2016 (5) TMI 354 - AT - Income Tax

EPF contributions under Employees Pension Scheme not subject to fringe benefit tax. Revenue appeal dismissed.

DCIT, Circle-1, Kolkata Versus M/s. North Brook Jute Company Ltd.

DCIT, Circle-1, Kolkata Versus M/s. North Brook Jute Company Ltd. - TMI Issues Involved:1. Whether the employer’s contribution to the Employees Provident Fund is subject to fringe benefit tax under Section 115WB(1)(c) of the Income Tax Act.2. Whether the contributions made by the employer to the Employees Pension Scheme, 1995 should be considered as contributions to an approved superannuation fund under Section 2(6) of the Income Tax Act.Issue-Wise Detailed Analysis:1. Employer’s Contribution to Employees Provident Fund and Fringe Benefit Tax:The primary issue was whether the employer’s contribution to the Employees Provident Fund (EPF) should be treated as a fringe benefit under Section 115WB(1)(c) of the Income Tax Act, thereby attracting fringe benefit tax (FBT). The Assessing Officer (AO) had added Rs. 1,13,42,857/- to the total value of fringe benefits, arguing that the employer’s contribution to the pension fund was a fringe benefit. However, the assessee contended that the contribution was a statutory requirement under the Employees Provident Fund & Miscellaneous Provisions Act, 1952, and not an approved superannuation fund as defined under Section 2(6) of the Income Tax Act.2. Contributions to Employees Pension Scheme, 1995 and Approved Superannuation Fund:The second issue revolved around whether the contributions made by the employer to the Employees Pension Scheme, 1995, should be treated as contributions to an approved superannuation fund under Section 2(6) of the Income Tax Act. The CIT(A) had deleted the addition made by the AO, holding that the contributions were not to an approved superannuation fund but to a statutory scheme framed by the Government of India.Detailed Analysis:Assessment and Reassessment:The fringe benefit tax assessment was initially completed under Section 115WE(3) of the Act, determining the value of taxable fringe benefits at Rs. 4,92,016/-. This was later rectified to Rs. 5,16,476/-. The case was reopened under Section 115WG(c), and a notice was issued under Section 115WH, leading to the reassessment where the AO added Rs. 1,13,42,857/- as fringe benefits.Arguments and Contentions:- The assessee argued that the contributions were made to the Employees Provident Fund Organisation under a scheme framed by the Government of India, which does not attract FBT as clarified by CBDT Circular No. 8/2005.- The AO maintained that the employer’s contribution to the pension fund was a fringe benefit, thus adding the amount to the total value of fringe benefits.CIT(A)’s Decision:The CIT(A) accepted the assessee’s contention that the employer’s contribution to the Employees Provident Fund is not a contribution to an approved superannuation fund under Section 2(6) of the Act. Consequently, the addition of Rs. 1,13,42,857/- as fringe benefits was deleted.Tribunal’s Analysis and Conclusion:- The Tribunal referred to Section 2(6) of the Income Tax Act, which defines an approved superannuation fund as one requiring approval from the Chief Commissioner or Commissioner in accordance with the rules in Part B of the Fourth Schedule.- The Tribunal noted that the Employees Pension Scheme, 1995, framed under Section 6A of the Employees Provident Fund & Miscellaneous Provisions Act, 1952, is a statutory scheme and not an approved superannuation fund as per Section 2(6).- The Tribunal also referred to CBDT Circular No. 8/2005, which clarified that contributions to approved gratuity funds or provident funds do not attract FBT.Final Judgment:The Tribunal held that contributions made to the Employees Provident Fund under the Employees Pension Scheme, 1995, are statutory contributions and not contributions to an approved superannuation fund under Section 2(6) of the Income Tax Act. Therefore, the addition of Rs. 1,13,42,857/- made by the AO towards fringe benefits under Section 115WB(1)(c) was not sustainable. The Tribunal confirmed the order of the CIT(A) and dismissed the appeal filed by the Revenue.Outcome:The appeal filed by the Revenue was dismissed, and the order of the CIT(A) deleting the addition of Rs. 1,13,42,857/- as fringe benefits was upheld.