M/S.THE TRADING COMPANY,ALAPPUZHA vs. THE DCIT, ALAPPUZHA

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.

not filed the return of fringe benefit along with income tax return for AY 2006-

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.

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.

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

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.

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