M/S APEEJAY TEA LIMITED,KOLKATA vs. D.C.I.T CC - III,KOLKATA, KOLKATA

This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax(Appeals), Central-I, Kolkata dated 27th August, 2013 for the assessment year 2009- 10.

1. That on the facts and in the circumstances of the case, Ld.CIT (A) is wrong and unjustified in dismissing assessee's appeal without considering the interim order passed by Hon'ble High Court by entertaining Writ Petition No. 1199 of 2007 in the assessee's own case.

2. That on the facts and in the circumstances of the case, Ld. CIT. (A) is wrong in dismissing assessee's appeal without making any attempt to interpret the language used in section 115WA (1) in determining fringe benefit provided or deemed to be provided to the employees in tea companies since only 40% M/s. Apeejay Tea Limited 1 of ex pen e is allowed in computing income from business or profession. 3. That on the facts and in the circumstances of the case, Ld.CI.T. (A) is wrong and unjustified in confirming the order passed by Assessing Officer U / s 115WE(3) of Income Tax Act, 1961 to compute value of Fringe Benefit at Rs. 51,85,190/-. 4. That the appellant craves leave to add, alter, adduce or amend any ground or grounds on or before the date of hearing of the appeal

We have carefully considered the submissions of the Ld Representatives of the parties and the orders of the authorities below. We have also considered the relevant provisions Le, section 115WA, 115WB & 115WE of the Income Tax Act. We observe' that an employer assessee is liable to pay Fringe Benefit Tax u/s 115WA of the Income Tax Act, in relation to Fringe Benefits provided by him to its employees. Sub-section (2) of section 115WA·starts with a non obstante clause and states that notwithstanding that no income- tax is payable by an employer to its total income computed in accordance with the provisions of the Act, the tax on Fringe Benefits shall be payable by such an employer. Therefore, an employer is liable to pay Fringe Benefit Tax even when no income-tax is payable by an employer on his total income computed in accordance with the provisions of the Income Tax Act. Therefore, the contention of the Ld Authorized Representative for the assessee that value of fringe Benefit should be computed by applying Rule 8 of Income Tax Rule has no merit as Fringe Benefit Tax is not payable on the income on the of an assessee but only Fringe benefits provided by an employer to its employees. In view of the above, we agree with the Ld Departmental Representative that the contention of the Ld. Authorized Representative for the assessee has no merit and accordingly, we uphold the order the ld. CIT(A) by rejecting grounds of appeal taken by the assessee. In the result, appeal of the assessee is dismissed.

4. I have perused the relevant orders. The issue is covered directly by the order of the jurisdictional ITAT in assessee’s own case for the assessment year 2006-07 as discussed above. Accordingly, ground no.1 2 and 3 are dismissed. Ground no.4 is general in nature.

The question for consideration before Their Lordships was whether deduction on account of deprecation is allowable from the business income arrived at after applying Rule 8. This question was answered by Their Lordships in the affirmative. From illustration (a) it would appear that business profit after taking into account the expenses was computed at Rs.600/-. Applying the Rule 8 taxable income on account of business was computed at Rs.240/-, that is to say, 40% of Rs.600/-. From illustration (b) it would appear that 40% of the total income from sale of tea was taken into account. From illustration (a) it would appear that total depreciation is Rs.100/-. For the purpose of computing business Profit & Loss of 40% of the total depreciation was taken into account. From illustration (a) it would appear that other expenses were computed at Rs.300/- and illustration (b) would show that other expenses were computed at Rs.120/-, in other words, 40% of Rs.300/- had been taken into account. We shall take assistance of the illustration to resolve the issue. Let us assume that the other expenses in illustration (a) amounting to Rs.300/- include Rs.I00/- spent by the employer on account of fringe benefits made available to its employees. In M/s. Apeejay Tea Limited 4 that case, 40% of the aforesaid sum of Rs.I00/- would also be includible in illustration (b). Therefore, the question posed before us has really been answered by the illustration given by the Apex Court in the aforesaid judgment. It cannot be disputed that the amount of expenditure incurred by the assessee in extending fringe benefits to its employees was not solely for the purpose of business. The expenditure incurred is both for the purpose of business and for the purpose of agriculture. The submission made by Mrs. Gutgutia that the expenditure on account of fringe benefits has already been taken into account is not correct. The net profit and loss of the business has to be arrived at after deducting all the expenses as indicated in illustration 'A' in the case of Doom Dooma (supra). Once that is done 40% of the net profit and loss has to be worked out which shall be chargeable to tax. Once this is done the expenditure on account of fringe benefits would automatically stand reduced to 40% as would appear from illustration “B ‘ in the case of Doom Dooma [ supra]. The revenue is interested in contending as would appear from the impugned orders that the expenditure on account of fringe benefit cannot be reduced to 40% for the purpose of computing fringe benefit tax. If that is done, the result would be that the agricultural income itself would become liable to tax, which is not permissible under sub-Section 1 of Section 10 of the Income Tax Act. The provisions contained in Chapter XII H of the Income Tax Act have to be read subject to Section 10 of the Income Tax Act.

Order Pronounced in the Open Court on 21st September, 2016