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order dtd.30.07.2015 of the CIT(A)-13,Mumbai,the assessee had filed the present appeal.Assessee-company,engaged in the business of manufacturing and trading filed the Fringe Benefit Tax(FBT) on 29/09/2009,showing value of chargeable Fringe Benefit (FB) at Rs.36.80 crores.In the return it had offered various expenses as chargeable to FBT.But,by way of a note it claimed that FBT was payable on such expenditure.The AO completed the assessment u/s.115WE(3)of the Act,on 17.10.2011,determining the value of the chargeable FB at Rs. 36,80,51,213/-.
2.First effective Ground of appeal (GOA-1-2)is about direction of the First Appellate Authority(FAA)to exclude FB declared by the assessee itself in the original and revised return of FBT, filed u/s.115W of the Act. During the course of hearing it was brought to our notice that identical issue was dealt by the Tribunal, while deciding the appeals for the earlier years.We find that while adjudicating the appeals for the earlier AY.s.(ITA.s.4910 & 4911 & 5632/Mum/2011 AY.s. 2006-07 to 2008- 09,dtd.19.06.2013),the Tribunal has dealt the identical issue as under: 2.Before proceeding with the grounds of appeal, it would be pertinent to discuss the issues raised by the Ld. Departmental Representative. It is the say of the Ld. DR that the assessee itself has filed Fringe benefit Tax return and has offered the value taxable as FBT, therefore, the assessee cannot retract now raising the issues relating to the taxability of FBT. It is the contention of the Ld. DR that if the assessee was not convinced with its return of fringe benefit, it should have filed a revised return failing
5057/M/15 M/s. Grasim Industries Ltd. which the assessee should be precluded from raising such grounds of appeal
. In support of his submissions, the Ld. DR relied upon the decision of the Hon’ble Supreme Court in the case of ITO Vs Murlidhar Bhagwan Das 52 ITR 335. It is the say of the Ld. DR that jurisdiction of the Tribunal in the hierarchy created by the Act is not higher than that of the ITO. The Tribunal cannot do what the ITO cannot.
3. Per contra, the ld. Senior Counsel relied upon the decision of CIT Vs Pruthvi Brokers and Shareholders Pvt. Ltd., 349 ITR 336 and contended that the assessee can take a plea not taken before the assessing authorities.
4. We have considered the rival submissions and carefully perused the decisions relied upon by the rival parties. In our considerate view, the decision relied upon by the Ld. DR relates to the power of the appellate authorities wherein it has been held that no power is conferred to make an order or issue directions in respect of an assessment year which is not the subject matter of appeal which means that the jurisdiction of the appellate authorities in the hierarchy created by the Act is confined to the year of assessment.
5. The Hon’ble Jurisdictional High Court in the case of Pruthvi Brokers & Shareholders (supra) has held that appellate authorities have power to consider claim not make in the return. The question before the Hon’ble Jurisdictional High Court was “whether on the facts and the circumstances of the case, the Hon’ble Income Tax Appellate Tribunal, in law, was right in holding that claim of deduction not made in the original return and supported by revised return is admissible. The question is answered in the affirmative and while answering this question, the Hon’ble Jurisdictional High Court has considered various decisions of the Supreme Court. Respectfully following the decision of the Jurisdictio9nal High Court, we proceed with the grounds of appeal one by one. Moreover , we find that the assessee has returned fringe benefits with a rider that ‘ taking abundant precaution ‘ the value is offered for fringe benefit tax and this fact has also been acknowledge by the AO while dealing with every item of Fringe benefits in his assessment order. We find that the Department had filed appeals before the honorable Bombay High Court against the above order of the Tribunal (ITA No.s 2325 of 2013, 2399 of 2013 and 464 of 2014).Dismissing the appeals, the honorable High Court had held as under: “3Regarding Question 1:- (a)We note that the Appellant had voluntarily filed its return of Fringe Benefit under Section 115(WD) of the Act. In its Return of Fringe Benefit, the Appellant had valued the Fringe Ben efit and offered tax on the expenses incurred. However, in its return ofFringe Benefit, the Appellant had appended a note, indicating thataccording to it, no Fring e Benefit tax on the amounts offered ispayable. However, the same is being filed by way of ab undantcaution. The Assessing Officer after recording the fact of implied protest dealt with the various amounts returned by the Appellant in its Fringe Benefit 26th Returns.However, by order dated December, 2008, on merits, held that the tax is payable; (b)In appeal, the CIT(A) did not allow the Respondent-Assessee tourge that no Fringe Benefit Tax in fact is payable. This on theground that as the Respondent-Assessee had not claimed t he benefitin its Return, it cannot raise the issue in appeal. This by relying ondecision of the A pex Court inGoetze (India) Ltd. v/s. CIT 284ITR 323. Thereafter, the CIT(A) in his order date d 28th March, 2011dealt with each of the submissions on merits and negated the same; c)On further appeal by the Respondent-Assessee to the Tribunal, the Respondent-Asse ssee defended the order of the CIT(A) inter alia on the ground that it is not open to the Respondent-Assessee to urge issue of non chargeablility to Fringe Benefit Tax in app
5057/M/15 M/s. Grasim Industries Ltd. eal. This is so, as it had itself voluntarily filed its Return of Fringe Benefitbefore the A ssessing Officer. The Tribunal by the impugned orderdated 19th June, 2013, did not a ccept the Revenue's contention byplacing reliance upon the order of this Court in CIT v/s. Pruthvi Brokers and Shareholders P. Ltd. 336 ITR 349to hold that even if a claim of deduction/ expenditure is not raised before the Assessing Officer, it can be raised i n appeal. This by recording that in Goetze (supra) has itself noted that it does not in any manner, restrict the power of the Tribunal to deal with claims not made before th e Assessing Officer; (d)Mr. Suresh Kumar, learned Counsel appearing for the Revenueurges that the decis ion of this Court in Pruthvi Brokers (supra) is not applicable in this case. This for the reason that the claim of Fringe Benefit Tax being payable is given up in having filed its Return; (e)In our view in all cases where a deduction/ exemption is not claimed by an assessee before the Assessing Officer would normally amount to giving up t he claim with regard to it. Nevertheless, this Court has held in Pruthvi Builde rs (supra) it could be raised in appeal. Moreover, in the present facts, the clai m had already been made by the Respondent in its Return of Fringe Benefit by way of note therein. Thus, it is not a new claim. In any case, on account of the decis ion of this Court in Pruthvi Brokers and Shareholders (supra), the Respondent Assesseeis well entitled to raise the claim before the Appellate Authority even it not raised before the Assessing Officer; (f)In the above circumstances, the Question 1 does not give rise to anysubstantial que stion of law. Hence not entertained.
4 Regarding Question (2):-
The impugned order of the Tribunal allowed relief of FringeBenefit Tax levied on exp enses incurred as non-employees and gifts givento non-employees by following its ord er in CIT v/s. Tata ConsultancyServices Ltd. (ITA/3457/MUM/2011 rendered on 26th September, 2012)to hold that the relationship of employer and employee is a sine-qua -nonof levy of Fringe Benefit Tax. The decision of the Tribunal in TataConsultancy Services (supra) was carried in appeal to this Court by theRevenue being Income Tax Appeal No.1132 of 2013. The aforesaid appealof the Revenue in the case of Tata Consequently Services was dismissedon 24th March, 2015. Thus, confir ming the decision of the Tribunal in thecase of Tata Consultancy Services (supra). No distinction has been shownto us which would warrant a different view. In the above v iew, Question(2) as framed does not give rise to any substantial question of law. Thus not entertained.
5 Regarding Question (3):-
(a) The impugned order of the Tribunal has held that in respect of medical reimburse- ment, medical facilities and education facilities made available to its employees,is taxable in the hands of its employees. Therefore, out side the scope of Fringe Benefit Tax;
5057/M/15 M/s. Grasim Industries Ltd.
(b) At the hearing before the Tribunal, the learned Counsel appearing for the Respondent -Assessee had specifically stated that the aforesaid facilities are liable to tax as perquisites in the hands of employees/individu als. This is not disputed. Even today, nothinghas been shown to us from the record tha t the statement made by Counsel for the Respondent-Assessee before the Tribunal is n ot correct. In case, the statement made by the Counsel appearing onbehalf of the Respondent-Assessee before the Tribunal is not correct and is so found by the Revenue, the remedy, if any, is to move the Tribunal .
Accordingly, the question as framed does not give rise to anysubstantial question of la w. Hence, dismissed.”
Considering the above, we decide the First effective Ground of appeal against the AO.
3.Rest of the grounds are against the relief granted by the FAA on expenditure incurred under the heads non-employees,gift to non-employees(GOA-3),medical reimbursement/expenses of employees and their families, education facilities (GOA-4),salary of drivers/pilots (G.s OA-5- 6), insurance premium for motor car/aircraft (GOA-7),preoperative expenses(GOA-8)and main-tenance of residential accommodation in the nature of guesthouse (GOA-9). It was brought over notice that,the tribunal had decided all the issues against the AO and in favour of the assessee, while deciding the appeals for the earlier years and the honorable jurisdictional High Court had endorsed the views of the tribunal. We are reproducing the relevant portion of the order of the tribunal, dated 19/06/2013 for the AY.s 2006-07 to 2008- 09(supra) and it reads as under: 6. Ground No. 1 relates to levy of FBT on expenses incurred on nonemployees.
The AO at page-2 para 3.1 of his order states that “as a matter of abundant caution, the assessee company had offered for tax expenses of Rs. 16,61,19,107/-, fringe benefit value at Rs. 3,91,08,627/-. It was contended that the expenses of Rs. 16,61,19,107/- do not involve employees/nor incurred on employees and are not liable to Fringe benefit tax.
The assessee relied upon the speech made by the Finance Minister while presenting the budget on 28.2.2005 and the explanation given in explanatory memorandum. The AO did not accept the contentions made by the assessee. The AO was of the firm belief that expenses incurred by the assessee on any item specified under clause (A) to( P) of Sec. 115WB are chargeable to fringe benefit tax irrespective of the fact that the expenses involve employees or not.
The assessee agitated this matter before the Ld. CIT(A) but without any success.
Before us, the Ld. Counsel for the assessee reiterated that since the expenses were incurred for non-employees, there is no occasion for the levy of fringe benefit tax. A similar issue arose before the Tribunal in the case of CIT Vs Tata Consultancy Ltd. in wherein one of us (Accountant Member) is the author of the said decision wherein the Tribunal has held as under: “While deciding Revenue’s appeal in ITA No. 6747/M/2011, this Bench had the occasion to consider the Circular issued by CBDT being Circular No. 8/2005 dt. 29.8.2005 wherein this Bench has held that employer/employee relationship is a pre- requisite for the levy of FBT. Rationale for introduction of FBT is that it is difficult to isolate the “personal element” if the benefits are collectively enjoyed by the people which means that the provisions of FBT will be applicable only in respect of those
5057/M/15 M/s. Grasim Industries Ltd. expenses which contain or at least are likely to contain an element of personal benefit to employees. We do not find any such thing present on the facts of the present case.”
Facts of the present case are identical, therefore, respectfully following the decision of the Tribunal, we direct the AO to exclude from the taxable value of FBT amount of Rs. 3,91,08,627/-. Ground No. 1 is accordingly allowed.
Ground No. 2 relates to charging of FBT on fringe benefit which are taxable in the hands of employees. 13.This head comprises of 5 expenses: a) Medical reimbursement - Rs. 1,34,20,291/- b) Medical facilities - Rs. 44,35,084/- For these two items, it is the claim of the assessee that these are taxable in the hands of the employees as perquisites. Therefore, the same should be outside the purview of FBT. On similar issue, the co-ordinate bench of the Tribunal at Banaglore in in the case of Vijaya Bank has held that where perquisites/benefits which are fully attributable to the employee and are taxed in their hands, would be continued to be taxed under the existing provisions of Sec. 17(2) of the Act. Only in case where the benefits are usually enjoyed collectively by the employees and cannot be attributed to an individual employee, they shall be taxed in the hands of the employer.
We find that in the present case, these two items are directly attributed to the personal benefit of the employees therefore deserves to be kept outside the purview of fringe benefit tax. The AO is accordingly directed to exclude the value of such fringe benefit. The other three items in ground No. 2 relates to education facilities Rs. 77,97,961/- , maintenance of residential colony for employees Rs. 93,78,107/- and Insurance premium paid by employer to keep in force an insurance on health of employees – Rs. 8,64,967/-.
It is the say of the Ld. Counsel that these are all perquisites liable to be taxed in the hands of the employees individually. As we have held hereinabove, that perquisites which are directly attributable to the employees deserves to be kept outside the purview of FBT. Accordingly, we direct the AO to exclude these items of perquisites outside the ambit of taxable value of fringe benefit. This ground is accordingly allowed. 16.Ground No. 3 relates to administration expenses incurred on driver/pilot who are in pay role of the company is chargeable as salary, therefore, such salary should not be taxed again as fringe benefit in the hands of the employer. 17.The assessee further contended that expenses on repair, running and maintenance of motor car/aircraft do not include remuneration paid to drivers/pilot.
We find that the contention raised by the assessee are supported by the decision of the Hon’ble Madras High Court in the case of CIT Vs Sholinger Textiles Ltd. 240 ITR 908. Respectfully following the decision cited hereinabove, we direct the AO to exclude the value of such fringe benefit amounting to Rs. 23,61, 629/- from taxable value of fringe benefit. This ground of the assessee is allowed.
Ground No. 4 relates to Insurance premium for motor car and aircraft. It is the say of the Counsel that the insurance premium is not the expense on repair, running and maintenance of motor car/aircraft and therefore not liable for fringe benefit.
We find that the Hon’ble Calcutta High Court in the case of CIT Vs Tungabhadra Industries Ltd. 207 ITR 553 has held that the expenditure incurred on repairs and insurance of car cannot be considered for disallowance u/s. 37(3A) of the Act. Taking a leaf out of the aforementioned decision, we direct the AO to exclude value of such fringe benefit of Rs. 4,70,334/- from the taxable value of fringe benefit. Ground No. 4 is accordingly allowed.
Ground No. 5 relates to pre-operative expenses. We find that the pre-operative expenses have been incurred on units not yet set up and the expenses have been claimed as capital expenditure. The CBDT in its explanatory note on the provisions relating to FBT “ Whether capital expenditure falling within the category specified in Sec. 115WB(2) would be covered in the scope of Fringe benefit. The CBDT answered “expenditure on any capital asset in respect of which depreciation is allowable u/s. 32 of the Act does not fall within the scope of sub-sec. (2) of Sec. 115WB of the Act. Since the approximate objective of incurring such expenditure is the acquisition of a capital asset therefore, such expenditure is not included in reckoning the value of fringe benefit. Drawing support from the answer of the CBDT, we
5057/M/15 M/s. Grasim Industries Ltd. direct the AO to exclude value of such fringe benefit of Rs. 6,68,332/- from the taxable value of fringe benefit. Ground No. 5 is accordingly allowed.
Ground No. 6 relates to expenses on maintenance of residential accommodation not in the nature of guest house. 23.The Tribunal had the occasion to decide the issue of accommodation not in the nature of guest house while disposing of WTA Nos. 41/Mum/1998 and 242 to 244/M/199 in the case of M/s. Grasim Industries Ltd., and in that Wealth Tax appeal order, the Tribunal has held that where the buildings have been used by the employees and other related visitors such as customers, surveyors, contractors, government officials, auditors etc., cannot be considered as guest house as they are connected with assessee’s business. Taking a leaf out of the said decision relating to Wealth tax proceedings, we direct the AO to exclude value of such fringe benefit at Rs. 30, 08, 558/- from the taxable value of fringe benefit. Ground No. 6 is accordingly allowed. XXXXX 28. Ground No. 7 relates to expenses on presentation articles distributed to business related persons.
We have already held that expenses incurred on non employees are outside the purview of FBT. As these expenses are incurred on persons related to or connected with the business but are not employees. We accordingly direct the AO to exclude value of such fringe benefit from the taxable value of fringe benefit. Ground No. 7 is accordingly allowed. Respectfully, following the above we decide Grounds of appeal 3-9 against the AO.