Fringe benefit tax requires an employer-employee relationship; retainership payments under a services contract were not taxable as fringe benefits.

Fringe benefit tax applies only to benefits provided or deemed to be provided by an employer to employees. The Tribunal treated the retainership arrangements as contracts for services, noting that the individuals were paid on a retainership basis, received no employee benefits, and were taxed as contractual or professional recipients rather than salary earners. On that factual basis, it rejected any presumed or de facto employment relationship and held that business expenditure alone did not create employer-employee status. Fringe benefit tax was therefore not leviable, and the additions were deleted.

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Issues: Whether fringe benefit tax could be levied where the persons engaged by the assessee were consultants on retainership basis and there was no employer-employee relationship.

Analysis: The charging provision for fringe benefit tax applies only to fringe benefits provided or deemed to have been provided by an employer to his employees. The Tribunal examined the engagement terms and found that the persons were paid on a retainership basis, were not given employee benefits, and tax was deducted under the provisions applicable to contractual or professional payments rather than salary. It held that the real nature of the arrangement was a contract for services and not a contract of service, so the presence of a de facto or presumed employment relationship could not be assumed merely because certain business expenses were incurred.

Conclusion: Fringe benefit tax was not leviable in the absence of an employer-employee relationship, and the additions were deleted in favour of the assessee.

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