Non deduction of TDS on Medical Reimbursement based on bona fide estimate of taxable salary
In the present case, as already detailed, the exemption in respect of medical expenditure 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 the provision are fulfilled. The details filed before the TDS officer explains the policies adopted to fulfill the process adopted in considering the exemption 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).
In the light of the admitted position that the conditions for grant of exemption up to Rs.15,000 per employee towards medical reimbursement paid by the Assessee satisfies conditions contemplated by the proviso (v) to Sec.1 7(2) of the Act, can the AO deny the relief under the proviso (v) to Sec.17(2) of the Act? The answer admittedly is ‘no’, because the AO does not dispute non-fulfilment of conditions for allowing exemption under proviso (v) to Sec.1 7(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).
INCOME TAX APPELLATE TRIBUNAL, “A” BENCH : BANGALORE
BEFORE SHRI N. BARATHVAJA SANKAR, VICE PRESIDENT
AND SHRI N.V. VASUDEVAN, JUDICIAL MEMBER
ITA Nos. 1414 to 1416/Bang/2012
Assessment years : 2008-09 to 2010-11
The Assistant Commissioner of Income Tax (TDS)
Vs.
M/s. SAP Labs India Pvt. Ltd.
Date of hearing : 15.07.2013
Date of Pronouncement : 15.07.2013
O R D E R
Per Bench
These are appeals by the Revenue against the common order dated 23.8.2012 of CIT(A)-II, Bangalore, relating to A.Ys. 2808-09 to 2010-11.
2. In these three appeals, the revenue has challenged the order of the CIT(Appeals) whereby the CIT(Appeals) cancelled the order of the Assessing Officer treating the appellant herein as an assessee in default for not deducting tax at source u/s. 201 of the Act and also imposing interest on tax not deducted at source u/s. 201(1A) of the Act. The particulars of the amounts for which the order u/s. 201(1) and 201(1A) were passed by the AO are as follows:-
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