R & B FALCON (A) PVT. LTD. vs. COMMISSIONER OF INCOME TAX

CIVIL APPEAL No. 3326/2008Supreme Court[2008] 7 S.C.R. 80406 May 2008Bench: 2 JudgesAuthor: S.B. SINHA, V.S. SIRPURKAR24 pages
AI SummaryPartly Allowed

What were the facts?

R & B Falcon (A) Pvt. Ltd. (the appellant) entered into a contract to supply a Mobile Off-shore Drilling Rig (MOOR) along with equipment and offshore crew on a charter hire basis. The appellant applied to the Authority of Advance Ruling (AAR) seeking an opinion on whether the transportation costs incurred for offshore employees, from their residences in home countries outside India to the Rig and back, were liable to Fringe Benefit Tax (FBT) under Section 115WB of the Income Tax Act, 1961. The AAR opined that exemptions under sub-section (3) of Section 115WB did not cover matters in sub-section (2), that 'residence' meant residence in India, and consequently held the appellant liable for FBT as the expenditure did not attract exemption. The appellant appealed this decision.

What did the Supreme Court hold?

The Supreme Court partly allowed the appeal. The Court agreed with the AAR that matters enumerated in sub-section (2) of Section 115WB are not covered by sub-section (3), and that free or subsidized transport falls under sub-section (1). However, the Court disagreed with the AAR's interpretation that 'residence' in sub-section (3) means residence in India, stating that the statute does not require the employee to be a resident of India for FBT purposes. The Court held that the AAR should not have decided the liability of the appellant by determining the nature of the travelling expenditure, as this issue was not referred for its opinion. The Court noted that the question of whether the expenditure was incurred on a regular basis or strictly came within the purview of Section 115WB needed to be determined by the Assessing Authority based on materials placed on record. The appeal was allowed to this extent.

What were the issues?

1. Whether the matters enumerated in sub-section (2) of Section 115WB of the Income Tax Act, 1961, are covered by the exemption provided in sub-section (3) thereof, and whether 'residence' within the meaning of sub-section (3) implies residence in India. Assessee's Contentions: The appellant argued that the AAR erred in its interpretation of 'residence' and that the transportation cost incurred for offshore employees should be considered for exemption. The appellant relied on the principle of purposive construction and the intention behind introducing fringe benefits to avoid double taxation and provide succor to employers. The appellant also implicitly argued that the AAR should not have decided the liability based on the nature of the expenditure as it was not part of the ruling sought. Revenue's Contentions: The judgment does not explicitly record the revenue's contentions. However, the AAR's opinion, which the revenue would likely support, held that 'residence' meant residence in India and that the expenditure did not attract exemption, making the appellant liable for FBT.

Which sections of the Income-tax Act were involved?

Section 115WB,Section 115WA,Section 9(1)(ii)

AI-generated summary — verify with the full judgment below

[2008] 7 S.C.R. 804 I ;.... A R & B FALCON (A) PVT. LTD. v. COMMISSIONER OF INCOME TAX (Civil Appeal No. 3326 of 2008) B MAY 6, 2008 [S.B. SINHA AND V.S. SIRPURKAR, JJ.] ""- Income Tax Act, 1961 - s. 115 WB - Fringe Benefit Tax - Levy of - On Assessee-Company providing transportation c to off-shore employees from their residence and home countries outside India to the place of Rig and back-Authority of Advance Ruling (AAR) opining that exemption provided under sub~section (3) does not cover the matters enumerated in sub-section (2) but those enumerated under sub-"section D (1 ); and that 'residence' within meaning of the provision would mean residence in India - On the basis of opinion AAR also holding the assessee-Company liable to pay the tax as the nature of the travelling expenditure incurred by it did not attract the provision of exemption - On appeal, held: AAR was right E in opining that matters enumerated in sub-section (2) are not covered by sub-section (3), but it was wrong in opining that 'residence' could mean residence in India - However, AAR could not have decided the liability of the assessee to pay the tax by determining the nature of the

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 115WB

All 56 judgments and leading authorities on Section 115WB →

Recent GST High Court judgments

Search GST case law →