Tribunal Upholds Fringe Benefits Reassessment for AY 2006-07, Dismisses Revenue's Appeal

The tribunal upheld the Assessing Officer's jurisdiction to reassess fringe benefits for AY 2006-07 due to prima facie underassessment. In valuing free/concessional airline tickets as fringe benefits, the tribunal confirmed the approach aligning with the frequent flier program, rejecting the revenue's appeal. However, for AY 2007-08, the reassessment was deemed time-barred under Section 153(1B), leading to the quashing of the reassessment order. Ultimately, the cross appeals for AY 2006-07 were dismissed, and for AY 2007-08, the revenue's appeal was dismissed while the assessee's appeal was partly allowed.

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Issues Involved:
1. Reopening of Fringe Benefit Tax (FBT) assessment.
2. Valuation of fringe benefits in respect of free/concessional tickets to employees.
3. Time limit for completion of reassessment.

Issue-wise Detailed Analysis:

1. Reopening of Fringe Benefit Tax (FBT) Assessment:
The assessee contested the reopening of the FBT assessment for AY 2006-07, arguing that the Deputy Commissioner of Income Tax (DCIT) erred in reopening the assessment without recording satisfaction that fringe benefits chargeable to tax had escaped assessment. The original assessment was completed u/s 115WE(3) on 30/12/2008, and reassessment proceedings were initiated on 06/11/2012. The reasons for reopening were based on information received from DCIT-5(2), Mumbai, indicating that the cost of free and concessional tickets provided by the airline company to its employees and their family members was not offered to tax as fringe benefits. The tribunal found that the Assessing Officer (AO) had valid jurisdiction to reassess the fringe benefits, as there was a prima facie opinion suggesting underassessment, and the reassessment provisions of Section 115WG were applicable.

2. Valuation of Fringe Benefits in Respect of Free/Concessional Tickets to Employees:
During reassessment, it was noted that the assessee provided free/concessional tickets to its employees and their family members, which the AO subjected to FBT. The assessee argued that no expenditure was incurred as the tickets were for unsold seats that would remain vacant otherwise. The AO, however, valued the fringe benefits based on the average revenue per passenger, resulting in additional fringe benefits of Rs. 62.38 crores. The CIT(A) provided partial relief by directing the AO to value the tickets at par with the provisions made for the frequent flier program, following the tribunal's decision in Jet Airways (India) Limited Vs. DCIT [153 TTJ 624]. The tribunal upheld the CIT(A)'s decision, confirming the valuation approach used for the frequent flier program and dismissing the revenue's appeal.

3. Time Limit for Completion of Reassessment:
For AY 2007-08, the reassessment notice u/s 115WH was issued on 06/11/2012, and the reassessment was completed on 20/02/2014. The assessee raised an additional ground, arguing that the reassessment was time-barred as per Section 153(1B), which stipulates a nine-month period from the end of the financial year in which the notice was served. The tribunal found that the reassessment should have been completed by 31/12/2013, and since it was completed on 20/02/2014, it was time-barred. Consequently, the reassessment order was quashed.

Conclusion:
The cross appeals for AY 2006-07 were dismissed. For AY 2007-08, the revenue's appeal was dismissed, and the assessee's appeal was partly allowed due to the reassessment being time-barred. The order was pronounced on 11th July 2018.

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