ITO, Bangalore V. M/s LG Soft India Private Limited, Bangalore

ITA 1306/BANG/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68301 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-07-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 08-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIMAL ANAND
• Assessee Lawyers: K R VASUDEVAN
• Keywords: Earning of tax free income; Non-deduction of tax; Difference of opinion; Corroborative evidences; Benefit of exemption
• Section: 133A; 201(1)

Judgement Text

ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 1 OF 22 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE B BENCHES, BANGALORE BEFORE SHRI N. BARTHVAJASANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K. JUDICIAL MEMBER ITA NOS.1304 TO 1307/BANG/2012 & 949 TO 952/BANG/2012 (ASSESSMENT YEARS: 2007-08 TO 2010-11) INCOME TAX OFFICER, WARD 16(2), NO.59, 4 TH FLOOR, HMT BHAVAN, BELLARY ROAD, BANGALORE 560032 VS. M/S LG SOFT INDIA PRIVATE LIMITED EMBASSY TECH SQUARE, MARATHAHALLI, SARJAPUR OUTER RING ROAD, BANGALORE-560013 PAN: AAACL 3009 P (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI VIMAL ANAND, DR ASSESSEE BY: SHRI K.R.VASUDEVAN, ADV. DATE OF HEARING: 14/08/2013 DATE OF PRONOUNCEMENT: 23/08/2013 O R D E R PER BENCH: THESE EIGHT APPEALS INSTITUTED AT THE INSTANCE OF THE REVENUE ARE DIRECTED AGAINST THE CONSOLIDATED ORDER OF THE CIT (A)-II, BANGALORE, DATED 1.8.2012 IN RELATION TO TH E ASSESSMENT YEARS 2007-08 TO 2010-11 . THE CIT (A)S ORDER ARISES OUT OF THE ORDERS OF THE AO PASSED U/S 201(1) AND U/S 201( 1A) OF THE ACT DATED 29.3.2011 AND 30.3.2011 RESPECTIVELY. 2. THE MAIN DISPUTES IN THESE APPEALS ARE REGARDING THE OBLIGATION OF THE ASSESSEE COMPANY TO DEDUCT TAX AT SOURCE (TDS) ON PAYMENTS MADE TO ITS EMPLOYEES ON ACCOUNT OF (I) LEAVE TRAVEL ALLOWANCE (LTA); (II) MEDICAL REIMBURS EMENT; (III) ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 2 OF 22 REIMBURSEMENT ON TELEPHONE BILLS/VEHICLE MAINTENANC E/FUEL COST/ CONVEYANCE; AND (IV) MEAL VOUCHERS/FOOD COUPO NS (AY 2010-11). 3. BRIEF FACTS RELATING TO THE CASE ARE AS UNDER: THERE WAS A SURVEY OPERATION IN THE PREMISES OF TH E ASSESSEE COMPANY ON 31.1.2011 BY THE INCOME-TAX OFF ICER (TDS), WARD 16(2), BANGALORE [THE AO]. THE AO HAD CONSIDERED THE ASSESSEE AS ASSESSEE IN DEFAULT U/S 201(1) OF THE ACT IN RESPECT OF CERTAIN ITEM OF SALARY PAYMENTS MADE T O ITS EMPLOYEES. THE AO ALSO LEVIED INTEREST U/S 201(1A) OF THE ACT ON TAX NOT DEDUCTED FROM THE DATES ON WHICH THE TAX ES OUGHT TO HAVE BEEN DEDUCTED TILL THE DATES ON WHICH THE T AXES OUGHT TO BE PAID OVER TO THE GOVERNMENT EXCHEQUER. THE D ETAILS OF ITEMS AND DEMAND RAISED YEAR-WISE ARE AS UNDER: ALLOWANCES/BENEFITS 2007-08 (RS.) 2008-09 (RS.) 2009-10 (RS.) 2010-11 (RS.) TOTAL (RS.) MEDICAL ALLOWANCE 4148462 3990413 4152237 4044739 LTA 719771 902062 1077953 871387 FUEL REIMBURSEMENT 4394729 4954305 5757687 2555543 CONVEYANCE 403926 301565 263351 202180 TELEPHONE [phone] 4057193 4890901 CAR MAINTENANCE 55275 49355 92186 158237 SODEXO MEAL VOUCHERS - - - 11899895 TOTAL 12788423 13755774 15400607 24600882 TAX LIABILITY 3506955 4146862 4563014 8179528 20396359 TOTAL TAX PAYABLE + INT. U/S 201(1A) 5190293 5639732 5658137 9161071 5252874 TOTAL PAYABLE 2,56,49,233 4. ON APPEALS, THE CIT (A) CANCELLED THE DEMANDS RA ISED U/S 201(1) AND ALSO THE INTEREST CHARGED U/S 201(1A ) OF THE ACT. THE RELEVANT PORTIONS OF THE FINDINGS OF THE CIT (A) WITH REGARD TO THE DELETION OF THE DEMANDS FOR ALL THE A YS UNDER DISPUTE IN RESPECT OF NON-DEDUCTION OF TAX FOR MEDICAL REIMBURSEMENT READ AS FOLLOWS: ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 3 OF 22 4.3. I HAVE CAREFULLY CONSIDERED THE APPELLANTS SUBMISSIONS AND PERUSED THE AOS ORDER. THE EMPLOYEES ARE PAID UP-TO RS.15000/- PER ANNUM SPLIT INTO MONTHLY DISBURSEMENTS. THIS AMOUNT IS TREATED AS EXEMPT UNDER THE PROVISIONS OF I.T. ACT ONLY IF SUP PORTED BY BILLS. WHEREVER BILLS ARE PROVIDED THE AMOUNT I S TREATED AS A TAXABLE SALARY AND TAX IS DEDUCTED DUR ING THE FINANCIAL YEAR-END. 4.4. ON THE FACTS OF THE CASE, I FIND THAT: (A) NO INSTANCE HAS BEEN BROUGHT ON RECORD TO SUGGEST THAT, IN THE CASE OF ANY EMPLOYEE, THE BENEFIT OR ALLOWANCE HAS BEEN ALLOWED WITHOUT TDS DURING THE FINANCIAL YEAR, IF IT IS NOT BACKED BY ACTUAL EXPENDITURE. B) IN SUCH A CASE, THE BENEFIT PROVIDED CLEARLY FIT S 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 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 BOARDS 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, CIRCULA R 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 ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 4 OF 22 SPOUSE, CHILDREN OR PARENTS, INCLUDING THE PROVISIO N 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 EMPLOYE R; (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 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 STA Y 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 FOR ANY OTHER INTERPRETATION. 4.5. 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 ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 5 OF 22 SALARIES BY THE BY THE EMPLOYER APPELLANT. MERELY BECAUSE THE SAME IS TAKEN INTO ACCOUNT AT THE BEGIN NING OF THE YEAR OR AT THE TIME OF DECIDING HIS/HER SALA RY, WHICH ITSELF IS IN TERMS OF COST TO COMPANY, IT C ANNOT BE SAID THAT IT CEASES TO BE A PERQUISITE AND, THEREFO RE, 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 N OT BACKED BY BILLS, IT IS LIABLE TO TDS AND THIS LIABI LITY IS NOT DENIED OR INFRINGED. 4.6 THEREFORE, IN MY VIEW, THE VIEW OF THE AO IS A VERY NARROW AND TECHNICAL INTERPRETATION AND IN RELATION TO A WELFARE MEASURE TO THE EMPLOYEES ACROSS THE SALARIE D STRATA CANNOT BE THE CORRECT INTERPRETATION. 4.7. THERE IS, THEREFORE, NO CASE FOR TAKING ACTIO N U/S 201(1) AND 201(1A) OF THE ACT. HENCE, THE DEMAND R AISED AND INTEREST CHARGED U/S 201(1) AND 201(1A) ARE UNCALLED FOR AND THEY ARE, THEREFORE, CANCELLED. 4.1 SIMILARLY, THE FINDINGS OF THE CIT (A) WITH REG ARD TO CANCELLATION OF DEMAND IN RESPECT OF NON-DEDUCTION OF TAX FOR PAYMENTS MADE ON ACCOUNT OF LTA READS AS FOLLOWS: 3.3. I HAVE CAREFULLY CONSIDERED THE FACTS, THE APPELLANTS SUBMISSIONS AND PERUSED THE ELABORATE ORDER. THE SUMMARY OF THE AOS OBSERVATIONS IS THA T LTA IS PAID TO AN EMPLOYEE IRRESPECTIVE OR WHETHER OR NOT AN EMPLOYEE: (I) HAS ANY INTENTION TO PROCEED ON LEAVE; (II) HAS ANY INTENTION TO TRAVEL; (III) HAS ALREADY AVAILED THE BENEFIT IN THE PREVIO US CALENDAR YEAR/FINANCIAL YEAR AND THEREBY DISENTITLI NG HIM TO THE EXEMPTION FROM TAX. 3.4. THE APPELLANT HAS STATED IN ITS SUBMISSIONS AS UNDER: (I) THE LTA IS A FIXED SUM PER ANNUM PAID AS REIMBURSEMENT OR AT THE REQUEST OF THE EMPLOYEE IN THE BEGINNING OF THE FINANCIAL YEAR; (II) EXEMPTION CAN BE CLAIMED ONLY IF THE EMPLOYEES AVAIL AT LEAST 1 EARNED LEAVE DURING THE TRAVEL; ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 6 OF 22 (III) EXEMPTION FROM TAX IS PROVIDED SUBJECT TO SATISFACTION OF SPECIFIC CONDITIONS; OTHERWISE, TAX ES ARE WITHHELD AND IT IS TREATED AS TAXABLE SALARY; (IV) ONLY TRAVEL COST HAS BEEN MADE ELIGIBLE FOR EXEMPTION; (V) ORIGINAL TRAVEL DOCUMENTS SHOULD BE PRODUCED FO R AVAILING THE TAX EXEMPTION; (VI) ONLY TWO JOURNEYS ARE PERMITTED DURING THE REL EVANT BLOCK PERIOD. 3.5. THE AO HAS DENIED THE CLAIM OF THE EMPLOYER APPELLANT U/S 10(5) READ WITH RULE 2B ON THE GROUND THAT THE AMOUNT WAS PAID WHETHER OR NOT THE EMPLOYE E HAD THE INTENTION OF PROCEEDING ON LEAVE OR NOT AND , EVEN IN CASES WHERE EMPLOYEES HAD ALREADY AVAILED O F THE BENEFIT IN THE PREVIOUS YEAR, THEREBY DISENTITL ING HIM FROM THE BENEFIT OF INCOME-TAX IN THE YEAR IN QUEST ION AND, THEREFORE, IT COULD NOT BE AN ALLOWANCE, BUT, MERELY A TAXABLE SALARY. 3.6. THE FACT REMAINS THAT, WHENEVER AN AMOUNT IS P AID, WHERE EITHER THE EMPLOYER HAS NOT AVAILED OF ACTUAL TRAVEL OR HAS AVAILED OF THE ALLOWANCE OVER AND ABO VE THE EXEMPTION IN THE FINANCIAL YEAR AND, THEREFORE, IS DISENTITLED TO THE BENEFIT OF EXEMPTION; TAX HAS BE EN DEDUCTED AT SOURCE. NO INSTANCE HAS BEEN BROUGHT O N RECORD BY THE AO THAT THE EMPLOYER HAS DISBURSED TH E AMOUNT WITHOUT DEDUCTION OF TAX IN CASES WHERE THE BENEFIT IS NOT BACKED BY BILLS OR IN EXCESS OF AMOU NT ALLOWABLE UNDER THE I.T. ACT. THE ONLY CASE OF THE AO IS THAT THE INTENTION OF EMPLOYER IS TO DISBURSE THE S AID SUM IRRESPECTIVE OF WHETHER AN EXEMPTION WILL BE ALLOWED TO AN EMPLOYEE OR NOT AND, THEREFORE, IT IS SIMPLY AN ALLOWANCE AND NOT A CONCESSION OR ASSISTANCE AS ENVISAGED IN THE I.T.ACT. 3.7. IN MY VIEW, THE BASIC REQUIREMENTS OF THE I.T . ACT READ WITH THE RELEVANT RULES ARE MET I.E., (I) NO DISBURSEMENT NOT BACKED BY BILLS/PROOF IS TR EATED IS NOT TAXABLE; (II) NO DISBURSEMENT IN EXCESS OF I.T. RULES HAS BE EN TREATED AS EXEMPT DURING THE FINANCIAL YEAR. ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 7 OF 22 3.8. THE INTERPRETATION OF THE AO IS TOO NARROW AN D TECHNICAL AND THE SAID BENEFIT WOULD CLEARLY FIT IN TO THE MEANING OF ASSISTANCE IN SUM AND SUBSTANCE. AS C AN BE SEEN FROM THE SUBMISSIONS MADE BY THE APPELLANT, CARE HAS BEEN TAKEN BY THE EMPLOYER TO SEE THAT THE RE 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. 4.2 THE FINDING OF THE CIT (A) IN REGARD TO MEAL VOUCHERS (AY 2010-11) ARE AS FOLLOWS: 9.5. 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 . 9.6 IT IS ALSO TO BE SEEN THAT THESE BENEFITS ARE PROVIDED TO EMPLOYEES ALL ACROSS THE SALARIED STRAT A 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, A NY OTHER INFERENCE CAN BE DRAWN, BUT THE ADMINISTRATIV E 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 ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 8 OF 22 INTERPRETATION OF THE AO IS VERY NARROW AND TECHNIC AL AND IN RESPECT OF A WELFARE MEASURE CANNOT BE THE CORRE CT INTERPRETATION. IN THIS CONNECTION, I DERIVE SUPPOR T FROM THE ORDER OF THE HON'BLE ITAT BENCH A AHMEDABAD I N 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. 9.7 IN VIEW OF THE DISCUSSIONS MADE IN THE PRECEDIN G PARAGRAPHS, I HOLD THAT THE DISBURSEMENT OF THE MEA L COUPONS MADE BY THE APPELLANT EMPLOYER IN THE PRESE NT CASE TO ITS EMPLOYEES DID NOT ATTRACT TDS U/S 192 A ND THE ACTION OF THE AO IN RAISING DEMAND U/S 201(1) A ND CHARGING INTEREST U/S 201(1A) IS UNCALLED FOR AND D ELETE THE SAME. ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 9 OF 22 4.3 WITH REGARD TO TELEPHONE BILLS REIMBURSEMENTS, VEHICLE MAINTENANCE, FUEL CONSUMPTION, CONVEYANCE ALLOWANCE ETC., THE FINDINGS OF THE CIT (A) ARE AS FOLLOWS: 10. FOR TELEPHONE (BILLS)REIMBURSEMENTS, VEHICLE MAINTENANCE, FUEL CONSUMPTION, CONVEYANCE ALLOWANCE AS DISCUSSED ABOVE AT PARAS 5,6,7 AND 8 RESPECTIVEL Y, THE REIMBURSEMENTS ARE SUPPORTED BY ACTUAL EXPENDITURE (BILLS OR VOUCHERS) AND ARE WITHIN THE LIMITS PROVIDED UNDER THE RELEVANT PROVISIONS OF THE I.T. ACT. MOREOVER, WHEREVER THE AMOUNTS ARE PAID WITHOUT ANY SUPPORTING EVIDENCE OF HAVING BEEN INCURRED BY THE EMPLOYEE CONCERNED, THESE ARE TREATED AS TAXABLE ALLOWANCE AND TAX IS DEDUCTED AT SOURCE ON THE SAME AT THE END OF THE SAME FINANCIAL YEAR. MERELY BECAUSE THESE ARE PRE-DETERMINED BY THE EMPLOYER AND TREATE D AS HIS SALARY COMPONENT WHICH IS WORKED OUT IN TERM S OF COST TO COMPANY, IT CANNOT BE HELD THAT THE EXEMPTION PROVIDED UNDER THE ACT (READ WITH RELEVAN T RULES) FROM THE AMBIT OF SECTION 17(2) TO CERTAIN PERQUISITES WOULD NOT APPLY. THIS VIEW OF THE AO W OULD BE TOO NARROW AND TECHNICAL IN TERMS OF INTERPRETIN G A TAX BENEFIT ALLOWABLE AS A WELFARE MEASURE UNDER TH E I.T. ACT AND APPLICABLE TO SALARIED STRATA OF EMPL OYEES OF PRIVATE SECTOR ALL ACROSS THE COUNTRY AND, THERE FORE, CANNOT BE THE CORRECT INTERPRETATION OF THE I. T LA W. THERE IS NO CASE TO HOLD THAT THE TDS PROVISIONS HA VE BEEN VIOLATED BY THE APPELLANT. 5. AGGRIEVED BY THE ORDER OF THE CIT (A), THE REVEN UE IS IN APPEAL BEFORE US RAISING 34 IDENTICAL GROUNDS FOR A LL THE ASSESSMENT YEARS UNDER CONSIDERATION. THE LEARNED DR SUPPORTED THE ORDERS OF THE AO PASSED U/S 201(1) AN D U/S 201(1A) OF THE ACT. ON THE OTHER HAND, THE LEARNE D AR SUBMITTED THAT THE ISSUES IN QUESTION ARE SQUARELY COVERED BY THE FINDINGS OF THE EARLIER BENCHES OF THIS TRIBUNA L IN THE CASES OF (I) ACIT (TDS) V. INFOSYS TECHNOLOGIES LTD IN IT A NOS.742 & 743/B/2012 DATED 4.7.2013, (II) ACIT (TDS) V. HONE YWELL TECHNOLOGY SOLUTIONS LAB PVT. LTD IN ITA NOS. 738 T O 7412/B/12 DATED 10.7.2013; (III) ACIT (TDS) V. M/S. ORACLE ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 10 OF 22 INDIA PVT. LTD IN ITA NOS.1215 TO 1217/B/12 ETC. DA TED 31.7.2013 & ACIT (TDS) V. M/S. INFOSYS BPO IN ITA N OS. 1390 & 1391/B/12 DATED 28.6.2013 IN REGARD TO LTC AND ME DICAL REIMBURSEMENT. IT WAS, FURTHER, SUBMITTED THAT THE EXPENDITURE INCURRED FOR MEAL VOUCHERS, THE ISSUE O F TDS ON THE SAME IS SQUARELY COVERED IN FAVOUR OF THE ASSES SEE BY THE FINDINGS OF THE HONBLE AHMEDABAD BENCH OF THE TRIB UNAL IN THE CASE OF CEDILLA HEALTH CARE REPORTED IN 2011-TI OL-582- ITAT-AHD. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE ISSUES RAISED IN THESE APPEALS REGARDING TDS ON LTA AND MEDICAL REIMBURSEM ENT ARE IDENTICAL TO THE ISSUES CONSIDERED BY THE EARLIER B ENCH OF THIS TRIBUNAL IN THE CASE OF M/S. INFOSYS BPO (SUPRA). THE RELEVANT FINDINGS OF THE TRIBUNAL READ 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 BUSIN ESS PREMISES OF THE ASSESSEE ON 5.10.2010. BASED ON TH E 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. 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. ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 11 OF 22 ******** 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 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 ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 12 OF 22 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 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 SHOW S 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 NO T 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 GIV EN ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 13 OF 22 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 PAR T 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, ACCORD ING TO THE AO, LTC AND MEDICAL REIMBURSEMENT SHOULD BE PAID AT THE TIME THE EXPENDITURE IS INCURRED OR AFT ER THE EXPENDITURE IS INCURRED BY WAY OF REIMBURSEMENT AND NOT AT AN EARLIER POINT OF TIME. IF IT IS SO P AID, THEN, ACCORDING TO THE AO, EVEN THOUGH THE PAYMENT WOULD NOT FORM PART OF TAXABLE SALARY OF AN EMPLOYE E, THE EMPLOYER HAS TO DEDUCT TAX AT SOURCE TREATING I T AS PART OF SALARY. IN SUPPORT OF THE STAND TAKEN BY T HE AO, SHE RELIES ON THE EXPRESSION ACTUALLY INCURRED IN PROVISO (IV) TO SECTION 17(2) WHICH ALLOWS EXEMPTIO N OF MEDICAL REIMBURSEMENT UP TO RS.15000/- TO AN ASSESSEE. AS FAR AS LTC IS CONCERNED, THE AO RELIE S ON THE EXPRESSION VALUE OF TRAVEL CONCESSION OR ASSISTANCE RECEIVED BY AN EMPLOYEE IN CONNECTION WI TH HIS PROCEEDING, (A) ON LEAVE TO ANY PLACE IN INDIA; (B) TO ANY PLACE IN INDIA AFTER RETIREMENT FROM SER VICE 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 T HE 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 BOAR D CIRCULAR CONCISELY PUTS ACROSS THE PROVISIONS OF TH E ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 14 OF 22 STATUTE WHICH HAVE BEEN ARTICULATED AT LENGTH IN THIS ORDER TO DRIVE HOME THE FACT THAT NO APPLICATI ON 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 AN D DOESNT 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 THA T 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 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 CA SE 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 C AN BE GIVEN IN ADVANCE WHEREAS LTC AND MEDICAL REIMBURSEMENT ARE NOT IN THE NATURE OF ALLOWANCE AN D THEREFORE CANNOT BE GIVEN LIKE AN ALLOWANCE BEFORE THEY ARE INCURRED. THE AOS FURTHER CASE IS THAT AT THE TIME ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 15 OF 22 OF DISBURSEMENT BY THE EMPLOYER THE SAME ASSUMES TH E CHARACTER OF SALARY AND ITS LATER APPLICATION FOR P URPOSES WHICH ARE EXEMPT WILL ONLY BE APPLICATION OF INCOME AND THEREFORE ACCRUAL OF INCOME IN THE FORM OF SALARY T AKES PLACE ON WHICH TAX HAD TO BE DEDUCTED AT SOURCE. 24. TO APPRECIATE THE STAND TAKEN BY THE AO, WE HAV E TO LOOK AT THE RELEVANT PROVISIONS OF SEC.192 OF TH E 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 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 PERSO N MAKING PAYMENT HAS TO MAKE AN HONEST OF INCOME UNDER THE HEAD SALARY PAYABLE BY HIM TO HIS EMPLOYE E AT THE TIME OF PAYMENT. THE PERSON MAKING THE PAYMENT HAS TO TAKE INTO CONSIDERATION VARIOUS DEDUCTIONS PERMITTED UNDER THE ACT UNDER CHAPTER VI A OF THE ACT, AS ALSO EXEMPT INCOME UNDER SEC.10 OF T HE ACT. REBATE AVAILABLE UNDER SECTIONS 88 AND 88B CA N BE CONSIDERED BY THE EMPLOYER. EMPLOYER SHOULD OBTA IN THE PROOF OF INVESTMENT MADE BY THE EMPLOYEE AND SHOULD NOT RELY ON SIMPLE DECLARATION OR ORAL ASSUR ANCE. CERTAIN EMPLOYEES WHO ARE ENTITLED TO RELIEF UNDER SECTION 89(1) CAN FURNISH THE INFORMATION IN PRESCR IBED FORM TO THE EMPLOYER, AND IN SUCH CASES EMPLOYER CA N ADJUST THE AMOUNT OF TDS BY ALLOWING RELIEF AVAILAB LE ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 16 OF 22 UNDER SECTION 89. IT IS FOR THE EMPLOYER TO PROVE THE ALLOWANCES AND PERQUISITES GIVEN TO THE EMPLOYEE AR E 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 S ALARY 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 EXPENDI TURE ON MEDICAL TREATMENT UP TO RS.15,000/- AND THE AVAILING OF THE LTC BY THE EMPLOYEES AND THE FULFIL LMENT 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 DED UCTIONS PERMISSIBLE UNDER PROVISO (IV) TO SEC.17(2) OR EXEM PTION U/S.10(5) OF THE ACT IN THE LATER MONTHS OF THE PRE VIOUS YEAR. WHAT HAS TO BE SEEN IS THE TAXES TO BE DEDUC TED ON INCOME UNDER THE HEAD SALARIES AS ON THE LAST DATE OF THE PREVIOUS YEAR. THE CASE OF THE AO IS THAT L TC AND MEDICAL REIMBURSEMENT SHOULD BE PAID AT THE TIM E THE EXPENDITURE IS INCURRED OR AFTER THE EXPENDITUR E IS INCURRED BY WAY OF REIMBURSEMENT AND NOT AT AN EARL IER 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 P ROVISIONS OF SEC.192(3) OF THE ACT AND CANNOT BE SUSTAINED. THE RELIANCE PLACED BY THE AO ON THE EXPRESSION ACTUAL LY INCURRED FOUND IN SEC.10(5) OF THE ACT AND PROVISO (IV) TO SEC.17(2) OF THE ACT, IN OUR VIEW CANNOT BE SUST AINED. IN ANY EVENT, THE INTERPRETATION OF THE WORD ACTUA LLY PAID IS NOT RELEVANT WHILE ASCERTAINING THE QUANTU M OF TAX THAT HAS TO BE DEDUCTED AT SOURCE U/S.192 OF TH E ACT. AS FAR AS THE ASSESSEE IS CONCERNED, HIS OBLI GATION IS ONLY TO MAKE AN ESTIMATE OF THE INCOME UNDER T HE HEAD SALARIES AND SUCH ESTIMATE HAS TO BE A BONAF IDE 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 DEDUCTO R THAT IS TO BE PROCEEDED AGAINST BUT THE PAYEES OF THE SUMS. TO REITERATE, THE PAYMENT TOWARDS MEDICAL EXPENDITURE ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 17 OF 22 AND LEAVE TRAVEL IS MADE KEEPING IN VIEW THE EMPLOY EE WELFARE. THE EXCLUSION IN RESPECT OF PAYMENT TOWARD S MEDICAL EXPENDITURE AND LEAVE TRAVEL IS CONSIDERED AFTER VERIFYING THE DETAILS AND EVIDENCE FURNISHED BY THE EMPLOYEES. NO EXEMPTION IS GRANTED IN THE ABSENCE O F DETAILS AND/OR EVIDENCE. THE EXEMPTION IN RESPECT O F MEDICAL EXPENDITURE IS RESTRICTED TO EXPENDITURE AC TUALLY INCURRED BY THE EMPLOYEES, OR RS. 15,000/- WHICHEVE R IS LOWER. THE EXEMPTION IS GRANTED EVEN IF THE PAYMENT PRECEDES THE INCURRENCE OF EXPENDITURE. THE REQUIREMENTS/CONDITIONS OF SECTION 10(5) AND PROVIS O TO SECTION 17(2) ARE METICULOUSLY FOLLOWED BEFORE EXTE NDING THE DEDUCTION/ EXEMPTION TO AN EMPLOYEE. NO TAX CA N BE RECOVERED FROM THE EMPLOYER ON ACCOUNT OF SHORT DEDUCTION OF TAX AT SOURCE UNDER SECTION 192 IF A B ONA FIDE ESTIMATE OF SALARY TAXABLE IN THE HANDS OF THE EMPLOYEE IS MADE BY THE EMPLOYER, IS THE RATIO OF T HE FOLLOWING DECISIONS. CIT VS. NICHOLAS PIRAMAL INDIA LTD (2008) 299 ITR 0356 (BOMBAY); CIT V. SEMICONDUCTOR COMPLEX LTD [2007] 292 ITR 636 (P&H) 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 LEA VE TRAVEL IS CONSIDERED AFTER COLLECTING AND VERIFYING THE DETAILS AND EVIDENCE FURNISHED BY THE EMPLOYEES. POLICIES AND CONTROLS ARE IN FORCE TO ENSURE THAT T HE REQUIREMENTS OF RULE 2B ARE FULFILLED. THE DETAILS FILED BEFORE THE TDS OFFICER EXPLAINS THE POLICIES ADOPTE D TO FULFILL THE REQUIREMENTS OF RULE 2B AND THE PROCESS ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 18 OF 22 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 19 2. HONEST AND BONA FIDE ESTIMATE OF TAXABLE SALARY IS MADE IN THE PROCESS OF DEDUCTING TAX AT SOURCE UNDE R SECTION 192. EVERY EFFORT IS MADE BY THE ASSESSEE T O 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 AN D 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 T HAT UP TO RS.15,000 PER EMPLOYEE MEDICAL REIMBURSEMENT PAID BY THE ASSESSEE SATISFIES CONDITIONS CONTEMPLA TED BY THE PROVISO (IV) TO SEC.17(2) OF THE ACT, CAN TH E AO DENY TO THE EMPLOYEE IN THEIR ASSESSMENT, EXEMPTION U/S.10(5) OR RELIEF UNDER THE PROVISO TO (IV) TO SE C.17(2) OF THE ACT? THE ANSWER ADMITTEDLY IS NO, BECAUSE TH E 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 SOUR CE 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 UNSUSTAI NABLE 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 N O DISPUTE THAT THE ASSESSEE HAS SATISFIED ITSELF THAT THE EMPLOYEES WERE ENTITLED TO EXEMPTION U/S.10(5) AS W ELL AS RELIEF UNDER PROVISO (IV) TO SEC.17(2) OF THE AC T. AS FAR AS LACK OF OPPORTUNITY IS CONCERNED, WE FIND THAT T HE 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 EMPLOY EE 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 FIND ING THAT THERE WAS NO DISPUTE THAT THE ASSESSEE HAS ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 19 OF 22 SATISFIED ITSELF THAT THE EMPLOYEES WERE ENTITLED T O 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 DISPUTE D 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 IN COME 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 I TR 226 (SC) CIT VS. ELI LILLY & CO. 312 ITR 225 (SC) DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CAS E OF CIT VS. TATA ELXSI ITA NO.82 OF 2003 DATED 23.1.200 8. WE HAVE NOT EXAMINED THE ABOVE ARGUMENT FOR THE REASON THAT THE ASSERTION OF THE ASSESSEE IN THIS R EGARD 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. 6.1. SINCE THE FACTS OF THIS CASE IS IDENTICAL TO T HE FACTS CONSIDERED BY THE TRIBUNAL IN THE CASE OF INFOSYS B PO (ITA NO.1390 & 1391/BANG/2012 DATED 28.06.2013 WE FOLLOW THE COORDINATE BENCH ORDER OF THE TRIBUNAL AND DECIDE T HE ISSUE OF TDS ON PAYMENTS MADE TO EMPLOYEE FOR LTC AND MEDICA L REIMBURSEMENT IN FAVOUR OF THE ASSESSEE. 7. WITH REGARD TO THE DISBURSEMENT OF MEAN COUPONS MADE BY THE ASSESSEE EMPLOYER TO ITS EMPLOYEES, THE CI T (A) HELD THAT THE ACTION OF THE ASSESSEE DID NOT ATTRACT TDS U/S 192 OF THE ACT. THE CIT (A) TOOK THE ABOVE STAND BY FOLLO WING THE ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 20 OF 22 FINDINGS OF THE AHMEDABAD TRIBUNAL IN THE CASE OF M /S. CEDILLA HEALTHCARE LIMITED (SUPRA). 7.1. AFTER HEARING THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THE FACTS OF THE DECISION OF IN THE CASE OF CE DILLA HEALTHCARE (SUPRA) ARE SIMILAR TO THE ISSUE IN THE ASSESSEES CASE WHEREIN IT WAS HELD THAT THE TDS IS NOT APPLIC ABLE ON FOOD COUPONS/MEAL VOUCHERS. THE RELEVANT FINDING OF THE TRIBUNAL IN THE CASE OF CEDILLA HEALTHCARE HAS ALREADY BEEN REPRODUCED AT PARAGRAPH 9.6 OF THE CIT (A)S ORDER. HENCE, TH E SAME IS NOT REPRODUCED HERE. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. RELIANCE INDUSTRIES REPORTED IN 308 ITR 8 2 (GUJ) HAD ALSO TAKEN AN IDENTICAL VIEW. 7.2. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT THE CIT (A) WAS JUSTIFIED IN HOLDING THAT THE EXPENDITURE INCUR RED ON DISBURSEMENT OF MEAL COUPONS BY THE EMPLOYER TO THE EMPLOYEES DID NOT ATTRACT THE PROVISIONS OF S. 192 OF THE ACT. IT IS ORDERED ACCORDINGLY. 8. WITH REGARD TO THE REVENUES OBJECTION IN RESPEC T OF TELEPHONE BILLS REIMBURSEMENTS, VEHICLE MAINTENANCE , FUEL CONSUMPTION, CONVEYANCE ALLOWANCE ETC., IT IS OBSER VED THAT THESE ISSUES HAVE BEEN ELABORATELY DEALT WITH BY TH E CIT (A) IN HER ORDER UNDER DISPUTE. AFTER DUE CONSIDERATION O F THE RELEVANT FACTS AS RECORDED IN HER ORDER, THE CIT (A ) CAME TO THE CONCLUSION THAT 5.3.THE FACT REMAINS THAT ONLY THE AMOUNT ALLOWABLE U/S 17(2) OF THE ACT READ WITH RUL E 3(7)(IX) PROVISO OF I.T. RULES AND SUPPORTED BY VOUCHERS IS TREATED AS A NON-TAXABLE PERQUISITE. NO INSTANCE IS BROUGHT ON RECORD BY THE ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 21 OF 22 AO TO SUGGEST THAT THERE IS ANY VIOLATION IN THIS R EGARD. FOR THE REASONS DISCUSSED ABOVE AND AT PARA 10 BELOW, THERE IS NO CASE FOR TAKING ACTION U/S 201(1) AND 201(1A) OF THE ACT . HENCE, THE DEMAND RAISED AND INTEREST CHARGED U/S 201(1) AND 2 01(1A) ARE UNCALLED FOR AND THEY ARE, THEREFORE, CANCELLED . FOR IDENTICAL REASONING, THE CIT (A) HAD ALSO CANCELLED THE DEMAND RAISED AND INTEREST CHARGED U/S 201(1) AND 201(1A) IN RESPECT OF VEHICLE MAINTENANCE, FUEL CONSUMPTION AND CONVEY ANCE ALLOWANCE. 8.1. INTERESTINGLY, EVEN AT THE TIME OF HEARING BEF ORE US, NO DOCUMENTARY EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO CONTRADICT THE CIT (A)S VERSION ON THE ABOVE ISSUES. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN THE FINDINGS OF THE CIT (A) WARRANTING OUR INTERFERENCE . IN SUBSTANCE, THESE ISSUES ARE DECIDED AGAINST THE REV ENUE FOR ALL THE AYS UNDER CONSIDERATION. 9. BEFORE PARTING WITH, WE WOULD LIKE TO POINT OUT THAT THE REVENUE HAD, IN ITS IDENTICAL GROUND NOS. 1 TO 4, A GGRIEVED THAT THE CIT (A) HAD NOT EXTENDED AN OPPORTUNITY TO THE AO TO PUT- FORTH HIS VIEWS ON THE ISSUES AND ALSO FAILED TO CO NSIDER THE SUBMISSIONS MADE BY THE AO VIDE HIS LETTERS DATED 2 0.12.2011 AND AGAIN ON 13.2.2012 ETC. 9.1. IN THIS CONNECTION, WE WOULD LIKE TO REITERATE THAT THE APPEALS WERE APPEARED TO HAVE BEEN HEARD BY THE FIR ST APPELLATE AUTHORITY ON 13/9/2011, 24/10/2011, 25/11/2011, 27/2/2012 AND FINALLY ON 10/7/2012 [SOU RCE: CIT (A)S ORDER UNDER THE CAPTION: DATE(S) OF HEAR ING . THE ITA NOS.1304-1307 AND 949-952 LG SOFT INDIA PVT LTD BANGALORE PAGE 22 OF 22 HEARINGS COULD HAVE TAKEN PLACE ONLY ON THE BASIS O F THE HEARING NOTICES ISSUED TO EITHER OF THE PARTY. IT ALSO APPEARS THAT THE AUTHORISED REPRESENTATIVES OF THE ASSESSEE HAVE ATTENDED THE HEARING(S) ON THE APPOINTED DATE(S) ON THE STRENGTH OF THE HEARING NOTICE(S). SUCH BEING THE A CTUAL FACTS, WE FIND NO SUBSTANCE IN THE GRIEVANCE OF THE REVENU E AND, ACCORDINGLY, GROUND NOS. 1 TO 4 OF THE REVENUE IS D ISMISSED. 10. IN THE RESULT, THE REVENUES APPEALS FOR THE AY S 2007-08 TO 2010-11 [U/S 201(1) AND U/S 201(1A) OF THE ACT] ARE DISMISSED. ORDER PRONOUNCED ON 23 RD AUGUST, 2013. SD/- (N. BARTHVAJASANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER BANGALORE, DATED 23 RD AUGUST, 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 ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCHES, BANGALORE