DCIT 5(1)(1), MUMBAI vs. AIR INDIA LTD, MUMBAI

आदेश / O R D E R

Per Bench 1. Aforesaid appeals by revenue for Assessment Years [AY] 2006-07 & 2007-08 contest separate orders of Ld. first appellate authority. The assessee has filed cross-objections against the same. Since common issues are involved, the same are being disposed-off by way of this common order for the sake of convenience and brevity. First, we take up cross appeals for AY 2006-07. Cross Appeals for AY 2006-07 2.1 The revenue’s appeal for AY 2006-07 contest the order of Ld. Commissioner of Income Tax (Appeals)-10, Mumbai [CIT(A)], Appeal No.CIT(A)-10/DCIT-5(1)/210/2013-2014 dated 12/12/2014 by raising the following sole ground of appeal:- Whether on the facts and circumstances of the case and in the law, the Ld. CIT(A) has erred in directing the Assessing Officer to value the fringe benefits in respect of free / concessional tickets to the employees at par with the provisions made in Air India Limited Assessment Years: 2006-07 & 2007-08 respect of frequent flier programme and thereafter the amounts recovered from the employees, if any should be reduced as has been directed by the Hon’ble ITAT in the case of M/s Jet Airways in A.Y.2006-07.

The assessment of fringe benefit for impugned AY was framed by Ld. Deputy Commissioner of Income Tax-5(1), Mumbai [AO] on 22/03/2013 u/s 115WE(3) read with Section 115WG of the Income Tax Act, 1961. 2.2 Briefly stated the assessee being resident corporate assessee engaged in Airlines business was subjected to re-assessment of Fringe Benefit [FB] u/s 115WE (3) read with Section 115WG of the Income Tax Act, 1961 on 22/03/2013. The return of Fringe Benefit Tax [FBT] was filed by the assessee on 28/11/2006 declaring value of fringe benefit at Rs.6.79 crores which was assessed u/s 115WE(3) at Rs.8.38 crores on 30/12/2008. Subsequently, the proceedings were subjected to reassessment within the meaning of Section 115WG by issuance of Air India Limited Assessment Years: 2006-07 & 2007-08 statutory notice u/s 115WH dated 06/11/2012 followed by notice u/s 115WE(2). The reasons for reopening have been extracted by Ld. AO on Page-2 of the quantum assessment order and the same were also supplied to the assessee as per the request. The perusal of the same reveal that reassessment proceedings were initiated on the premise that the assessee did not show any expenditure under the head of free and concessional tickets to the employees and their family members whereas the assessee being an Airline Company, the possibility of expenditure under this head could not be ignored. 2.3 During reassessment proceedings, it was noted that the assessee provided free / concessional tickets to its employees / their family members, the value of which, in the opinion of Ld. AO, was subjected to fringe benefit tax [FBT]. The assessee justified the same on the ground that no such expenditure was incurred by the assessee in providing free tickets to the employees since the employees could undertake journey on these tickets only if there were unsold seats in the aircraft which would even otherwise remain vacant whether the employee travels or not and therefore, the value thereof was Nil for FBT purposes. However, not convinced, Ld. AO relying upon CBDT circular No. 8/2005, worked out additional fringe benefit to the extent of Rs.62.38 crores which was arrived at after multiplying the number of free tickets issued with average revenue per passenger generated by the airline during the year.

Aggrieved, the assessee as well as revenue is in further appeal before us. The assessee has contested the issue on legal grounds as well as on merits whereas the revenue is aggrieved by relief provided by Ld. CIT(A) to the assessee.

The reassessment provisions as contained in Section 115WG are extracted here-in-below:- "115WG : Fringe benefits escaping assessment - If the Assessing Officer has reason to believe that any fringe benefits chargeable to tax have escaped assessment for any assessment year, he may, subject to the provisions of sections 115WH, 150 Air India Limited Assessment Years: 2006-07 & 2007-08 and 153, assess or reassess such fringe benefits and also any other fringe benefits chargeable to tax which have escaped assessment and which come to his notice subsequently in the course of the proceedings under this section, for the assessment year concerned (hereinafter referred to as the relevant assessment year) Explanation - For the purpose of this section, the following shall also be deemed to be cases where fringe benefits chargeable to tax have escaped assessment, namely :- (a) where no return of fringe benefits have been furnished by the assessee; (b) where a return of fringe benefits have been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the value of fringe benefits in the return; (c) an assessment has been made, but the fringe benefits chargeable to tax have been under-assessed."

A perusal of the same reveal that the prime condition to initiate reassessment proceedings is that the Ld. AO has reasons to believe that any fringe benefits chargeable to tax has escaped assessment. The explanation to this Section creates a deeming fiction wherein, in certain situation, the fringe benefits chargeable to tax are deemed to have escaped assessment. Since the assessee has originally been assessed, its case is covered by Clause (c) of the explanation, since the information as received by Ld. AO, suggested possible escapement of fringe benefit. At this stage, only a prima facie opinion suggesting under- assessment was required to be formed by Ld. AO, which has apparently been formed. It is settled law that deeming fiction has to be construed strictly. The Ld. AO, subsequent to completion of assessment, came across certain information which suggested possible under-assessment of fringe benefit in the hands of the assessee. This being the case, we are of the opinion that the Ld. AO was clinched with valid jurisdiction to reassess the fringe benefit of the assessee. This ground of assessee’s appeal stand dismissed.

Air India Limited Assessment Years: 2006-07 & 2007-08 6. Coming to the merits of the case, we find that Ld. CIT(A) has granted partial relief to the assessee by relying upon the decision of this Tribunal rendered in Jet Airways (India) Ltd. Vs. DCIT [153 TTJ 624] . Since a view has already been taken by the Tribunal on identical factual matrix, taking the same view, we confirm the stand of Ld. CIT(A) in this regard particularly when the revenue is unable to place on record any contrary judgment of any judicial authority. Accordingly, this ground as raised by revenue in the appeal and as raised in cross-objections, stands dismissed.

Cross Appeals for AY 2007-08 8. The cross appeals for AY 2007-08 are on similar factual matrix wherein the assessee has been reassessed for fringe benefits on 20/02/2014 wherein it has been saddled with additional fringe benefits of Rs.78.83 crores on account of free / concessional tickets provided by the assessee to its employees / their family members. The Ld. CIT(A), in similar manner, has provided partial relief to the assessee. Aggrieved, the assessee as well as revenue is in cross appeal before us with identical worded grounds. However, the assessee, in its cross objections, has filed an additional ground vide letter dated 03/05/2018. The Ld. DR has opposed the same on the ground that the same is altogether a new ground and being raised by the assessee for the first time and therefore not valid. However, the same being legal ground which do not require appreciation of new facts and hence, taken on record in terms of judgment of Hon’ble Apex Court rendered in NTPC Air India Limited Assessment Years: 2006-07 & 2007-08 Company Ltd Vs CIT [229 ITR 383]. The additional ground reads as follows:- On the facts and circumstances of the case, since the order u/s.115WG of I.T.Act 1961 was not passed within the time limit stipulated u/s 153(1B) of the I.T.Act,1961, it is prayed that the same is bad in law and may be cancelled.

As evident from additional ground, the quantum assessment order has been challenged on the premise that the same is time barred as per statutory provisions.

by assessee stands allowed. The revenue’s appeal as well as other grounds raised in assessee’s cross-objection stands dismissed, being infructuous.

10. In nutshell, the revenue’s appeal stand dismissed whereas the assessee’s appeal stand partly allowed in terms of our above order.