Statutory obligation exemption shields employee electricity expenditure from fringe benefits tax under the wage agreement framework.

Expenditure incurred by an employer to supply electricity to employees under the National Coal Wages Agreement was treated as arising from a binding settlement with statutory force, so it fell within the exclusion for statutory obligations under the Explanation to Section 115WB(2)(E) of the Income-tax Act, 1961. The electricity benefit was therefore not characterised as employees' welfare expenditure and was not exigible to fringe benefits tax. The same exclusion was held applicable both before and after the amendment effective from 01.04.2009, resulting in relief for the assessee.

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Issues: Whether expenditure incurred by the employer for supplying electricity to employees under the National Coal Wages Agreement is excluded from employees' welfare expenditure and, therefore, not exigible to fringe benefits tax under the Explanation to Section 115WB(2)(E) of the Income-tax Act, 1961.

Analysis: The expenditure was incurred pursuant to the National Coal Wages Agreement, which governed the service conditions of the workforce and was treated as a binding settlement having statutory force. The Explanation to Section 115WB(2)(E) excludes expenditure incurred to fulfil any statutory obligation from the category of employees' welfare expenditure. The Court followed the view that obligations arising from the binding coal wage agreement are statutory in character, and the electricity benefit provided to employees was part of that obligation. The same exclusion applied both before and after the amendment with effect from 01.04.2009.

Conclusion: The electricity expenditure was not to be treated as employees' welfare expenditure and was excluded from fringe benefits tax. The issue was answered in favour of the assessee.

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