The Tax Publishers2020 TaxPub(DT) 5108 (Karn-HC) : (2021) 430 ITR 0034 : (2021) 279 TAXMAN 0253


Section 115WB(2)

Fringe benefit tax - Leviability - Reimbursement of medical expenses to employees -

Assessee engaged in business of computer software as well as other diverse activities filed its return of fringe benefits for the assessment year 2006-07 on 29-11-2006 and furnished total value of chargeable fringe benefits of Rs. 52,96,15,186. During the assessment proceedings under section 115WE(3), various details were sought for, which were furnished by assessee including divisions and expenses attributable to permanent establishments of the assessee outside India, which were excluded for computing the fringe benefit tax liability. AO held that assessee had made reimbursement of medical expenses to its employees and has claimed that same was exempt upto Rs. 15,000 in the hands of employees, and therefore, assessee was not liable to fringe benefit tax. It was further held that exempt portion of the medical reimbursement, i.e., upto Rs. 15,000 is liable to fringe benefit tax as it is a fringe benefits under sub clause (E) of section 115WB(2). Accordingly, 20% of the amount i.e., Rs. 5,45,59,077 was held as chargeable value of fringe benefit. Held: Proviso (v) to section 17(2) defines the expression 'perquisite' and provides that perquisite would not include any sum paid by an employer in respect of any expenditure actually incurred by an employee on his medical treatment or treatment of any member of his family if such sum was not in excess of Rs. 15,000. The effect of proviso is that reimbursement of amount in excess of Rs. 15,000 would be taxable as part of the salary in the hands of employee, whereas, amount less than Rs. 15,000 would not be taxable in the hands of employee. However, such reimbursement nevertheless would main perquisite as defined under the Act but would remain untaxed in the hands of employees and therefore, untaxed amount is taxed as fringe benefits in the hands of employer. Thus, if medical reimbursement exceeded Rs. 15,000 relating to unapproved hospital, then under section 17(1), employees are taxed beyond Rs. 15,000 and if Rs. 15,000 which is exempt in the hands of employees is not liable for fringe benefit tax but over and above the aforesaid amount is liable for fringe benefit tax.


FAVOUR : Matter remanded.

A.Y. : 2006-07


Section 115WB(2)


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