Income Tax Appellate Tribunal - Bangalore
M/S Honeywell Technology Solutions Lab ... vs Department Of Income Tax on 10 July, 2013
ITA Nos.738 to 741 of 2012 Honeywell Technology Solution Lab Pvt Ltd Bangalore
IN THE INCOME TAX APPELLATE TRIBUNAL
Bangalore A Benches, Bangalore
Before Shri N. Barthvaja Sankar, Vice President and
Shri George George K. Judicial Member
ITA No.738 to 741/Bang/2012
(Assessment year: 2008-09)
Asstt. Commissioner of Income Vs. Honeywell Technology
Tax (TDS) Circle - 16 ( 2 ) Solutions Lab Pvt. Ltd,
Room No.59, 4th Floor No.151/1 Doraisamypalya,
HMT Bhavan, Bellary Road Bannerghatta Road,
Bangalore 560 032 Bangalore 560 076
PAN: AAACH 4151 J
(Appellant) (Respondent)
Department by: Dr.B.S.N.Prasad, CIT (DR-I)
Assessee by: Shri K.R. Vasudevan
Date of Hearing: 10/07/2013
Date of Pronouncement: 10/07/2013
ORDER
Per George George K. JM These four appeals at the instance of the Revenue is directed against the consolidated order of the CIT (A)-II Bangalore dated 28.03.2012 in relation to assessment year 2007-08 to 2010-11. The CIT (A)'s order arise out of the order of the ACIT passed u/s 201 (1) and 201(1A) of the Act.
2. The dispute in these appeals is regarding obligation of the assessee to deduct tax at source on payment made to employee on account of Leave Travel Concession (LTC), Medical Reimbursement and expenditure inurred on meal vouchers.
3. Brief facts relating to the case are as follows.
Page 1 of 19ITA Nos.738 to 741 of 2012 Honeywell Technology Solution Lab Pvt Ltd Bangalore The Assessing Officer had considered the assessee company as an "assessee in default" u/s 201 (1) of the Act in respect 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 year- wise are as under:
Allowances/ AY 2007-08 AY 2008-09 AY 2009-10 AY 2010-11 Total Benefits LTA 54,87,839 52,62,445 72,41,422 50,76,495 2,30,68,202 Medical 5,74,14,926 6,71,22,245 8,04,69,008 8,30,48,858 28,80,55,037 Reimbruse-
ment Sodexho- - - - 9,80,62,350 9,80,62,350 Meal Vouchers 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 3,13,36,145 3,34,60,836 3,69,67,841 7,18,28,702 17,35,93,525 Demand
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 cancellation demand in respect of non deduction of tax for medical reimbrusement read as follows:
"3.5 I have considered the appellant's submission and the AO's observations. My views are:
a) No intsance has been brought on record to suggest that in the case of any employee, the benefit or allowacne has been disbursed without TDS if it is not backed by actual expenditure.
b) In such a case, the benefit provided clearly fits into the ambit of the exemption provided u/s 17(2) proviso which states:
"(v) any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member Page 2 of 19 ITA Nos.738 to 741 of 2012 Honeywell Technology Solution Lab Pvt Ltd Bangalore of his family other than the treatment referred to in clauses (1) and (ii); so, however, that such sum does not exceed *fifteen thousand rupees, in the previous year;"
[increased from 'ten thousand rupees' with effect from 1/4/1999]
c) The Board's Circular No.603 dated 6/6/1991 reads as follows:
CIRCULAR No.603 dated 6.6.1991 (CLARI.) "Non-inclusion of value of perquisite arising from expenditure on medical treatment incurred by employee on himself or on his spouse, children, 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 11-4-1991 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 Page 3 of 19 ITA Nos.738 to 741 of 2012 Honeywell Technology Solution Lab Pvt Ltd Bangalore mentioned 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 year.
3.6 It is clear, therefore, that in effect there is no infringement of the tax provisions allowable to the employees under the I.T. provisions in disbursing salaries by the by the employer appellant. Merely because the same is taken into account at the beginning of the year or at the time of deciding his/her salary, which itself is in terms of 'cost to company', it cannot be said that it ceases to be a perquisite and, therefore, not entitled to exemption u/s 17(2). Perquisite in any case also forms part of taxable salary. The employer has clarified that, wherever the said disbursement is not backed by bills, it is liable to TDS and this liability is not denied or infringed.
3.7 Therefore, in my view, the view of the AO is a very narrow and technical interpretation and in relation to a Page 4 of 19 ITA Nos.738 to 741 of 2012 Honeywell Technology Solution Lab Pvt Ltd Bangalore welfare measure to the employees across the salaried strata cannot be the correct interpretation."
4.1 Similarly the findings of the CIT (A) with regard to cancellation of demand in respect of non deduction of tax for payment made on account of Leave Travel Allowances reads as follows:
"4.4 I have carefully considered the facts, the appellant's submission and perused the elaborate assessment order. The AO has denied the claim of the employer appellant u/s 10(5) r.w.r 2B on the ground that the amount was paid whether or not the emplkoyee had the intention of proceeding on leave or not and, even in cases where employees had already availed of the benefit in the previous year, thereby disentitling him from the benefit of income-tax in the year in question and, therefore, it could not be an exempt benefit but meraly a taxable salary.
4.5 The fact remains that, whenever an amount is paid, where either the employee has not availed of actual travel or has availed of the allowance over and above the exemption claimed in the immediately preceding year, therefore, si disentitled to the benefit of exemption, tax has been deducted at source. No instance has been brought on record by the AO that the employer has disbursed the amount without deduction of tax in cases where the benefit is not backed by bills or in excess of amount allowable under the I.T. Act. The only case of the AO is that the intention of employer is to disburse the said sum irrespective of whether an exemption will be allowable to an employee or not and, that such payments do not fit into the 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.Page 5 of 19
ITA Nos.738 to 741 of 2012 Honeywell Technology Solution Lab Pvt Ltd Bangalore 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.
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 .
5.6 It is also to be seen that these benefits are provided to employees all across the salaried strata in the private sector in this manner and employers are dealing with a large number of employees (numbering tens of thousands) and not merely a few hundreds or thousands to monitor each meal coupon usage. On the whole, whether sufficient checks and balances have been provided by rhe 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 Page 6 of 19 ITA Nos.738 to 741 of 2012 Honeywell Technology Solution Lab Pvt Ltd Bangalore 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 very narrow and technical and in respect of a welfare measure cannot be the correct interpretation. In this connection, 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 of provisions relating to FBT by the Finance Act, 2005 with effect from 01.04.2005, the relevant provisions of Rule 3(7)(iii) of the IT Rules, 1962 relating to valuation of any perquisite in the nature of provisions of food provided by the employer were amended. As per clause (ii) of section 115WB(2)(B) of the Act, even FBT was not payable by the employer on the expenditure incurred through paid food vouchers which were not transferrable and usable only at eating joints or outlets. Since the AO did not bring any material on record that Sodexo Lunch Coupons were misused by the employes, the learned CIT (A) while relying upon the decision 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 Page 7 of 19 ITA Nos.738 to 741 of 2012 Honeywell Technology Solution Lab Pvt Ltd Bangalore 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 that the expenditure incurred for meal vouchers, the issue of TDS on the same is squarely covered in favour of the assessee by the order of Tribunal in case of Cadilla Health Care reported in 2011-TIOL-582-ITAT-AHM.
6. We have heard the rival submissions and perused the relevant material on record. The issues raised in this appeal regarding TDS on LTC and Medical Reimbursement is identical to the issues considered by the Tribunal in ITA Nos.1390 and 1391/Bang/2012 (Supra). The relevant findings of the Tribunal reads as follows:
"20. We have considered the rival submissions. We shall first see the sequence of events that lead to the passing of the order u/s.201(1) and 201(1A) of the Act. There was a Survey u/s.133A of the Act at the business premises of the Assessee 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.Page 8 of 19
ITA Nos.738 to 741 of 2012 Honeywell Technology Solution Lab Pvt Ltd Bangalore "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 that 40% of the pay constituted allowances, the break-up of which was as per the option exercised by the employee. It was explained that the basket of allowances could be changed at any point of time by the employee. Evidently a fixed amount was entered by the employee against each of the allowances irrespective of the fact as to whether such expenditure was incurred by him or not. Such allowances admittedly, would constitute part of taxable salary and the employee ought to have been subjected to provision of section 192 on this entire amount. However, it has been explained that any bills produced subsequently has been accepted to 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 Page 9 of 19 ITA Nos.738 to 741 of 2012 Honeywell Technology Solution Lab Pvt Ltd Bangalore 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 4897131.00 F.Y 2010-11 691129.00 691129.00 TOTAL 1,29,55,799.77*
* Amount on which tax is to be deducted.
Further the company is extending the benefit of Medical allowance, which forms 25% of basket of allowance and allowed exemption u/s 17(2) of IT Act on medical bills submitted by your employees up to a maximum of Rs.15000/- as perquisite exempt u/s 17(2). The employees are in receipt of medical allowance u/s 17(1) of 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 Page 10 of 19 ITA Nos.738 to 741 of 2012 Honeywell Technology Solution Lab Pvt Ltd Bangalore 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 would constitute part of salary and therefore even the allowances should be considered as part of salary for the purpose of deduction of tax at source. In other words, according to the AO, LTC and Medical reimbursement should be paid at the time the expenditure is incurred or after the expenditure is incurred by way of reimbursement and not at an earlier point of time. If it is so paid, then, according to the AO, even though the payment would not form part of taxable salary of an employee, the employer has to deduct tax at source treating it as part of salary. In support of the stand taken by the AO, she relies on the expression "actually incurred" in proviso (iv) to Section 17(2) which allows exemption of medical reimbursement up to Rs.15000/- to an Assessee. 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.
Page 11 of 19ITA Nos.738 to 741 of 2012 Honeywell Technology Solution Lab Pvt Ltd Bangalore
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 the fact that no application of fund could determine the taxability or exemption of any income let alone salary. Therefore, 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 Page 12 of 19 ITA Nos.738 to 741 of 2012 Honeywell Technology Solution Lab Pvt Ltd Bangalore 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 difference between "Allowance" and "LTC and Medical Reimbursement". An allowance according to the AO can be given in advance whereas LTC and medical reimbursement are not in the nature of allowance and therefore cannot be given like an allowance before they are incurred. The AO's further case is that at the time of disbursement by the employer the same assumes the character of salary and its later application for purposes which are exempt will only be application of income and therefore accrual of income in the form of salary takes place on which tax had to be deducted at source.
24. To appreciate the stand taken by the AO, we have to look at the relevant provisions of Sec.192 of the Act in so far as the same is relevant for the present case.
"192. Salary.-(1) Any person responsible for paying any income chargeable under the head "Salaries"
shall, at the time of payment, deduct income-tax on the amount payable at the average rate of income- tax 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 Page 13 of 19 ITA Nos.738 to 741 of 2012 Honeywell Technology Solution Lab Pvt Ltd Bangalore 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 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 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 in the later months of the previous year. What has to be seen is the taxes to be deducted on income under the head 'salaries' as on the last date of the previous year. The case of the AO is that LTC and Medical reimbursement should be paid at the time the expenditure is incurred or after the expenditure is Page 14 of 19 ITA Nos.738 to 741 of 2012 Honeywell Technology Solution Lab Pvt Ltd Bangalore incurred by way of reimbursement and not at an earlier point of time. If it is so paid, then, even though the payment would not form part of taxable salary of an employee, the employer has to deduct tax at source treating it as part of salary, is contrary to the provisions of Sec.192(3) of the Act and cannot be sustained. The reliance placed by the AO on the expression "actually incurred" found in Sec.10(5) of the Act and proviso (iv) to Sec.17(2) of the Act, in our view cannot be sustained. In any event, the interpretation of the word "actually paid" is not relevant while ascertaining the quantum of tax that has to be deducted at source u/s.192 of the Act. As far as the Assessee 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 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 vs. Nicholas Piramal India Ltd (2008) 299 ITR 0356 (BOMBAY);
CIT v. Semiconductor Complex Ltd [2007] 292 ITR 636 (P&H) Page 15 of 19 ITA Nos.738 to 741 of 2012 Honeywell Technology Solution Lab Pvt Ltd Bangalore 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 the requirements of rule 2B and the process adopted in considering the exemption under section 10(5) and proviso to section 17(2). The assessee is a law abiding Company. Internal controls are in place to discharge the statutory obligation under section 192. Honest and bona fide estimate of taxable salary is made in the process of deducting tax at source under section 192. Every effort is made by the assessee to comply with the requirements of section 192. The assessee is not benefited by allowing employees to claim exemption. The order passed by the AO under section 201(1) & 201(1A) is therefore bad in law and rightly quashed by the CIT(A).
29. In the light of the admitted position that the conditions for grant of exemption u/s.10(5) of the Act to the employees in respect of LTC and also the fact that up to Rs.15,000 per employee medical reimbursement paid by the Assessee satisfies conditions contemplated by the proviso (iv) to Sec.17(2) of the Act, can the AO deny to the employee in their assessment, exemption u/s.10(5) or relief under the proviso to (iv) to Sec.17(2) of the Act? The answer admittedly is 'no', because the AO Page 16 of 19 ITA Nos.738 to 741 of 2012 Honeywell Technology Solution Lab Pvt Ltd Bangalore 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 so given are the same figures on the basis of which the AO has passed order u/s.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) Decision of Hon'ble Karnataka High Court in the case of CIT Vs. Tata Elxsi ITA No.82 of 2003 dated 23.1.2008.Page 17 of 19
ITA Nos.738 to 741 of 2012 Honeywell Technology Solution Lab Pvt Ltd Bangalore We have not examined the above argument for the reason that the assertion of the assessee in this regard has not been examined either by the AO or CIT(A).
32. For the reasons given above, we do not find any grounds to interfere with the order of the CIT(A). Consequently, these appeals by the Revenue are dismissed.
33. In the result, the appeals are dismissed".
7. Since the facts of this case is identical to the facts considered by the Tribunal in the case cited above (Supra), we follow the Coordinate Bench order of the Tribunal in ITA No.1391/Bang/2012 (Supra) and decide the issue of TDS on payments made to employee for LTC and Medical Reimbursement in favour of the assessee.
8. The CIT (A) held that disbursement of meal coupons made by the assessee employer 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 holding so the reasoning of the CIT (A) are under:
i) The food vouchers issued per meal per employee is as per the Rules.
ii) The assessee has ensured that the coupons are non-
transferrable and valid for ready to eat items and for food products.
iii) No instance has been brought on record indicating any violation of the Rules.
9. After hearing the rival submissions, we are of the view that the facts of the decision in the case of Cedilla Healthcare (Supra) are similar to the issue in the assessee's case wherein it was held that the TDS is not applicable on food coupons/meal vouchers. The relevant findings of the Tribunal in the case of Cedilla Healthcare Page 18 of 19 ITA Nos.738 to 741 of 2012 Honeywell Technology Solution Lab Pvt Ltd Bangalore has already reproduced at Para 5.6 of the CIT (A)'s order. Hence the same is not reiterated here. In view of the order of the Tribunal in the case cited (supra), we are of the view that the CIT (A) is justified in holding that the expenditure incurred on disbursement of meal coupons by the employer to the employees did not attract the provisions of section 192 of the Act. It is ordered accordingly.
10. In the result appeals filed by the Revenue are dismissed.
Order pronounced at the end of the hearing on 10th July, 2013.
Sd/- Sd/-
(N. Barthvaja Sankar) (George George K)
Vice President Judicial Member
Bangalore dated 10th July, 2013.
Vnodan/sps
Copy to:
1. The Appellant
2. The Respondent
3. The concerned CIT(A)
4. The concerned CIT
5. The DR, ITAT, Bangalore
By Order
Senior Private Secretary
Income Tax Appellate Tribunal,
Bangalore Benches, Bangalore
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