Tribunal upholds Fringe Benefit Tax levy, rejects exemption claim

The Tribunal dismissed both appeals filed by the assessee, affirming the orders of the Assessing Officer (AO) and Commissioner of Income Tax (Appeals) regarding the levy of Fringe Benefit Tax (FBT) under Section 115WE of the Income Tax Act, 1961, and the rejection of the application under Section 154. The Tribunal held that the assessee was not engaged in the business of carriage of passengers or goods by aircraft, making it ineligible for exemption under Section 115WC(2)(f). The orders were pronounced on 29th July 2015.

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Issues Involved:
1. Levy of Fringe Benefit Tax (FBT) under Section 115WE of the Income Tax Act, 1961.
2. Rejection of the application filed by the assessee under Section 154 of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Levy of Fringe Benefit Tax (FBT) under Section 115WE of the Income Tax Act, 1961

The assessee initially declared the value of fringe benefits at Rs. 11,29,71,006/- in the original return, which was later revised to Rs. 5,42,95,190/-. The reduction of Rs. 5,86,75,815/- was attributed to the different values of fringe benefits for repair, running (including fuel), and maintenance of aircraft and the amount of depreciation thereon. The assessee argued that these expenses should be liable for FBT at NIL rate under Section 115WC(2)(1) as the company is engaged in the business of carriage of passengers or goods by aircraft.

The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] held that the assessee was primarily using the aircraft for internal business purposes (92.85%) and only 7.15% for hire. The CIT(A) noted that the major expenses were related to the company's own use, and the income from hiring was minimal. The assessee's claim for exemption under Section 115WC(2)(f) was rejected as it was not engaged in the business of carriage of passengers or goods by aircraft.

Issue 2: Rejection of Application under Section 154 of the Income Tax Act, 1961

The assessee filed an application under Section 154, which was also rejected by the AO and CIT(A). The CIT(A) observed that the assessee had admitted liability for FBT in the original return and had paid FBT in previous years on similar facts. The doctrine of consistency was applied to dismiss the assessee's claim.

Tribunal's Findings

The Tribunal noted that the assessee had conceded that it was not engaged in the business of carriage of passengers or goods by aircraft, thus making it ineligible for exemption under Section 115WC(2)(f). The Tribunal emphasized that FBT can be levied only when the expenditure incurred is for the purpose of business, and even salary paid to an employee is considered as expenditure for business purposes.

The Tribunal rejected the assessee's argument that there was no consideration for employment, noting that the assessee had admitted the possibility of the aircraft being used for the benefit of employees. The Tribunal found no evidence to support the assessee's contention that the expenditure in question was not "consideration for employment."

The Tribunal distinguished the case from the Mumbai Bench decision in DCIT vs. Kotak Mahindra Old Mutual Life Insurance Ltd. and the Pune Bench decision in Intervalve (India) Ltd. vs. ACIT, noting that the factual circumstances were different.

The Tribunal upheld the AO's and CIT(A)'s orders, stating that the assessee had consistently filed FBT returns and paid tax on the same expenditure in previous years. The revised return filed by the assessee was based on a claim for exemption under Section 115WC(2)(f), which was now conceded as inapplicable.

Conclusion

The Tribunal dismissed both appeals filed by the assessee, affirming the orders of the AO and CIT(A) regarding the levy of FBT and the rejection of the application under Section 154.

Order Pronouncement

The order was pronounced in the open court on 29th July, 2015.

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