Fringe benefit tax addition unsustainable where disputed amount was deposited in escrow as directed by the High Court.

Disputed fringe benefit tax could not be sustained where the assessee had deposited the amount in a separate escrow account in compliance with the jurisdictional High Court's interim directions. The authorities were said to be unjustified in making the addition once the High Court had treated such deposit as sufficient compliance with the provisions governing fringe benefit tax. The Assessing Officer was directed to verify whether the deposit had actually been made as stated, and, if verified, delete the addition. The resulting position was that the fringe benefit value addition was unsustainable on verification of the escrow deposit.

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Issues: Whether the addition made on account of fringe benefit value could be sustained when the assessee had deposited the disputed amount in a separate escrow account pursuant to the jurisdictional High Court's directions.

Analysis: The appeal concerned assessment under Chapter XII-H of the Income-tax Act, 1961 dealing with fringe benefit tax. The assessee showed that the disputed amount had been deposited in a separate bank account in compliance with the High Court's interim directions in the connected writ proceedings. The Court held that the authorities were not justified in making the addition despite the categorical observation of the High Court that such deposit would amount to sufficient compliance with the provisions levying fringe benefit tax. The Assessing Officer was directed to verify whether the amount had in fact been deposited as stated and, upon such verification, delete the addition.

Conclusion: The addition of fringe benefit value was held unsustainable, and relief was granted to the assessee.

Final Conclusion: The appeal succeeded and the assessment addition was directed to be deleted on verification of the escrow deposit.

Ratio Decidendi: Where a jurisdictional High Court has directed disputed fringe benefit tax to be deposited in a separate account as sufficient compliance, the tax authorities cannot sustain the addition contrary to that direction once the prescribed deposit is verified.

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