2013 (6) TMI 569 - AT - Income Tax

Tribunal Decision: Assessee's Appeal Partly Allowed for A.Yrs. 2006-09

The Tribunal partly allowed the assessee's appeal for A.Yrs. 2006-07 to 2008-09. It held that the assessee could raise FBT issues post-return filing ... FBT on expenses incurred on non- employees - Held that:- As decided in CIT Vs Tata Consultancy Ltd. [2013 (6) TMI 516 - ITAT MUMBAI] employer/employee relationship is a pre-requisite for the levy of fringe benefit tax. Thus as no employer-employee relationship exists with non- employees payment deserves to be kept out side the purview of FBT. In favour of assessee. FBT on fringe benefit which are taxable in the hands of employees - Medical reimbursement & Medical facilities - Held that:- As decided in case of Vijaya Bank [2011 (8) TMI 751 - ITAT BANGALORE] where perquisites/benefits which are fully attributable to the employee and are taxed in their hands, would be continued to be taxed under the existing provisions of Sec. 17(2) of the Act. In the present case, these two items are directly attributed to the personal benefit of the employees therefore deserves to be kept outside the purview of fringe benefit tax. The other three items i.e. education facilities, maintenance of residential colony for employees and Insurance premium paid by employer to keep in force an insurance on health of employees are all perquisites liable to be taxed in the hands of the employees individually thus deserves to be kept outside the purview of FBT. In favour of assessee. FBT on administration expenses incurred on driver/pilot - Held that:- Expenses on repair, running and maintenance of motor car/aircraft do not include remuneration paid to drivers/pilot as supported by the decision of CIT Vs Sholinger Textiles Ltd. [1998 (4) TMI 83 - MADRAS High Court] - exclusion of value of such fringe benefit from the taxable value of fringe benefit. In favour of assessee. FBT on Insurance premium for motor car and aircraft - Held that:- As decided in CIT Vs Tungabhadra Industries Ltd [1991 (11) TMI 6 - CALCUTTA High Court] expenditure incurred on repairs and insurance of car cannot be considered for disallowance u/s. 37(3A) - exclusion of value of such fringe benefit from the taxable value of fringe benefit. In favour of assessee. FBT on pre-operative expenses - Held that:- CBDT in its explanatory note on the provisions relating to FBT answered that expenditure on any capital asset in respect of which depreciation is allowable u/s. 32 does not fall within the scope of sub-sec. (2) of Sec. 115WB. Since the approximate objective of incurring such expenditure is the acquisition of a capital asset therefore, such expenditure is not included in reckoning the value of fringe benefit - exclusion of value of such fringe benefit from the taxable value of fringe benefit - In favour of assessee. FBT on expenses on maintenance of residential accommodation not in the nature of guest house - Held that:- As decided in assessee's own case where the buildings have been used by the employees and other related visitors such as customers, surveyors, contractors, government officials, auditors etc., cannot be considered as guest house as they are connected with assessee's business - exclusion of value of such fringe benefit from the taxable value of fringe benefit - In favour of assessee. FBT on presentation articles distributed to business related persons - Held that:- As these expenses are incurred on persons related to or connected with the business but are not employees exclusion of value of such fringe benefit from the taxable value of fringe benefit directed - In favour of assessee. Issues:Three separate appeals by the assessee against CIT(A) orders for A.Yrs. 2006-07 to 2008-09; Whether assessee can raise issues related to Fringe Benefit Tax after filing return; Levy of FBT on expenses incurred on non-employees; Charging FBT on fringe benefits taxable in employees' hands; Administration expenses on drivers/pilots; Insurance premium for motor car and aircraft; Pre-operative expenses; Maintenance of residential accommodation; Expenses on presentation articles to business-related persons.Analysis:1. Issue of Raising FBT Issues Post Return Filing:The Departmental Representative argued that once the assessee filed Fringe Benefit Tax return, it cannot raise issues regarding FBT taxability later. The contention was supported by a Supreme Court decision. However, the Senior Counsel cited a case where it was held that the assessee can raise new pleas before appellate authorities. The Tribunal noted that appellate authorities have the power to consider claims not made in the original return, following a decision of the Jurisdictional High Court. The Tribunal proceeded to address the grounds of appeal based on this premise.2. Levy of FBT on Expenses Incurred on Non-Employees:The AO had levied FBT on expenses not involving employees. The assessee contended that such expenses should not attract FBT. Citing a previous Tribunal decision, it was held that FBT is applicable only to expenses containing a personal benefit element for employees. Following this, the Tribunal directed the AO to exclude the specified amount from the taxable FBT value.3. Charging FBT on Fringe Benefits Taxable in Employees' Hands:Certain fringe benefits were attributed directly to employees' personal benefits and were taxed in their hands. The Tribunal directed the AO to exclude these benefits from the FBT taxable value. Other items like education facilities and insurance premiums were also deemed outside the purview of FBT due to their direct attribution to employees.4. Administration Expenses on Drivers/Pilots:The Tribunal supported the assessee's contention that expenses on drivers/pilots should not be taxed again as fringe benefits. Citing a High Court decision, the Tribunal directed the AO to exclude such expenses from the taxable FBT value.5. Insurance Premium for Motor Car and Aircraft:The Tribunal, following a High Court decision, directed the AO to exclude the insurance premium expenses from the taxable FBT value. It was established that such expenses were not part of repair, running, or maintenance costs for motor vehicles.6. Pre-Operative Expenses:Pre-operative expenses incurred on units not yet set up were considered capital expenditure. Citing CBDT's explanatory note, the Tribunal directed the exclusion of such expenses from the FBT taxable value.7. Maintenance of Residential Accommodation:Expenses on maintenance of residential accommodation not in the nature of a guest house were addressed. Following a previous Tribunal decision, the Tribunal directed the exclusion of these expenses from the taxable FBT value.8. Expenses on Presentation Articles:Expenses on presentation articles distributed to business-related persons were deemed outside the purview of FBT since they were not incurred on employees. The Tribunal directed the exclusion of such expenses from the taxable FBT value.9. Overall Decision:The Tribunal partly allowed the appeal filed by the assessee for the respective assessment years, considering the specific issues and directing the exclusion of various expenses from the taxable FBT value based on legal precedents and interpretations.This detailed analysis covers the various issues addressed in the judgment, providing a comprehensive overview of the Tribunal's decision on each matter raised by the assessee in the appeals.