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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Per CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order of the CIT(A),
Kottayam dated 19/12/2017 for the assessment year 2006-07.
The facts of the case are that the assessee firm liable to fringe benefit had
not filed the return of fringe benefit along with income tax return for AY 2006-
In response to the notice, the assessee filed a letter on 19/05/2010
intimating that the firm had furnished the return of fringe benefits disclosing
value of fringe benefits at Rs.1,53,180/- on 09/03/2007 and the same may be
I.T.A. No.32/C/2018
treated as one filed in response to notice u/s. 115WH. The Assessing Officer
completed the assessment u/s. 115WE(3) r.w.s. 115WA, determining value of
fringe benefits at Rs.3,30,150/- after including the entire sale promotion
expenses of Rs.10,95,721/- for assessment of fringe benefits.
On appeal, the CIT(A) observed that for the assessment of FBT, the
Assessing Officer did not exclude the “reimbursement expenditure” amounting to
Rs.8,84,837/-. The CIT(A) held that in the absence of any express provision
under the Income Tax Act, 1961 to prove that the reimbursement amount is to
be excluded for assessment of FBT, the action of the Assessing Officer is upheld.
Against this, the assessee is in appeal before us. The Ld. AR submitted that
the provision of section 115WB(2) of the Act was not applicable in respect of
expenses which were incurred for sales promotion by way of reimbursement
towards agarbathi, cigarettes, foods, matches etc. given to the customers cannot
be equated as given to the employees or their family members. The impugned
expenditure was paid to the third parties, i.e. customers of the assessee as
reimbursement to them and not to the employees. It is a legitimate business
expenditure incurred by the assessee in the course of business. According to
him, the expenditure was reimbursed to the customers to carry on the business
of the assessee. Hence, it was submitted that the order of the lower authorities
is to be reversed.
I.T.A. No.32/C/2018
On the other hand, the Ld. DR relied on the order of the lower authorities.
We have heard the rival submissions and perused the record. The facts of
the case are that the Assessing Officer treated the sales promotion expenses at
Rs.10,95,721/- as liable for fringe benefit tax as against the amount of
Rs.2,10,884/- returned by the assessee. The Assessing Officer included various
expenditures which are reimbursed to the customers by the assessee towards
sales promotion expenses.
5.1 In our opinion, if the assessee has incurred any expenditure by way of
reimbursement having no element of profit to the recipients, being in the nature
of sales promotion which is a legitimate business expenditure for the purpose of
carrying on the business of the assessee, such expenditure cannot be liable to
fringe benefit tax u/s. 115WB(2) of the I.T. Act. In view of this, it is appropriate
to remit this issue to the file of the Assessing Officer to verify whether it is a
reimbursement of expenditure and decide thereupon. Accordingly, we remit the
issue in dispute to the file of the Assessing Officer for fresh consideration as
directed above. Thus, this ground of appeal of the assessee is partly allowed for
statistical purposes.
In the result, the appeal filed by the assessee is partly allowed for statistical
purposes.
I.T.A. No.32/C/2018
Order pronounced in the open Court on this 2nd July 2018.
sd/- sd/- ( GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER
Place: Dated: 2nd July, 2018 GJ Copy to: 1. M/s. The Trading Company, A.S. Canal Road, Poonthoppu Ward, Alappuzha. 2. The Deputy Commissioner of Income Tax, Circle-1, Alappuzha. 3. The Commissioner of Income-tax(Appeals), Kottayam. 4. The Pr. Commissioner of Income-tax, Kottayam. 5. D.R., I.T.A.T., Cochin Bench, Cochin. 6. Guard File. By Order
(ASSISTANT REGISTRAR) I.T.A.T., Cochin