TaxTMI 
TaxTMI 
TaxTMI 
2018 (11) TMI 259
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....Appeals)-XII, New Delhi qua the assessment years 2006-07, 2007-08 & 2008-09 respectively on the grounds inter alia that:- "ITA NO.3793/DEL/2010 (AY 2006-07) 1. Ld. Commissioner of Income Tax (Appeals) erred, in law and on the facts and circumstances of the case, in deleting the addition of Rs. 1068.75 lakh made by the AO to the value of Fringe Benefits on account of medical reimbursement expense. 2. Ld. Commissioner of Income Tax (Appeals) erred, in law and on the facts and circumstances of the case, in deleting the addition of Rs. 797.13 lakh made by the AO to the value of Fringe Benefits on account of maintenance expenses of Township of the assessee. 3. Ld. Commissioner of Income Tax (Appeals) erred, in law and on the facts and circumstances of the case, in directing the AO to allow 50% of Rs. 2077.14 lakh which was included by the AO in the value of Fringe Benefits on account of Medical expenses for treatment in Hospitals." "ITA NO.4851/DEL/2010 (AY 2007-08) 1. On the facts and circumstances of the case, the Ld. CIT (A) erred in law as well as on merits in deleting the addition of Rs. 467.40 lacs being 50% of Rs. 934.81 lacs made by the AO to the value of Fringe Bene....
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.... covered by Section 17[2] read with Rule 3A and arriving at erroneous conclusions / decisions. 3. That the CIT [A] has erred in confirming the action of the AO treating the Maintenance of Townships [8 Nos.] expenses of Rs. 863.43 lakhs as Employee Welfare Expenses for the purposes of Fringe Benefit Tax ignoring the fact that the factories of the company are huge and that they are deemed as townships for which the company is responsible." "ITA NO.2699/DEL/2011 (AY 2008-09) 1.1 The CIT [A] should have deleted the whole of the addition of Rs. 4828.40 [770.48 + 4057.92] lacs on account reimbursement of medical bills and payment to referral hospitals on reference by Hospitals run by the company instead of deleting only 50% despite it being excluded by Section 115WB[E] read with Section 17[2]. [Para 4.3-page 4 of order] 1.2 The authorities below should have accepted the illustrative evidences submitted on test check basis in view of voluminous nature of evidences. 2 The authorities below have erred in mixing up the provisions regarding tax exemption limit of Rs. 15,000 for domiciliary treatment with hospitalization charges covered by Section 17[2] read with Rule 3A and arriving....
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....eling aggrieved, both the Revenue as well as the assessee have come up before the Tribunal by way of filing the present appeals. 7. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. GROUND NO.1 IN REVENUE'S APPEAL ITA NO. 3793/Del./2010 (AY : 2006-07) ITA No.4851/Del./2010 (AY : 2007-08) ITA No.3261/Del./2011 (AY : 2008-09) GROUND NO.3 IN REVENUE'S APPEAL ITA NO. 3793/Del./2010 (AY : 2006-07) GROUND NO.2 IN REVENUE'S APPEAL ITA No.4851/Del./2010 (AY : 2007-08) ITA No.3261/Del./2011 (AY : 2008-09) GROUNDS NO.1 & 2 IN ASSESSEE'S APPEAL ITA NO.3285/DEL/2010 (AY 2006-07 ITA No.4689/Del./2010 (AY : 2007-08) GROUNDs NO.1.1, 1.2 & 2 IN ASSESSEE'S APPEAL ITA No.2699/Del./2011 (AY : 2008-09) 8. AO has disallowed reimbursement of medical expenses by invoking the provisions contained u/s 17(2)(vi) of the Act and held the same taxable in the hands of employees subject to certain exemptions and held that the amount taxable in the hands of the employees was not subjected to FBT u/s 115WE of the Act. It is conte....
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....e amount actually paid by, or recovered from, the assessee in respect of such security or shares; (d) "fair market value" means the value determined in accordance with the method as may be prescribed; (e) "option" means a right but not an obligation granted to an employee to apply for the specified security or sweat equity shares at a predetermined price;" 10. In AY 2006-07, ld. CIT (A) has deleted the entire addition made by AO to the value of FBT on account of medical reimbursement expenses of 100% in AY 2006-07 and 50% in AYs 2007-08 & 2008-09 on the ground that since the reimbursement of medical expenses is taxable in the hands of the employees, the same cannot be includible for FBT. Likewise, ld. CIT (A) deleted 50% of the addition made by the AO in the value of FBT on account of medical expenses for treatment in hospital in all three assessment years. 11. So far as question of addition made by AO/CIT (A) to the value of FBT on account of medical reimbursement expenses is concerned, when undisputedly reimbursement of medical expenses are prerequisite in the hands of the employees, the same cannot be treated as FBT in the hands of the assessee. 12. Identical issue has be....
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.... such allowance provided by the employer to his employees for journeys by the employees from their residence to the place of work or such place of work to the place of residence)" (Emphasis ours). 3.6 In the budget speech at para 160 reported in 273 ITR (St.) 25, at page 56, it is observed as follows:- "I have looked into the present system of taxing perquisites and I have found that many perquisites are disguised as fringe benefits, and escape tax. Neither the employer nor the employee pays any tax on these benefits which are certainly of considerable material value. At present where the benefits are fully attributable to the employee they are taxed in the hands of the employee; that position will continue. In addition, I now propose that where the benefits are usually enjoyed collectively by the employees and cannot be attributed to individual employees, they shall be taxed in the hands of the employer". 3.7 In the memorandum explaining the proviso to the Finance Bill, it is stated as follows:- "Therefore, it is proposed to adopt a two pronged approach for the taxation of fringe benefits under the Income-tax Act. Perquisites which can be directly attributed to the emplo....
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.... us, could not be subjected to FBT. In taking the above view, we are also fortified by the order of the Mumbai Tribunal in the case of Godrej Properties Ltd., which has decided an identical issue. 3.10. In the result, ground nos. 2 to 4 are allowed." 13. So, following the decision rendered by the coordinate Bench of the Tribunal in Vijaya Bank (supra) which is squarely applicable to the facts and circumstances of the case, we are of the considered view that medical reimbursement expenses is prerequisites in the hands of employees and is taxable as such, even if medical expenses are in excess of Rs. 15,000/- and as such cannot be subjected to FBT because once the item as prerequisites is exempted in the hands of individual employee, the same cannot be subjected as FBT. So, ld. CIT (A) has rightly deleted the addition made by the AO in AY 2006-07 to the value of FBT on account of medical reimbursement expenses. However, the ld. CIT A) has erred in deleting the addition in AYs 2007-08 & 2008-09 on account of medical reimbursement expenses to the extent of 50% only. For AYs 2007-08 and 2008-09 also entire addition is liable to be deleted. So, ground no.1 of AYs 2006-07, 2007-08 & 20....
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.... 2007-08) & ITA No.3261/Del./2011 (AY : 2008-09) in Revenue's appeal are determined against the Revenue. Grounds No.1 & 2 in ITA NO.3285/Del/2010 (AY 2006-07) and ITA No.4689/Del./2010 (AY : 2007-08) and Grounds No.1.1, 1.2 & 2 being ITA No.2699/Del./2011 (AY : 2008-09) in assessee's appeal are partly determined in favour of the assessee. GROUND NO.2 IN REVENUE'S APPEAL ITA NO. 3793/Del./2010 (AY : 2006-07) GROUND NO.3 IN ASSESSEE'S APPEAL ITA No.4689/Del./2010 (AY : 2007-08) ITA No.2699/Del./2011 (AY : 2008-09) 18. Undisputedly, assessee has been maintaining townships situated in the vicinity of its plants all over the country. It is also not in dispute that in the township constructed and maintained by the assessee are being used by its employees only. 19. AO made addition to the value of FBT on account of maintenance expenses of township of the assessee on the ground that no such amount is being taxed as prerequisites in the hands of employees and treated the same as deemed FBT u/s 115WB(2)(E). The ld. CIT (A) confirmed the addition in AYs 2007-08 & 2008-09 but deleted this addition in AY 2006-07 on the ground that maintenance and administrative township expenses are neces....
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.... details for payment of medical reimbursement expenses of Rs. 1038.75 lacs & Rs. 934.81 lacs for AYs 2006-07 & 2007-08 respectively on account of medical expenses for treatment in approved hospitals to the tune of Rs. 2077.14 lacs & Rs. 3368.35 lacs for AYs 2006-07 & 2007-08 respectively; and to the tune of Rs. 797.13 lacs & Rs. 863.43 lacs for AYs 2006-07 & 2007-08 respectively on account of township expenses; and consequently 20% of 1038.75 lacs i.e. Rs. 207.71 and Rs. 934.81 lacs i.e. Rs. 196.96 lacs for AYs 2006-07 & 2007-08 respectively on account of medical reimbursement expenses; 20% on account of Rs. 2077.14 lacs i.e. Rs. 415.43 lacs & Rs. 3368.35 i.e. Rs. 673.67 lacs for AYs 2006-07 & 2007-08 respectively on account of medical expenses for treatment in approved hospitals; and Rs. 797.13 lacs & Rs. 863.43 lacs for AYs 2006-07 & 2007-08 respectively on account of township expenses have been treated as taxable FBT by the AO. 24. The ld. CIT (A) confirmed the addition of 50% on account of reimbursement of medical expenses. AO declining the contentions raised by the assessee that its case does not attract the provisions contained u/s 271(1)(d) of the Act proceeded to hold that....
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....at no detail or evidence has been brought on record by the assessee to prove that in each case, reimbursement was above Rs. 15,000/- to its employees and similarly in case of payment to the approved hospitals, no details have been supplied that the payment was below Rs. 15,000/- nor detail of hospital has been brought on record, the assessee was having reasons to claim the deductions. Moreover, in Vijaya Bank (supra) case, identical issue has been decided in favour of the assessee by deleting the addition made by the AO and confirmed by the CIT (A) to the value of FBT on account of medical reimbursement expenses and on account of medical expenses sought treatment form the approval hospitals. 30. So far as question of addition on account of maintenance expenses of townships of the assessee are concerned, this addition has been held to be not sustainable as per our findings in the preceding paras no.14, 15, 16 & 17. So, when main addition is not sustainable, penalty is also not sustainable. 31. Moreover, in AY 2006-07, ld. CIT (A) has herself deleted the township expenses being not employee welfare expenses and the said order has been confirmed by the Tribunal as discussed in the p....