the revenue against the common order dated 17.07.2012 of the CIT(Appeals)-II, Bangalore relating to assessment years 2008-09 to 2010-11 in the case of M/s. Oracle Solution Services (India) Pvt. Ltd., wherein the CIT(Appeals) cancelled the order of the Assessing Officer treating the respondent as assessee in default u/s. 201(1) of the Act and also levying interest u/s. 201(1A) of the Act. Consequent to the objections raised by the registry, the revenue has filed six appeals in ITA Nos. 579 to 584/Bang/2013 by filing two separate appeals in each of the assessment years in respect of treating the respondent as an assessee in default u/s. 201(1) & also levying interest u/s. 201(1A) of the Act respectively. 4. Since identical issues are involved in case of both the assessees, all these appeals were heard together and disposed of by this common order for the sake of convenience and brevity. 5. In all th....
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....bed therein consists of salary from the employer or former employer falling in three categories. Sec.16 of the Act contains deductions to be made from salaries. Section 17 of the Act contains an inclusive definition of "salary" for purposes of Section 15, Section 16 and Section 17 of the Act which, along with other items, includes "perquisite" and these terms are also separately defined therein. Sec.17 of the Act, which defines "Salary", "perquisite" and "profits in lieu of salary" in so far as it is relevant to the present appeal reads thus: "For the purposes of sections 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; (v) to (viii) .................. (2) "perquisite" includes- (i) to (iii) ...........................  ....
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....bsp; (b) from his employer or former employer for himself and his family, in connection with his proceeding to any place in India after retirement from service or after the termination of his service, subject to such conditions as may be prescribed (including conditions as to number of journeys and the amount which shall be exempt per head) having regard to the travel concession or assistance granted to the employees of the Central Government; Provided that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel. Explanation : For the purposes of this clause, "family", in relation to an individual, means- (i) the spouse and children of the individual; and (ii) the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual;" 13. Rule 2B of the Income Tax Rules, 1962 (the 'Rules') lays down the conditions to be satisfied for the for the purpose of availing exemption under section 10(5) of the Act....
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....89 except to the extent that the journey or journeys so performed shall be taken into account for computing the limit of two journeys specified in this sub-rule. (3) Where such travel concession or assistance is not availed of by the individual during any block of four calendar years, an amount in respect of the value of the travel concession or assistance, if any, first availed of by the individual during first calendar year of the immediately succeeding block of four calendar years shall be eligible for exemption. (4) The exemption referred to in sub-rule (1) shall not be available to more than two surviving children of an individual after 1st October, 1998 : Provided that this sub-rule shall not apply in respect of children born before 1st October, 1998, and also in case of multiple births after one child. Explanation : The amount in respect of the value of the travel concession or assistance referred to in this sub-rule shall not be taken into account in determining the eligibility of the amount in respect of the value of the travel concession or assistance in relatio....
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....r within the two year block. However, if the employee opts for payment of unutilized portion of the LTA amount, the same is then paid as an allowance subject to tax deduction at source. The respondent does not pay the LTA amount as upfront monthly allowance. 18. The payments to employees of the assessee include a component towards medical expenditure. If the employee submits proof of having incurred the expenditure towards medical treatment, the sum spent towards medical treatment or Rs. 15,000/-, whichever is less, is excluded from salary. The exclusion is on the basis of the proviso (iv) to section 17(2) of the Act. If the amount spent towards medical treatment is in excess of Rs. 15,000/- the excess (beyond Rs. 15,000) is considered not considered as a deduction. Effectively, the excess amount spent continues to remain taxable. If no proof of having incurred the expenditure towards the medical treatment is produced by the employee, the entire sum paid is considered as a perquisite. Tax under section 192 of the Act is deducted accordingly. 19. As far as LTC is concerned, if the employee submits proof regarding utilization of the component towards leave travel and subject to....
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.... 3. As far as "Meal Vouchers" are concerned, the AO held that the food and non-alcoholic beverages were being provided outside the office premises and therefore was taxable. The case of the revenue was that as per the proviso to Rule 3(7)(iii) of the Rules, free food and non-alcoholic beverages provided by employer during working hours at office or business premises or through paid vouchers which are not transferred and usable only at different eating joints shall not form part of perquisites to the extent of the value thereof in either case does not exceed Rs.50 per meal. The case of the revenue was that paid vouchers are used even outside the office premises and therefore was not exempt perquisite and therefore the respondent as an employee ought to have included the value of the meal vouchers as part of perquisites and salary and deduct tax thereon at source. 21. The AO accordingly considered the Respondents as an "Assessee in default" u/s.201(1) of the Act, in respect of the portion of exemption claimed in the statement annexed to the order towards LTC and Medical reimbursement as well as providing meal vouchers for the AYs 2008-09 to 2010-11. The AO also levied ....
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....terms of 'cost to company' as is the norm in the private sector and this merely does not mean that it is an allowance and not a reimbursement. The said 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. MEDICAL REIMBURSEMENT ....................................... 4.3 I have carefully considered the facts and the submissions made by the appellant. The appellant has claimed that the same is disbursed as a pure reimbursement as and when the medical bills are submitted for Rs.15,000/- per annum per employee. The amount not supported by bills is paid as a taxable allowance at the end of the year. .......................................
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....Central Government Health Schedule or Central Medical Scheme (a list of such hospitals furnished by the Ministry of Health and family welfare on 11th April, 1991 is annexed). (iii) Where the expenditure is on medical insurance premia; (iv) Where the medical treatment is availed of from any doctor outside the institutions/schemes mentioned in (i) to (iii) above, an expenditure of upto Rs. 10,000 in a year, in the aggregate; and (v) Where the medical treatment is availed of in a hospital outside India and the expenditure is incurred for treatment (including on travel and stay abroad in connection with such treatment) as also on travel and stay abroad of one attendant, to the extent permitted by the Reserve Bank of India, subject to the condition that the amount qualifying for such tax exemption would not include expenditure incurred on travel in the case of employees whose gross total income, as computed under the IT Act without considering the amount paid or reimbursed for expenditure in connection with medical treatment abroad, ....
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....ands to monitor each meal coupon usage. On the whole, whether sufficient checks and balances have been provided by the employer to ensure that in sum and substance the benefit provided is as per Rule 3(7)(iii) or not, is what would be relevant. I do not feel that, from the amount involved per employee in the present case, any other inference can be drawn, but the administrative convenience of the employer in disbursing the said benefit, which is also a welfare measure aimed at ensuring better productivity from the employees and well within the ambit of the provisions of the I.T. Act. The interpretation of the AO is too narrow and technical and in respect of a welfare measure cannot be the correct interpretation. In this context, I derive support from the order of the Hon'ble ITAT, Bench 'A', Ahmedabad in the case of ITO, TDS-1, Ahmedabad v. M/s Cadila Healthcare Ltd. reported in 2011-TIOL-582-ITAT-AHM, where the Hon'ble Tribunal has held as under: ".. the assessee distributed 'sodexo' meal coupons pursuant to an agreement with 'Sodexo' and such coupons were to be used by the employees only at the specified eating joints or outlets. With the introduction ....
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....ployer has not checked the conditions under section 10(5) of the act read with Rule 23 of IT rules are 2. Medical Reimbursement a. The CIT(A) has erred in not appreciating the fact that employer has disbursed allowance towards medical reimbursement Rs. 15,000/- per annum even without the production of bills by the employees. b. The CIT(A) has erred in holding that the order was based on narrow and technical interpretation in respect of a welfare measure. 3. Meal Vouchers a. The CIT(A) has erred in not considering the conclusion drawn by the AO on the issue of Sodexo coupons in the said case. b. The CIT(A) has erred in not appreciating the fact that all employees would then be entitled for exemption in respect of food expenses as they are applied from the salary income of the employee. 4. The CIT(A) has erred in not considering the distinctions drawn in respect of the judicial decisions relied upon by the deductor. 5. The CIT(A) has erred in not considering the f....
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....ds of the employees is being made. We are of the view that the provisions for deducting tax at source are all machinery provisions. The obligation of the person making payment, in the context of these provisions, is only to make a bonafide estimate of the income of the person to whom the payment is made. We are of the view that in the facts and circumstances of the present case, the estimation made by the assessee is bona fide. 28. This Tribunal in the case of Infosys BPO (supra) has dealt with identical orders passed u/s.201(1) & 201(1A) of the Act, as follows: "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....
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...., the Circular is in fact in support of the view taken and doesn't lend any credence to the arguments of the deductor. 6.2.2.3 In the instant case, the leave travel allowance is disbursed to an employee irrespective of the fact as to whether: (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 t....
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....ct under Chapter VIA of the Act, as also exempt income under Sec.10 of the Act. Rebate available under sections 88 and 88B can be considered by the employer. Employer should obtain the proof of investment made by the employee and should not rely on simple declaration or oral assurance. Certain employees who are entitled to relief under section 89(1) can furnish the information in prescribed form 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 t....
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....nditions of section 10(5) and proviso to section 17(2) are meticulously followed before extending the deduction/ exemption to an employee. No tax can be recovered from the employer on account of short deduction of tax at source under section 192 if a bona fide estimate of salary taxable in the hands of the employee is made by the employer, is the ratio of the following decisions. CIT v. Nicholas Piramal India Ltd [2008] 299 ITR 0356 (BOMBAY); CIT v. Semiconductor Complex Ltd [2007] 292 ITR 636 (P&H) CIT v. 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) ....