LIC OF INDIA,ROURKELA vs. ITO(TDS), ROURKELA, ROUKELA

In all the above appeals, the assessee has raised common ground with regard to confirming the addition by the CIT(A) made u/s.201(1) of the Act by the AO for short-deduction of TDS and interest u/s.201(1A) of the Act.

Brief facts of the case are that the assessee-bank is a cooperative society which has been created by the Special Act of the Legislature. A TDS verification was conducted on 19th October, 2012 in the impugned cases and the ITO(TDS) found from the pay bills register, form No.16 and other relevant documents relating to salary payments of the employees of the assessee that ‘cash medical benefit’ was allowed exemption u/s.10 of the Act by the deductor. The ITO(TDS) noted that under the provisions of Income Tax Act, the cash medical benefit which is paid as an allowance is taxable u/s.15 of the Act irrespective of the fact that it is paid in addition to, or in lieu of salary. Accordingly, the ITO(TDS) calculated the TDS liability for short deduction of tax u/s.201(1) and interest payable u/s.201(1A) of the Act for the respective assessment years under consideration in the respective appeals as under :-

Feeling aggrieved from the order of AO, the assessee appealed before the CIT(A), however, the CIT(A) dismissed all the appeals of the assessee.

Now, aggrieved further from the order of CIT(A), the assessee is in appeals before the Income Tax Appellate Tribunal.

Ld. AR submitted that the CIT(A) has wrongly confirmed the order of AO for non-deduction of TDS as per Section 194A of the Act. It was further submitted by the ld. AR that both the authorities below have failed to appreciate that CBDT vide letter Ref.L F.No.200/75/2001-ITAT, dated 20.05.2002 clarified the matter relating to the income tax on lump sum cash medical benefit to officer and employees of LIC of India and has allowed exemption upto Rs.15,000/- as per the proviso (v) of Section 17(2) of the Act in respect of any expenditure incurred by the officer/employee on his medical treatment Therefore, ld. AR vehemently submitted that the lump sum cash medical benefit to officers and employees upto Rs.15000/- is not chargeable to tax in view of the proviso (v) of Section 17(2) of the Act and also the interest cannot be leviable. Therefore, ld AR submitted that the appeals of the assessee deserves to be allowed.

On the other hand, ld. DR relied on the orders of authorities below and submitted that the assessee is to be treated as assessee-in- default for non-deduction of TDS as per Section 201(1) of the Act.

After hearing both the sides and perusing the entire material available on record, we noticed from the orders of authorities below that the ITO(TDS) noted that under the Income Tax Act, the cash medical benefit which is paid as an allowance is taxable u/s.15 of the Act irrespective of the fact that it is paid in addition to or in lieu of salary. The AO was of the view that what is contemplated by proviso (iv) to Sec.17(2) of the Act was 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. Since the Assessee was paying medical reimbursement as a component of the monthly payment to the employee and later claiming that it was not perquisite to the extent of Rs.15,000, the same had to be considered as payment should not precede the actually incurring of the expenses and it should be only by way of reimbursement. The grievance of the assessee is that there should not be any deduction of TDS on reimbursement of medical allowance and charging of interest thereon.

In view of the above factual aspect of the case, we find that the employer has provided fixed medical allowance to his employees. It is clear from the order of the authorities below that the employees have not submitted any bills/vouchers regarding their medical expenses incurred by them. The allowance is exempt to the extent of expenditure incurred by the employees. In the impugned case, there is no any proof of medical expenditure incurred by the employees which is clear from the orders of authorities below. The ld. AR of the assessee also could not substantiate that the employees have spent the allowances received by them for the intended purpose. Therefore, the fixed medical allowance given by the employer is taxable as salary income. The employer has not been deducted TDS on the fixed medical allowance. The CBDT letter relied on by the ld. AR of the assessee has no application on the issue under consideration as the CIT(A) has already dealt the same in the appellate order. The authorities below have decided the issue in detail and accordingly, we uphold the same. Thus, the sole ground raised