Fringe Benefit Tax applies only to expenditure incurred in consideration for employment; guest entertainment and auditors' travel were excluded.

Fringe Benefit Tax under Chapter XII-H applies only to expenditure that constitutes consideration for employment, and the deeming fiction in section 115WB(2) cannot be expanded beyond that statutory limit by administrative circulars. On that construction, entertainment expenditure for guests and auditors' travelling expenses were outside the levy, driver salaries were also not chargeable as FBT, and sales promotion and gift expenditure required further verification to determine whether it related to employees or outsiders. The core interpretation of the FBT provisions was applied in favour of the assessee, with limited remand for factual examination of the remaining items.

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Issues: (i) Whether the deeming fiction in section 115WB(2) of the Income-tax Act applies only to expenditure incurred in consideration for employment; (ii) whether the disputed items of expenditure, namely entertainment, sales promotion, gifts, auditors' travelling and driver salaries, were liable to Fringe Benefit Tax.

Issue (i): Whether the deeming fiction in section 115WB(2) of the Income-tax Act applies only to expenditure incurred in consideration for employment.

Analysis: Chapter XII-H levies Fringe Benefit Tax on fringe benefits provided or deemed to have been provided by an employer. Section 115WB(1) defines fringe benefits as consideration for employment, and that statutory meaning governs the chapter as a whole. The deeming provision in section 115WB(2) cannot be read in isolation so as to enlarge the levy to expenses unrelated to employment. A CBDT circular cannot override the Act, and the legislative object of taxing collective employee benefits supports a restricted construction of the deeming fiction.

Conclusion: The deeming fiction in section 115WB(2) operates only where the specified expenditure is incurred in consideration for employment.

Issue (ii): Whether the disputed items of expenditure, namely entertainment, sales promotion, gifts, auditors' travelling and driver salaries, were liable to Fringe Benefit Tax.

Analysis: Entertainment expenditure incurred for guests was outside the levy because it was not shown to relate to employees. Auditors are not employees, so their travelling expenses could not be brought within section 115WB. Driver salaries were also held to be outside the provision, as such remuneration is taxable in the hands of the driver under the head salary. As regards sales promotion and gifts, the material was insufficient to determine whether the expenditure was on employees or outsiders, so verification by the Assessing Officer was required.

Conclusion: Entertainment expenditure and auditors' travelling expenses were not liable to Fringe Benefit Tax, driver salaries were wrongly subjected to the levy, and sales promotion and gift expenditure was remitted for verification.

Final Conclusion: The assessee succeeded on the core legal interpretation of the FBT provisions, obtained relief for certain items of expenditure, and secured remand for limited factual verification of the remaining items.

Ratio Decidendi: For Fringe Benefit Tax, the deeming provision applies only to specified expenditure incurred in consideration for employment, and it cannot be expanded by administrative circulars beyond the statutory charge.

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