ITAT rules FBT not applicable to employees abroad; directs deletion of disallowed expenses

The Appellate Tribunal (ITAT) allowed the appeal filed by the assessee, ruling that Fringe Benefit Tax (FBT) provisions do not apply to employees stationed outside India. The ITAT held that FBT is applicable only when benefits are collectively enjoyed by employees, and personal attribution poses difficulty. Therefore, the Assessing Officer was directed to delete the disallowance of expenses related to the foreign representative office in Dubai, UAE, as they did not fall under the purview of FBT provisions.

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Issues:
Addition on account of Rs. 3,22,115/- u/s 115WB, i.e. FBT provisions.

Analysis:

Issue 1: Addition on account of FBT provisions

The appeal pertains to the addition made by the Assessing Officer under section 115WB, i.e., Fringe Benefit Tax (FBT) provisions. The assessee, engaged in manufacturing and exporting garments, maintained a Foreign Representative office in Dubai, UAE, for various purposes related to its business operations. The CIT(A) upheld the addition, stating that the expenses incurred on the foreign representative office fell under the purview of FBT as per the provisions of section 115WB. However, the Appellate Tribunal (ITAT) considered the arguments presented by the assessee's representative (AR) that FBT should not apply to employees stationed outside India. The AR relied on Circular No. 8 of 2005, which clarified that FBT is payable on fringe benefits provided to employees based in India and determined on a presumptive basis. The ITAT also referred to decisions by coordinate Benches in similar cases, emphasizing that FBT is applicable only when benefits are collectively enjoyed by employees and personal attribution poses difficulty. The ITAT concluded that the provisions of FBT do not extend to employees stationed outside India and directed the Assessing Officer to delete the disallowance, thereby allowing the appeal filed by the assessee.

This detailed analysis of the judgment provides insights into the legal reasoning behind the decision and the interpretation of FBT provisions concerning employees stationed outside India.

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