THE POONA STUD FARM PVT. LTD.,,PUNE vs. INCOME-TAX OFFICER,,

आदेश / ORDER PER ANIL CHATURVEDI, AM :

This appeal filed by the assessee u/s 253 of the Act is 1. emanating out of the order of Commissioner of Income Tax (A) - Pune – 5, Pune dt.28.01.2016 for the assessment year 2006-07.

2.1 Assessee is a company engaged in the business of breeding, rearing and sale of race horses. Assessee electronically filed Fringe Benefit Tax (FBT) return for A.Y. 2006-07 on 25.11.2006 showing

total value of fringe benefits at Rs.1,66,827/-. The case was selected

for scrutiny and thereafter assessment was framed u/s 115WE(3) of

the Act vide order dt.29.12.2008 and the total value of fringe benefit

was determined at Rs.4,98,290/-. Aggrieved by the order of AO,

assessee carried the matter before Ld.CIT(A), who vide order

dt.28.01.2016 (in appeal No.PN/CIT(A)-5/ITO, Tech & Jud – IV/Rg-

07/Pune/12/2008-09) dismissed the appeal of the assessee.

Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before

us and has raised the following grounds :

“1. The Ld.CIT(A) erred in Charging Fringe Benefit Tax (ignoring the provisions of Sec.115WA) on expenses incurred by appellant on persons who are not its employees.

Sr Expenditure % as per FB’ as per Disputed No Nomenclature Amount Ap’lant A.O. Ap’lant A.O. amount of FB 1 Contribution to 3,37,038 100% 100% 1,10,784 3,37,038 2,26,254 approved (above (1) super- Rs.1 lac annuation per fund. employee) 2 Personal 31,233 Nil% 20% Nil 31,233 31,233 accident (2) insurance premium 3 Medical 15,000 Nil% 20% Nil 15,000 15,000 reimburse- (3) ment 4 Conveyance 34,000 Nil% 20% Nil 6,800 6,800 expenses (4) 5 Tour & Travel 4,49,358 5% 20% 22,468 89,872 67,404 expenditure (5)

ground No.1 and the same is therefore dismissed as not pressed.

noticed that assessee has contributed to approved

superannuation fund of Rs.3,37,038/- but had considered

only an amount of Rs.1,10,784/- for calculation of value of

FBT as it was of the view that the amendment to

Sec.115WC(1)(b) by the Finance Act, 2006 stating that

contribution to superannuation fund in excess of

Rs.1,00,000/- per employee is liable to FBT is clarificatory in

nature and therefore would apply to the assessment year

under consideration. The assessee therefore considered only

Rs.1,10,784/- as FBT. The submission of the assessee was

not found acceptable to the AO. He considered the total value

of Rs.3,37,038/- as the value of FBT and after giving credit to

Rs.1,10,784/- which was offered by assessee, determined the

balance amount of Rs.2,26,254/- as value of FBT.

(b) AO also noticed that out of the total Employee Welfare

expenditure of Rs.2,01,549/- assessee had considered an

expenditure of Rs.31,233/- as being liable to FBT. AO on

perusing the details noticed that an amount of Rs.39,989/-

representing the payment of Personal Accident Premium which

was paid for the benefits of the employees has not been

considered by the assessee while arriving at the value of FBT.

He accordingly considered 20% of the same as the value of the

fringe benefit. He also noticed that assessee had paid an

amount of Rs.15,000/- towards Medical Reimbursement

which was not considered for the purpose of fringe benefit

based on the Clarificatory Circular of CBDT 8 of 2005

dt.29.08.2005. AO was of the view that when the

reimbursement exceeds Rs.15,000/-, the same is to be

considered for valuation of fringe benefit. He accordingly

considered the amount of medical reimbursement of

Rs.15,000/- for the purpose of fringe benefit.

(c). AO noticed that assessee had incurred total expenditure

of Rs.72,308/- as Conveyance Expenses but it had considered

an expenditure only of Rs.38,308/- as being liable for fringe

benefit tax. On perusing the details AO noticed that an

amount of Rs.34,000/- which represented the conveyance

charges paid to the Directors were not considered by the

assessee while arriving at the value of FBT. He accordingly

considered the amount of conveyance charges paid to the

Directors (Rs.34,000/-) as to be liable for FBT.

(d). AO noticed that assessee had incurred expenditure of

Rs.4,49,358/- towards Tour and Travel expenditure. Assessee

after considering the amendment by Finance Act offered only

5% of the expenses on tour and travel expenditure to be liable

for FBT as it was of the view that the amendment made by

Finance Act was clarificatory in nature. The submission of the

assessee was not found acceptable to the AO. He considered

the entire amount on tour and travel expenditure of

Rs.4,49,358/- as the fringe benefit.

before Ld.CIT(A), who upheld the order of AO. Aggrieved by the

order of Ld.CIT(A), assessee is now in appeal before us.

From the aforesaid table he submitted that assessee does not wish

to press the ground with respect to tour and travel expenditure of

Rs.4,49,358/-. With respect to the personal accidental premium of

Rs.31,233/-, he fairly conceded that identical issue arose before the

Pune Bench of the Tribunal in the case of Intervalve (India) Limited

in ITA No.1262/PN/2010 order dt.20.06.2012 and this issue has

been decided against the assessee vide para No.14 of the order. He

therefore submitted that this issue be decided accordingly.

reimbursement of Rs.15,000/- he submitted that an identical

issue arose before Pune Bench of the Tribunal in the case of

Intervalve (India) Ltd., (supra) and the issue has been decided

in favour of the assessee at para No.15 of the order. He

therefore submitted that relying on the aforesaid order of the

Pune Bench of the Tribunal, the ground be decided in

assessee’s favour.

(b). With respect to the contribution towards approved

superannuation fund of Rs.3,37,038/- he submitted that

identical issue arose before the Jaipur Bench of the Tribunal

in the case of DCIT Vs. State Bank of Bikaner & Jaipur in ITA

No.548/JP/2011 order dt.21.10.2011. The Co-ordinate Bench

of the Tribunal of Jaipur after relying on the decisions of

Jaipur Tribunal in the case of Rajasthan Rajya Vidyut

Utpadan Nigam Limited the speech of Finance Minister and

the memorandum of explaining the provisions of the Bill and

thereafter held that the amendment made to Sec.115WB(1)(c)

by Finance Act is retrospective and is applicable to assessment

year 2006-07. He submitted that in the case of assessee, the

assessment year involved is A.Y. 2006-07 and therefore relying

on the decision of Jaipur Bench of the Tribunal, the issue be

decided accordingly.

(c). With respect to the conveyance expenses of Rs.34,000/-,

he pointed to the submissions made before Ld.CIT(A) and

submitted that it was incurred for the conveyance expenses of

non-executive Directors and consultants, who were not the

employees of the assessee. He submitted that since these

persons are not the employees of the assessee, the question of

paying FBT does not arise and for this proposition, he relied

on the decisions in the case of DCIT Vs. Kotak Mahindra Old

Mutual Life Insurance Ltd., reported in 134 ITD 388 (Mum)

and Joshi Technology International Incorporation reported in

157 TTJ 468 (Ahd). Ld.D.R. on the other hand, supported the

order of AO.

on record. The issue in the present case is with respect to

consideration of fringe benefit of the various expenses. Before us,

Ld.A.R. has submitted that he does not wish to dispute the fringe

benefit with respect to tour and travel expenditure of Rs.4,49,358/-.

With respect to the expenditure of Personal Accident Premium, we

find that the Pune Bench of the Tribunal in the case of Intervalve

(India) Ltd., (supra) has decided the issue against the assessee by

holding as under :

“14. In Ground No. (4), the assessee claims that FBT has been wrongly charged with respect to the insurance premium paid of Rs 22,561/- on Group Accident Policy. The claim of the assessee is that in terms of section 115WB(2)(E) expenses on employees’ welfare which are other than the exceptions provided therein are not liable to be considered for levy of FBT. As per the assessee, it is engaged in the business of manufacture of engineering products and it has taken an accidental insurance policy covering its employees for loss of life, medical treatment if met with an accident. The assessee submits that in terms of Explanation to section 115WB(2)(E) any expenditure on employees’ welfare incurred to fulfill any statutory obligation or mitigate occupational hazards, etc., is also not liable to be considered for levy of FBT and that in the present case, such expenditure is of the nature covered by such Explanation to section 115WB(2)(E) of the Act. We find that the Commissioner of Income-tax (Appeals) has observed that the impugned expenditure is not on account of a statutory obligation and, therefore, the same does not fall within the exceptions provided in the Explanation to section 115WB(2)(E) of the Act. On this aspect, we find no cogent controversion on the part of the assessee and accordingly the action of the Commissioner of Income- tax (Appeals) on the basis of reasons contained therein is hereby affirmed. Thus, on this Ground, the assessee fails.”

decision in its support. In view of these facts, issue with respect to

the expenditure of Personal Accident Premium is decided against the

assessee.

Rs.15,000/-, we find that the Co-ordinate Bench of the Tribunal in

the case of Intervalve (India) Ltd., (supra) after relying on various

decisions cited in the order, has decided the issue in favour of

assessee by holding as under :

“15. Ground No. (5) is with regard to the charging of FBT on the reimbursement of medical expenses to the extent of Rs 15,000/-. The contention of the assessee is that reimbursement of medical expenses to the extent of Rs 15,000/- is exempt in the hands of the employee

and to the extent of such exempted allowance, it was also not liable to be considered for FBT in the hands of employer. In this connection, we find that our co-ordinate Benches, namely, the Mumbai Bench of the Tribunal in the case of Godrej Properties Ltd. v. Addl. CIT (2011) 16 Taxmann.com.298 (Mum) and the Bangalore Bench of the Tribunal in the case of Bosch Ld. V. DCIT (2011) 15 Taxmann.com.187 (Bang) have opined that medical reimbursement is taxable as perquisite in the hands of individual employees and merely because grant of such exemptions, same cannot be said to be a fringe benefit for the purposes of Chapter XII-H of the Act. Thus, on this Ground, the assessee succeeds.”

decision in its support. We therefore following the decision laid

down by Pune Bench of the Tribunal in the case of Intervalve (India)

Ltd., (supra) hold that medical reimbursement of Rs.15,000/- is not

liable for FBT.

of Rs.3,37,038/-, we find that the Jaipur Bench of the Tribunal in

the case of DCIT Vs. State Bank of Bikaner & Jaipur (supra) has

held that the amendment made to Sec.115WB(1)(c) is retrospective

and is applicable for A.Y. 2006-07. The observations of Jaipur

Bench of the Tribunal are as under :

“3. The Tribunal vide order dated 27.11.2009 in the case of Rajasthan Rajya Vidyut Prasaran Nigam Ltd. considered that the amendment has been made as welfare measure for overwhelming majority of employees to make it parallel with the deduction provided u/s 80C read with Section 80CCD. Such view was taken after combined reading of the speech of Finance Minister and the memorandum explaining the provisions of the bill. It will be useful to reproduced para 10 of the order of the Tribunal dated 27.11.2009:- “The above principle of interpretation laid down in various judgments of Hon'ble Supreme Court when read in context with the purchase and intention for which the amendment was made u/s 115WB(1)(c) leaves no scope of debate that the said amendment was to remedy the unintended consequences and therefore,, it is required to be considered as retrospective in operation so that a reasonable interpretation can be given to the scheme of levy of fringe benefit tax on contribution to

superannuation fund as a whole. We, therefore, hold that the contribution to superannuation fund in present case being less than Rs. 1.00 lac per employee, is not liable for fringe benefit tax. In the result, this ground of assessee is allowed.”

decision in its support. We therefore, following the decision of

Jaipur Bench of the Tribunal, hold that the amendment to

Sec.115WB(1)(c) is retrospective and is applicable to the year under

consideration. Thus this part of the ground is decided in favour of

the assessee.

assessee’s submission that the amount of conveyance expenses has

been paid for the non-executive Directors and consultants, who were

not the employees of the assessee. The aforesaid contention of

assessee has not been controverted by Revenue. We find that the

Co-ordinate Bench of the Tribunal of Ahmedabad Bench in the case

of Joshi Technology International Incorporation (supra) has held

that FBT is allowable only in a case where expenditure is incurred

by the employer ostensibly for the purpose of business but includes

partially a benefit of a personal nature passed on to the employees.

It further held that legitimate business expenditure not within the

ambit of employer - employee relationship is outside the scope of FBT. Before us, Revenue has not placed any contrary binding decision in its support. We therefore hold that the conveyance expenses incurred on non employees is not liable for FBT. Thus, this portion of the ground is decided in assessee’s favour.

Order pronounced on 31st day of January, 2018.

Sd/- Sd/- (VIKAS AWASTHY) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 31st January, 2018. Yamini

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(A), Pune-5, Pune. 4. Pr.CIT, Pune-4, Pune. 5 �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “ए” / DR, ITAT, “A” Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार/ BY ORDER // True Copy // / / // True Copy //

व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.