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Judgment
Per Satbeer Singh Godara, Judicial Member:
This Revenue’s appeal for Assessment Year 2015-16, arise s against the C IT(A)-23 , New De lhi’s order dated 22.12.2022 in case No. 23/10884/2014-15, in proceedings u/s 201(1) r.w.s. 201(1A) of the Income Tax Act, 1961.
Heard both the parties at length. Case file perused.
It emerges at the outset that the first and foremost issue between the parties herein is that of correctness of the learned CIT(A)’s action reversing the Assessing Officer’s findings holding the assessee as the assessee in default for not having deducted TDS on external development charges (“EDC”) and interest there upon; paid to the Haryana Urban Development Authority (“HUDA”), in the relevant previous year.
Suffice to say, we find that the very issue stands settled in the departme nt’s favo ur and against the assessee in hon’ble jurisdictional high court rece nt landmark decision in Puri Constructions (P) Ltd. Vs. Addl. CIT (2024) 159 taxmann.com 441 (Del.) that such “EDC” payments indeed attract TDS deduction. We thus find merit in the Revenue’s instant first and foremost ground which stands accepted in very terms.
Next co mes the Revenue’s latter substantive ground seeking to revive the assessment findings that the assessee was liable to deduct TDS on it’s medical reimbursement/payments made for oversees treatment of directors which stands deleted in the CIT(A)’s lower appellate discussion as under:
25.The total amount disallo wed has various components. The allo wability is co mponent is discussed below.
Payment by Credit car d Rs . 28,45,736/-
26.This amount re presents the expenses incurred in two parts. F irstly, a sum of Rs. 16,09,915/- represe nts the ho spital bills paid thro ugh cre dit card to a S ingapore hospital namely; Mount Elizabe th Orchard dur ing September 2014 for medical treatment of the dire ctor when he was tr avelling Singapore for an official visit. This amount also includes the boarding and lodging and hotel bills incurred through credit cards amounting to Rs. 1,78,626/- at Singapo re during September 2014 and Rs. 10,57,195/- in USA dur ing Octobe r 2014 to Fe bruary 2015 while getting the treatment.
27.The appellant had gone to Singapore . He was carrying the Inte rnational Credit Card o f the company. The amount was spent there for the treatment o f the director mainly for conducting medical test and examination. The dise ase was detected the re and subsequently he was mainly tre ated in the USA.
28.The appe llant states that he appro ache d the authorised dealer who was authorised to release fore ign exchange unde r the F EMA Regulations and various circulars issued by the RBI. It is further stated by the appe llant that he was advised that expenses can be incurre d thro ugh the international credit cards to any extent fo r any purpose whi le trave lling out o f country. All the afo resaid expenses were incurred as per Rule 5 of FEMA Rules for using the credit cards towards expenses while on visit outside India. The appellant claimed that all the aforesaid expenses were incurre d in accordance with clause A. 15 of the Master Circular No .6/ 2014-15 of RBI dated 01.07.2014 which is re produced as under:-
"15.1The restrictions contained in rule 5 o f the Fore ign Exchange Manage ment (Curre nt Account Transactions) Rules, 2000 will not be applicable for use of International Credit cards (ICCs) by res idents for making payment towards expenses, while on visit outsi de I ndia."
29.On the basis of the allowability to spend any amount by w ay of foreign currency through the internatio nal credit card, it was claimed that the expenses do not take the character of perquisite taxable as salary. Co nsequently, it was ar gued that the Assessing Office r was incor rect in holding the appellant as assessee in default fo r non deductio n o f T DS and raising demand.
Payment of Rs. 15,25,000/- travel of attendant.
30.This amount repr esents as sum paid for the o ne atte ndant Mr. Aditya Soo d amounting to USD 25,000/-while travelling abroad for seek ing the treatment during October 2014, who in this case was the brother o f Mr. Amit Rai Sood. This amount was re leased by the authorized dealer in acco rdance with as pe r Clause 8 of Rule 5 of Schedule III of Master Circular issued by RBI No. 6/2014-15 dated 01/07/2014 which is repro duce d as under:-
"8.Release of fo r eign exchange, exceeding USD 25,000 to a person, irrespective o f pe riod of stay, for busine ss travel, or attending a conference or specialized training or for maintenance expenses of a patient going abroad for medical treatment o r check-up aboard, o r accompanying as atte ndant to a patient going abro ad for medical treatm ent/check- up."
31.It was argued that as per clause (vi), o f section 17(2) any expenditure by the employer on travel and stay abroad o f one attendant who a companies the patient in co nnection wi th such treatment is allo wed. The appe llant furthe r argued that in view of the express provisio n of the A ct and the Master Circular of the RBI, the payment of Rs.15,25,000/- is not in the nature of perquisite taxable as salary. The refo re, the appellant was not require d to deduct TDS o n the payment. The demand u/s 201(1) on payment of Rs .15,25,000/- should be delete d.
Payment of Rs. 7,12,002/- as cash paid to the Direc tor
32.This amount represents the fore ign currency paid to employee directo r while travelling abroad. The appellant state d that when the director we nt to Singapore fo r the first time , the amount was tak en by him in cash equivalent of 10,000 USD. It was stated that the amo unt is pe rmissible as per the RBI Master Circular. It has also been po inted o ut that any person trave lling abroad can carry cas h upto USD 25,000 and such amount o f fore x is permitted to be carried by the RBI .
33.The appellant stated that this amount was released by the authorized dealer equivalent to USD 10,000/- as foreign cur rency as per Para 2 of Schedule III of Master Circul ar issued by RBI No . 6/2014-15 dated 01/07/ 2014 which is reproduced as unde r:-
“In respect of re mittance application for miscellane ous non trade current account transactions of amount no t exceeding USD 25,000 authorized dealer may obtain simplified application cum declar atio n fo rm."
On the basis of such Master C ircular , the appellant argued that the Assessing Officer was unjustified in treating the amount as per quisite taxable as salary and conseque ntly holding the appellant as assessee in default for non de duction of TDS .
It was asserte d by the appellant that in view o f the Master Circular, the Assessing Offic er was unjustifie d in treating the payment of Rs.7,12,002/- as part of perquisite taxable as salary. Consequently, the appe llant argued that the appellant was no t re quired to deduct TDS on such payments made fo r the benefi t o f the Director .
Payment of Rs. 22,22,535/- made in the subsequent year.
This amount repre sents the amount incurre d on the medical treatment in the hospital in USA for which the payment was made in the next F.Y. i.e. F.Y . 2015-16. The appellant argued that as the payment was made in the subsequent year, therefo re , it is to be considere d in the ne xt F.Y fo r the purpose o f TDS and in vie w of the blanket sanction of US$ 100000 for the medical treatment for which no permission is required and authorized dealer can re lease the payment as per self declaration as pe r FEMA guide lines and rules. As such, the said amount of Rs.22,22,535/- is belo w such threshold limit and the refo re the appellant ar gued that it is not require d to be treated as taxable perquisite. Therefore, the assessee asserted that no TDS is re quired to be made on such amount.
All the fo ur transactions are discussed.
It is seen that as per item no.3 of clause (vi), of section 17(2) any expenditure by the employer o n tr avel and stay abro ad of one attendant who a companies the patient in connection with such treatment is allo wed separately apart from the medical treatment of the employee. There is no bar on the quantum of expense for the attendant. The appe llant incurr ed an e xpense of Rs. 15,25,000/- (USD 25000) for the attendant accompanying the directo r. The Master Circular of the RBI allows for payment upto US D 25000 for atte ndant.
Therefo re, in view of the express provisio n of the Act and the Master Circular o f the RBI, the payment of Rs.15,25,000/- is not in the nature of perquisite taxable as salary. T herefo re, the appe llant was not required to deduct TDS on the payment. The demand u/s 201( 1) on payment of Rs.15,25,000/- is deleted. T he interest u/s 2O1(1A) is also de leted.
40.In respect o f the other payments, it would be relevant to first see what the Master Circular o f the RBI says. The Master Circular No.6/2014-15 issued by RB I on 01.07.2014 in respect of availing foreign exchange for medical treatment is re produced as unde r:-
“3.1With a view to enable residents to avail of foreign e xchange for medical treatment abroad without any hassles and any loss o f time, authorised deale r may release fo reign e xchange up to an amount of US D 100,000 or its equivale nt, on the basis of self declaration that the applicant is buying e xchange for medical treatment outside India, witho ut insisting o n any estimate from a hospital/doctor.
3.2For amount exceeding the above limit, estimate from the docto r I n India or hospital/doctor abroad, is required to be submitted to the Authorised Deale r.
3.3A perso n w ho has fallen sick after proceeding abroad may also be released fo reign exchange by an Authorised Deale r for medical tre atm ent o utside India."
41.The case o f the appe llant is ac tually co vere d by Schedule III of Foreign Exchange Management (Cur rent Account Transaction) Rules 2000 & Foreign Exchange Management ( Cur rent Account T ransaction) Amendment Rules 2015. T hese rules are popularly calle d as Libe rali zed Remittance Scheme (LRS) also! In the Scheme, fo r the purpose of Medical Treatment/check- up abroad, remittances upto UDS 2,50,000 is allo wed thro ugh the autom atic ro ute . The to tal expenses incurred by the appellant during the year under consideration (including the expense accounted in F.Y 2014-15 but paid in the next financial ye ar i.e . F .Y 2015-16) does not exceed the prescribe d limit set by the RBI in LRS. Therefore, the case of the appe llant is to be e xamine d in term of the LRS. As per both the rules & LRS the prescribed limit is USD 250000 which apparently the appe llant has not exceeded. The refore, by joint reading of section 17( 2) and LR Scheme the limit se t by RBI is USD 250000 fo r the purpose of me dical tre atment by an individual.
42.Therefo re, it is held that the appellant did not exceed the prescribed ce iling of US D 250000 se t by the RBI.
43.As the appe llant did not e xceed the prescribe d ceiling, there fore, the amount reimbursed by the appe llant to the director or the amount paid by the company for the medical tre atme nt of the emplo yee director does no t take the character of pe rquisite taxable as salary u/s 17(2) o f the Act. Co nseque ntly, the appe llant was not liable to deduct TDS on the paym ents made fo r the medical tre atment o f the director .
44.In view of the above, it is he ld that the Assessing Office r was unjustified in treating the appellant as assessee in default and raising the demand of Rs.22,47,892/- and Rs.19,78,145 u/s 201( 1) and 2O1(1A) respectively o f the I.T Act. The demand raise d is accordingly delete d.
45.In the result, the raising o f demand and levy u/s. 201(1) and 201(1A) of the Act amounting to Rs.42,26,037/- is delete d.”
We have given our thoughtful consideration to the Revenue’s and the assessee’s vehement submissions in tune with their respective stands. It has already come on recor d that the learned CIT(A) has already gone by the banking regulator RBI’s landmark circular dated 01.07.2014 prescribing ceiling of USD 250000 under the Liberalized Remittance Scheme (“LRS”) there by concluding that since the asse ssee had not exceeded the same, it was not liable to deduct any TDS in the given facts. This clinching finding has gone un-rebutted from the Revenue side. We thus find no merit in the Revenue’s instant latter substantive ground stands rejected in very terms.
No other ground or argument has been pressed before us.
This Revenue’s appeal is partly allowed.