Fringe Benefit Tax cannot override agricultural income exemption where the assessee has only exempt agricultural income.

Fringe Benefit Tax could not be levied where the assessee's only income was agricultural income exempt under section 10(1), because Chapter XII-H had to be read subject to that exemption. The Tribunal held that applying fringe benefit tax on the related expenditure would, in substance, tax income excluded from total income, and the non obstante wording of section 115WA(2) did not override the agricultural income exemption. The addition made on that basis was therefore deleted.

---

---

Issues: Whether Fringe Benefit Tax could be levied on an assessee whose only income was agricultural income exempt under section 10(1) of the Income-tax Act, 1961.

Analysis: The assessee's agricultural income was not part of total income and was exempt from tax. The dispute turned on whether the provisions governing fringe benefit tax could operate independently of that exemption. The Tribunal applied the principle that the provisions of Chapter XII-H must be read subject to section 10(1), and that levy of fringe benefit tax on the full expenditure relating to fringe benefits in such a case would effectively tax exempt agricultural income. Following the binding view of the Calcutta High Court, it was held that the non obstante language in section 115WA(2) did not override the exemption for agricultural income so as to fasten fringe benefit tax on the assessee.

Conclusion: Fringe Benefit Tax was not leviable on the assessee, and the addition made on that basis was deleted.

Ratio Decidendi: Provisions imposing Fringe Benefit Tax must be construed subject to the exemption for agricultural income, and they cannot be applied in a manner that indirectly taxes income excluded from total income under section 10(1).

---