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Facts
The assessee computed Fringe Benefit Tax (FBT) at Rs. 1,13,86,653. The Assessing Officer (AO) added Rs. 27,31,879 as FBT, which was restricted by the CIT(A) to Rs. 5,56,161 (20% of Rs. 27,80,802). The appeal is against the CIT(A)'s order upholding the disallowance.
Held
The Tribunal held that certain expenses, including taxi and jeep hire charges, vehicle hire charges for guests and senior staff, medical expenses, and refreshments, are not liable to FBT based on relevant CBDT circulars and judicial precedents. Therefore, no further addition other than Rs. 113,86,653 is liable for FBT.
Key Issues
Whether various expenses claimed as exempt under FBT, such as transport, vehicle hire, medical expenses, and refreshments, were correctly disallowed or partially disallowed by the lower authorities.
Sections Cited
115WE(3), 115WB(3), 115WA, 115WB(2)(Q), 115WC(1)(e), 115WB(2)(B)(i), 115WB(2)H
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Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI
Before: Shri Challa Nagendra Prasad & Dr. B. R. R. Kumar
ORDER Per Dr. B. R. R. Kumar:- The present appeal has been filed by the assessee against the order of Ld.CIT, Rohtak dated 31.12.2009 for the A.Y. 2006- 07. 2. The assessee has raised the following grounds of appeal are as under:-
1. That on the facts and circumstances of the case and in law, the Commissioner of Income Tax (Apppeals), rohtak {Briefly the CIT(A)} erred in upholding disallowance in the value of Fringe Benefit.
2. That on the facts and circumstances of the case and in law, the CIT(A) erred in upholding the following expenditures under 20% category of FBT. a) Travelling & conveyance - 4,05565 b) Vehicle Maintenance - 16,21,509 c) Staff Welfare i)Medical Exp. 4,65,286 ii) Staff welfare incentive 1,05,987 d) Staff welfare pre operative 1,82,455 27,80,802 ---------- 3. The captioned appeal is in respect of Fringe Benefit Tax ("FBT") against the order passed by the Ld. Assessing Officer ("AO") under section 115WE(3) of the Income Tax Act, 1961 ("the Act").
4. The assessee computed value of FBT at Rs. 1,13,86,653/- while filing return after claiming certain expenses as exempt from FBT. Out of the said exempt expenses, the Ld. AO added Rs. 27,31,879/- as the value of FBT to the returned income of the assessee. The Ld. Commissioner of Income Tax (Appeals) ("CIT (A)") restricted the disallowance to Rs. 5,56,161/- being the value of FBT computed @20% of Rs. 27,80,802/-).
5. The details of expenses disallowed by the Ld. AO as exempt and sustained by the Ld. CIT (A) against which the assessee is in appeal are as under:
S.No Particulars Amount Explanation I Travelling Submissions filed before CIT (A) are Expenses at pages 4-5 of the PB.
Taxi and jeep 3,04,680 Details at page 22-23 of the PB - Free hire charges or subsidized transport service to (Crushing employees from their residence to division - place of work at Koira, Odissa, where Koira) crushing plant of the assessee was situated and back to home is not liable to FBT. Exception u/s Section 115WB(3). Also Refer CBDT Circular No. 8/2005 dated 29.08.2005 - FAQ- 104. The place where crushing plant was situated was in a remote area having no connectivity with public transport.
Taxi Hire 75,385 Details at page 20 of the PB - No charges employer-employee relationship (Sponge Iron exists between parties which is pre- division- requisite to levy FBT. Hence, exempt Champa) from FBT. Section 115WA - Refer CBDT Circular No. 8/2005 dated 29.08.2005 - FAQ-1 3. Travelling and 25,500 Details at page 19 of the PB. others Expenses are relating to tour of (Picture Tube - employees from Kolkata-Delhi-Kolkata Pithampura) from 10th June, 2005 to 14th June, 2005 and 13th March, 2006 to 15th March, 2006. Expenses are not in relation to conveyance but tour. As per Section 115WB(2)(Q) read with Section 115WC(1)(e) value of FBT on account of tour and travel (including foreign travel) shall be computed @ 5% of the expense. II. Vehicle maintenance 1. Vehicle hire 16,21,509 Details are at attached. The expense charges includes: (Sponge Iron a. Vehicle hire charges for guest from division- city to plant - Rs. 2,08,522/- -For the Champa) benefit of guests and not for employees. No employer employee relationship. Not liable to FBT. - Refer CBDT Circular No. 8/2005 dated 29.08.2005 - FAQ-1 b. Vehicle hire charges for senior staff from their residence to place of work i.e, plant at Champa and back - Rs. 11,14,721/-. Not liable to FBT. - Refer CBDT Circular No. 8/2005 dated 29.08.2005 - FAQ-104 c. Insurance, registration, accessories and other charges - Rs. 1,12,780/- d. EMI of car taken on loan for three employees - Rs. 1,85,376/- (includes interest of Rs. 55,000/-). - Not covered under section 115WB(2)H, hence not liable to FBT- Brihan Maharashtra Sugar Syndicate Ltd. (15 taxmann.com 300) – ITAT Pune. III Staff Welfare In respect of Medical expense - expenses Submissions filed before CIT (A) are at page 11-12 of the PB. In respect of Refreshments - Submissions filed before CIT(A) are at page 12 and 13 of the PB.
1. Medical 4,65,286 Details at: expenses - page 26 - Rs. 2,94,430/- Medical (Pithampura) expenses page 34-35 - Rs. 60,092/- (Rayya) incurred as page 36-38 - Rs. 1,10,764/- reimbursement (Uttranchal) to the Reimbursement of medical expenses employees on is a perquisite under section 17 and presentation of therefore, not liable to FBT- section bills 115WB(3). Wipro Ltd. (58 taxmann.com 220)- ITAT Bangalore 2. Refreshments 1,05,987 Details at page 24 of the PB. The in expenses were incurred in respect of office/factory food and beverages for the workers at Raipur working at production division. As per (Rolling Mill Section 115WB(2)(B)(i) any Division) expenditure incurred by the employer during on payment of food or beverages overtime - provided to his employees does not within the purview of FBT. - Refer CBDT Circular No. 8/2005 dated 29.08.2005 - FAQ-52 IV Pre- Submissions filed before CIT (A) are operative at page 14 of the PB. expenses Staff welfare - 1,82,455 Details are at pages 94-102 of the PB. food and Expenditure were incurred for beverages providing food and beverages to the staff working at Steel division. As per Section 115WB(2)(B)(i) any expenditure incurred by the employer on payment of food or beverages provided to his employees does not within the purview of FBT. - Refer CBDT Circular No. 8/2005 dated 29.08.2005 - FAQ-52 Total expenses 27,80,802 Value of FBT 5,56,161 @20%
Before us, the ld. AR argued placed on the submissions made before the ld. CIT(A) and the ld. DR supported the order of the ld. CIT(A).
Heard the arguments of both the parties and perused the material available on record.
With the regard to the taxi higher charges, we find that these expenses were incurred for providing transport services at cruising division at interior of Orissa where there was no connectivity with the public transport. Similarly the expenses incurred on taxi higher charges were incurred on account of non employers of the assessee company and an amount of Rs. 25,500/- was incurred not on account of conveyance but on account of tour & travel. Further, the vehicle higher charges of sponge Iron division were incurred for the purpose of guest but not for employees. These expenses also include medical expenses reimbursed of Rs. 4.65 lakhs and refreshment of Rs. 2.87 lakhs. Hence keeping in view CBDT Circular No. 8/2005 dated 29.08.2005 and judgments of Co-ordinate Bench of the ITAT Bangalore in the case of Wipro Ltd. (58 taxmann.com 220)- ITAT with regard to the medical expenses and order of the Co-ordinate Bench of the ITAT Pune in the case of Brihan Maharashtra Sugar Syndicate Ltd. (15 taxmann.com 300) with regard to loan given to the employees, we hold that no further addition other than the amount of Rs. 113,86,653/- is liable to be computed in respect of Fringe Benefit Tax(FBT).
In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 05/01/2024.