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Income Tax Appellate Tribunal, BENCH ‘B’ KOLKATA
Before: Hon’ble Shri N.V.Vasudevan, JM & Shri M.Balaganesh, AM ]
ORDER PER N.V.VASUDEVAN, JM:
This is an appeal by the assessee against the order dated 04.03.2013 of CIT(A) IV, Kolkata, relating to AY 2009-10.
The Assessee is a company. It is engaged in the growth and manufacture of tea. The assessee filed its return of Fringe Benefit on 30.09.2009, revised return on 07.04.2010 and was assessed u/s 115WE(1) of the Income Tax Act, 1961. In the return of Fringe benefit, the assessee computed fringe benefits to the extent of Rs.1,97,888/- & 40% thereof being Rs.79,154/- was offered for tax.
In the intimation u/s 115WE(1) of the Income tax Act, 1961 the Fringe Benefit was enhanced from Rs.79,154/- to Rs.1,97,888/- and no credit was allowed on account of advance tax paid.
The assessee filed a petition u/s 154 of the I.T.Act for rectification of two mistakes : 1.Enhancement of taxable fringe benefit.
2. For allowing credit of advance tax of Rs.70,000/-.
Tukvar Tea Co.Ltd. A.Y.2009-10
In response to petition filed by the assessee., an order was passed on 26.07.2011 u/s 154 of the Act wherein credit towards advance tax was allowed and nothing was mentioned about enhancement of taxable fringe benefits. Being aggrieved by the said order/intimation, the assessee preferred an appeal before the CIT(A). The Ld. CIT(A) vide its order dated 04.03.2013 dismissed the appeal filed by the assessee. The CIT(A) in coming to the conclusion that Rule 8D is not applicable in the calculation of fringe benefits followed the decision of the Hon’ble ITAT, Kolkata in the case of DCIT vs Mcleod Russel India Ltd. Vide dated 06.05.2011. Before the Hon’ble ITAT the assessee in the case of DCIT vs Mcleod Russel India Ltd. (supra) had contended as follows :-
There is no dispute to the fact that as per Rule 8 of Income Tax Rules in the case of a tea company, only 40% of the total net income is liable to pay tax under the Income Tax Act at the prescribed rate and the balance 60% is to be considered as agricultural income, which is not liable to be taxed under the Income Tax Act 1961 as it is within the domain 'of the State. The thrust of the submission of the ld. A.R. is that fringe benefit tax is an additional tax on the assessee-company and it is in pari materia with the provisions of section 115-O of the Income Tax Act and relying on the decision of the Hon'ble Jurisdictional High Court in the case of Jayshree Tea and Industries Ltd. & Another (supra) submitted that the additional tax liability will also be to the extent of 40% of the expenditure incurred by the assessee and as such fringe benefit tax is to be computed by taking into account 40% of the expenditure claimed by the assessee.
The decision of the Hon’ble Calcutta High Court in the case of Jayshree Tea and Industries Ltd. Vs. Union of India reported in [2006] 285 ITR 506(Cal) was also cited.
Being aggrieved by the said order of CIT(A) the assessee has preferred this appeal before the Tribunal. Grounds of appeal
raised by the assessee read as follows :- “1.For that the Learned CIT(A) confirmed the order of the Learned Assessing Officer where the Learned Assessing Officer has not apply Rule 8 of Income Tax Rules 1982 to compute the fringe benefits which is applicable in case of the assessee engaged in the business of growing and manufacturing tea.”
7. At the time of hearing before us it was brought to our notice on behalf of the assessee that the Hon’ble Calcutta High Court in the case of Apeejay Tea Ltd. Vs CIT and Another 370 ITR 775 (Cal) had recently gone in to the issue of valuation of taxable fringe benefits in the case of a company engaged in the manufacture and sale of tea. The Hon’ble Calcutta High Court had to deal with the following questions :- Tukvar Tea Co.Ltd. A.Y.2009-10
“Whether rule 8 is applicable for the purpose of computing valuation of the fringe benefits for the purpose of Chapter XII-H of the Income Tax Act ? “
The Hon’ble Calcutta High Court held as follows :- “It could not be disputed that the amount of expenditure incurred by the assessee- employer in extending fringe benefits to its employees was not solely for the purpose of business. The expenditure incurred was both for the purpose of business and for the purpose of agriculture. The submission that the expenditure on account of fringe benefits had already been taken into account was not correct. The net profit and loss of the business had to be arrived at after deducting all the expenses. Once that was done 40 per cent. of the net profit and loss had to be worked out which shall be chargeable to tax. Once this was done the expenditure on account of fringe benefits would automatically stand reduced to 40 per cent.””
In coming to the above conclusion the Hon’ble Calcutta High Court placed reliance on the decision of the Hon’ble Supreme Court in the case of CIT vs., Doom Doom India Ltd. 310 ITR 392 (SC). In view of the aforesaid decision of the Hon’ble Calcutta High Court we are of the view that the claim of the assessee for computing the taxable fringe benefit at Rs.79,154/- is directed to be accepted. We are also of the view that any view contrary to the view taken by the Hon’ble jurisdictional High Court (assuming there is no decision of Hon’ble Supreme Court contrary to the Hon’ble High Court’s decision), is a mistake apparent on the face of the record and proceedings for rectification of such mistakes would be maintainable u/s.154 of the Act. 10. In the result the appeal of the assesse is allowed.
Order pronounced in the Court on 01.06.2016.