Page 19 - Corporate_Professional_Today

WheTher TdS on All reimburSemenTS JuSTified?
In the case of salaried employee the following
allowances have the semblance of reimbursement
and they are not specifically dealt with in
certain cases:
(i) Entertainment allowance: In the case of
government employees, entertainment
allowance though included in gross
salary it is eligible for deduction subject
to a maximum of `5,000 or one-fifth of
salary or the actual allowance-whichever
is less. In present day context, the de-
duction of entertainment allowance is a
miniscule sum of `5,000. Even in cases
where the employee does not incur any
expenditure, it is eligible for deduction
under section 16(2). This may require an
upward revision considering the fact that
the government employees beyond certain
cadre have to extend basic courtesies to
the stakeholders who may visit them of-
ficially. In the case of non-government
employees, such allowance is taxable
whether or not the employee incurs
expenditure by way of entertainment
to the customers/staff. In reality, the
expenditure is incurred by the employer
and booked directly as expenditure in
the books of account.
(ii) Motor car owned by employee: Where the
employer owns the motor car and
gives the same to the employee both
for official and personal use, the value
of perquisite is determined on notional
basis, on the engine capacity of the car.
However, where the employee owns a
motor car and it is used for official
and personal purposes and the entire
expenditure of running and maintenance
are met by the employer (by way of
reimbursement to the employee), it is
liable for perquisite valuation by tak-
ing the total amount of expenditure
incurred less the taxable portion that
would have been computed if the motor
car was owned by the employer. The
following table would explain it.
126 January 20 To January 26, 2018 u Taxmann’s Corporate Professionals Today u Vol. 41 u 20
Cubic /engine capacity Car Car
of the car more than owned by owned by
1.6 litres employer employee
Perquisite value taxable (A)
in the hands of employ-
ee @ ` 2,400 p.m. plus
` 900 p.m. if chauffeur
is provided. ` 3300 × 12 39,600
Actual expenditure on (B) 90,000 90,000
running and maintenance
of car
Less: Perquisite value 39,600
that would have been
taxed if the car was
owned by the employer
Perquisite value (A) 39,600 50,400
This kind of cumbersome calculation of
perquisite valuation could be avoided
by prescribing the perquisite value
with reference to the original cost of
car on some notional basis by making
reference to the expenditures incurred
by the employer. That would provide
ease in computation of perquisite value.
(iii) Leave travel concession: The value of leave
travel concession reimbursed by the
employer is exempt from income-tax
subject to the limits prescribed in rule
3 of the Income-tax rules. It is exempt
for 2 out of a block of 4 years and
subject to number of persons comprised
in the family of the employee. The
concession per se is includible in com-
puting the gross salary and the exempt
portion is subsequently reduced. It is
incumbent on the part of the employer
to verify the expenditure claim. In CIT
v. Larsen & Toubro Ltd. [2009] 313 ITR
1/181 Taxman 71 (SC) it was held that
the employer needs not to verify the
expenditures actually incurred by the
employee for the purpose of allowing
the exemption. Subsequently, section
192(2D) was inserted by the Finance
Act, 2015 w.e.f. 1-6-2015 empowering
the employer to obtain evidence or
proof or particulars of prescribed claims