PIRAMAL GLASS LTD,MUMBAI vs. ASST CIT CEN CIR 6(3), MUMBAI

The assessee is aggrieved by the decision of the learned CIT(A) in confirming the addition of ` 26.90 lakhs to the chargeable fringe benefit computed by the assessee. It is pertinent to note that the Assessing Officer has made the above said addition in the rectification order passed u/s. 154 of the Act.

The assessee company filed its return of fringe benefit declaring total chargeable fringe benefit at ` 1,17,23,764/-. The same was accepted by the Assessing Officer in the order passed u/s. 115W(3) of the Act. Subsequently, the Assessing Officer passed a rectification order dated 8.3.3013 u/s. 154 of 2 Piramal Glass Limited the Act on noticing that the assessee has incurred travelling expenses of ` 29,74,970/- on persons other than the employees and the same was not considered for computing fringe benefit. Similarly, the assessee had incurred a sum of ` 1,27,09,369/- on medical reimbursement expenses and the same was also not considered. The AO took the view that both the items referred above are chargeable to Fringe benefit tax. Hence the Assessing Officer considered omission of both the items as mistakes apparent from record and accordingly revised the total chargeable fringe benefit to ` 1,44,14,387 by including chargeable portion of both the expenditure referred above. The assessee challenged the rectification order passed by the Assessing Officer by filing the appeal before the learned CIT(A), but could not succeed. Hence the assessee has filed this appeal before us.

We have heard the parties and perused the record. The first issue is whether travelling expenses incurred by the assessee on persons who are not the employees are liable to fringe benefit tax or not. It was brought to our notice that this issue has been decided in favour of the assessee by the decision rendered by Hon'ble Bombay High Court in the case of CIT Vs. Tata Consultancy Services Ltd. (2015) 374 ITR 112, wherein Hon'ble Bombay High Court held that the basis of fringe benefit tax emanate out of employer and employee relationship and hence the payment made to a person out of contractual agreement would not be liable to fringe benefit tax. By following binding decision of Hon'ble Bombay High Court referred above, we set aside the order passed by the learned CIT(A) on this issue and direct the Assessing Officer to exclude travelling expenditure incurred on persons other than the employees while computing chargeable fringe benefit.

Next issue relates to liability to pay fringe benefit tax on medical reimbursement made to the employees at a figure of less than ` 15,000/- for each employee in a year. Learned AR submitted that an identical issue was considered by the coordinate Bench of the Mumbai Tribunal in the case of Godrej Properties Vs. Addl. CIT (2011) 16 Taxmann.com 298, wherein the 3 Piramal Glass Limited Tribunal held that the medical reimbursement covered by the benefit of the proviso (v) to section 17(2) of the Act would not constitute fringe benefit as defined u/s. 115WB of the Act. In the instant case, the claim of the assessee is medical reimbursement of ` 1,27,09,369/- constitute medical reimbursement made to various employees at the rate of less than ` 15,000/- per employee and hence the same is covered by proviso (v) to section 17(2) of the Act. Accordingly, by following the decision rendered by the Coordinate Bench in the above said case, we set aside the order passed by the learned CIT(A) on this issue and direct the Assessing Officer to exclude medical reimbursement of less than ` 15,000/- per employee made to them from the value of chargeable fringe benefit after carrying necessary verification, if required, in order to satisfy himself that the entire amount of medical reimbursement expenditure referred above relates to employees claim of less than Rs.15,000/- per person.

The assessee has also challenged the validity of order passed u/s. 154 of the Act on the ground that the above said issues considered by the Assessing Officer are debatable in nature. Since, we have decided both the issues in favour of the assessee on merits, we do not find it necessary to dispose of the legal ground urged by the assessee.

In the result, appeal filed by the assessee is allowed.