AI Drafter 
TaxTMI 
TaxTMI 
2013 (7) TMI 1027
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....spect of certain item of "salary" payments made to the employes. The Assessing Officer also levied interest u/s 201(1A) of the Act on tax not deducted from the date on which the tax ought to have been deducted till date on which the tax ought to be paid over to the government account. The details of items and demand raised yearwise are as under: Allowances/ Benefits AY 2007-08 AY 2008-09 AY 2009-10 AY 2010-11 Total LTA 54,87,839 52,62,445 72,41,422 50,76,495 2,30,68,202 Medical Reimbrusement 5,74,14,926 6,71,22,245 8,04,69,008 8,30,48,858 28,80,55,037 Sodexho- Meal Vouchers - - - 9,80,62,350 9,80,62,350 Total 6,29,02,765 7,23,84,690 8,71,10,430 18,61,87,703 40,91,85,589 Tax liability 2,11,73,071 2,46,03,556 2,98,12,775 6,32,85,200 13,88,74,603 Interest 1,01,63,074 88,57,280 71,55,066 85,43,502 3,74,18,922 Total Demand 3,13,36,145 3,34,60,836 3,69,67,841 7,18,28,702 17,35,93,525 4. On appeal the CIT (A) cancelled the demands raised and interest charged u/s 201(1) and 201(1A) of the Act. The relevant findings of the CIT (A) in regard to....
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....ed in (i) to (iii) above, an expenditure of up to 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, exceeds Rs. 1,00,000. 2. The contents of this circular will be applicable in relation to the assessment year 1991- 92 and the subsequent years" d) Moreover, in the present case, the amount of Rs. 15,000/- per employee per annum is too small to attribute any other motive or to imagine a situation as envisaged in Para 5.4.3 of the assessment order. e) Section 192(3) does not bar the employer from making adjustments of tax deduction u/s 192 of the Act within the financial y....
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....he meaning of travel 'concession' or 'assistance' as envisaged in the I.T. Act.. 4.6 Once again, in my view, the basic requriements of the I.T. Act read with relevant rules are met i.e. i) No disbursement not backed by bills/proof is treated as not taxable. ii) No disbursement in excess of I.T. Rules has been treated as exempt. 4.7 In my opinion, the said benefit would clearly fit into the meaning of 'commission' or 'assistance' in sum and substance. As can be seen from the submissionsm made by the apellant, care has been taken by the employer to see that there is no irregulatity in making payments under the LTA scheme treated as exempt under the I.T. Act. In my opinion, the AO was not justified in treating the appellant as an "assessee-in-default'. Hence, the demands 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: "5.5 I have c onsidered 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. ....
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.... of the Hon'ble jurisdictional High Court in the case of CIT vs. Reliance Industreis Ltd concluded that the assessee was not liable to deduct tax at source on expenditure incurred on sodexo lun ch coupons given to the employees of the company. Revenue having not placed any material so as to enable to take a different view in the matter, the order of the CIT (A) is upheld". 5.7 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". 5. Aggrieved by the order of the CIT (A), the Revenue is in appeal before the Tribunal raising 27 grounds. The learned DR supported the order of the Asstt. CIT passed u/s 201(1) and 201(1A) of the Act. 5.1 The learned AR on the other hand submited the issue in question is squarely covers by the order of the Tribunal in the case of ACIT (TDS) vs. M/s Infosys BPO in ITA Nos.1390 & 1391/Bang/2012 dated 28.06.2013 in regard to LTC and Medical Reimbursement. It was submitted ....
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.... be a reimbursement and has been excluded from the purview of section 192. Verification of the returns of income filed by the employee as well as the TDS certificate issued by you do not quantify this to be taxable income resulting in taxes not being deducted at source nor being offered for taxation by the employee. As per the provisions of Income-tax Act, any allowance forms part of salary u/s 17 and such a component of salary is liable for taxation. The provision of section 10(5) provides for the benefit of the value of any travel concession or assistance in connection with his proceeding on leave. The allowance provided by a company is a fixed monetary benefit which an employee is entitled to irrespective of the fact as to whether any leave is sanctioned or not. Such an allowance forms part of salary and is not a benefit or reimbursement provided in addition to salary. Therefore exemption u/s 10(5) provided to LTA cannot be justified and the entire allowance is to be brought to tax. Year Allowance Exemption F.Y 20067 2381842.77 2381842.77 F.Y. 2007-08 4294568.00 4294,568.00 F.Y. 2008-09 691129.00 691129.00 F.Y 2009-10 4897131.00 48....
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....ssessee. As far as LTC is concerned, the AO relies on the expression "value of travel concession or assistance received by an employee in connection with his proceeding, - (a) on leave to any place in India; (b) to any place in India after retirement from service or after the termination of his service, shall be the amount "actually incurred" on the performance of such travel", found in Sec.10(5) of the Act. 22. The Assessee in this regard, among other things, relied on CBDT Circular No.603 dated 6.6.1991 extracted in the order of the CIT(A). The AO has however held that the said circular does not help the case of the Assessee for the following reason:- "6.2.2.2 The circular evidently makes it clear that payment or reimbursement of expenses actually incurred for medical treatment is alone exempted from the purview of taxation. The circular at no point even remotely suggest that an allowance could be granted which if adequately evidence with medical bills could be reduced from the taxable salary of an employee. In fact the Board Circular concisely puts across the provisions of the statute which have been articulated at length in this order to drive home....
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.... average rate of incometax computed on the basis of the rates in force for the financial year in which the payment is made on the estimated income of the assessee under this head for that financial year (2)...... (3) The person responsible for making the payment referred to in sub-section (1) or sub-section (1A) or sub-section (2) or sub-section (2A) or sub-section (2B)] may, at the time of making any deduction, increase or reduce the amount to be deducted under this section for the purpose of adjusting any excess or deficiency arising out of any previous deduction or failure to deduct during the financial year." 25. Section 192(1) of the Act requires tax to be deducted at average rate of income-tax in force on estimated income under the head salaries. The person making payment has to make an honest of income under the head salary payable by him to his employee at the time of payment. The person making the payment has to take into consideration various deductions permitted under the Act 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....
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....see is concerned, his obligation is only to make an "estimate" of the income under the head "salaries" and such estimate has to be a bonafide estimate. 27. The primary liability of the payee to pay tax remains. Section 191 confirms this. In a situation of honest difference of opinion, it is not the deductor that is to be proceeded against but the payees of the sums. To reiterate, the payment towards medical expenditure and leave travel is made keeping in view the employee welfare. The exclusion in respect of payment towards medical expenditure and leave travel is considered after verifying the details and evidence furnished by the employees. No exemption is granted in the absence of details and/or evidence. The exemption in respect of medical expenditure is restricted to expenditure actually incurred by the employees, or Rs. 15,000/- whichever is lower. The exemption is granted even if the payment precedes the incurrence of expenditure. The requirements/conditions 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....
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....ct? The answer admittedly is 'no', because the AO does not dispute non-fulfillment of conditions for allowing exemption u/s.10(5) of the Act or proviso (iv) to Sec.17(2) of the Act. The liability of the person deducting tax at source cannot be greater than the liability of the person on whose behalf tax at source is deducted. The AO has ignored this aspect and has proceeded to pass the order u/s.201(1) and 201(1A) of the Act. His order was rightly held to be unsustainable by the CIT(A). 30. In the grounds of appeal raised by the revenue, we find that among other grounds there are grievances regarding lack of opportunity to the AO before CIT(A) and grounds challenging the finding that there is 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. As far as lack of opportunity is concerned, we find that the CIT(A) has only called for break-up of the figures regarding medical reimbursement and LTC which was actually paid to employees and that which was considered not forming part of salary by the employee on production of evidence by the employee. In fact, the figures s....