2025 (10) TMI 1393

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....A No. 1028/BANG/2011 on the file of the Income Tax Appellate Tribunal, Bengaluru Bench [for short 'the Tribunal']. In fact, the Tribunal's order dated 22.01.2014 is common to the appeals in Nos. 1028[B]/2011, 1029[B]/2011 and 430[B]/2011. This Court, on 14.09.2020, has dismissed this appeal because of the tax effect but it is restored by the order dated 26.05.2023 in Review Petition No.279/2022. 2. This Court, prior to the order dated 14.09.2020, had admitted the appeal on the following questions of law: i. Whether the Tribunal is correct in holding that the medical expenses/ reimbursement incurred by the assessee for its employees is not liable to fringe benefit tax because this amount in the employees' hands is exe....

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.... present case, the medical reimbursement is taxable but for the exemption provided in proviso (ii) to s.17(2) of the Act. It cannot be said, merely because of the grant of exemption, that the tax is not payable. Therefore, a specific item of perquisite which is normally taxable in the hands of individual employee cannot be subjected to FBT, only for the reason that the same is exempt in the hands of the employees. As stated earlier, when an item which is to be treated as a 'perquisite' is exempt in the hands of an individual employee, the same, in our perception, could not be subjected to FBT. 7.4.4. In an overall consideration of the facts and circumstances of the issue as deliberated upon in the fore-going paragraphs and ....

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....,000/- in the employee's hand is exempt from tax as a perquisite, it should be taxed as Fringe Benefit Tax in the hands of the employer. 5. The substantial questions must be answered as against this Circular in the light of the provisions of Section 115WB [3]. There are two factors i.e., the medical expenses incurred by an employee must be reimbursed by an employer and must not be taxable as such in the employee's hands. The exemption is because of the proviso to Section 17[2] which in its material part reads as under: If an employer has paid any sum as reimbursement of the expenditure incurred by the employee for his/her family's medical treatment with any hospital as contemplated under Proviso to Section 17(2)(ii)(a) or 17....