2013 (3) TMI 466

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.... law in support of the addition made on this ground can never be a valid reason to delete the addition in question. The AO has rightly disallowed the proportionate salary to the partners and that the action of the CIT(A) is not valid. 2. The Ld. CIT(A) has erred in law as well as on facts deleting the addition made proportionately with regard to various expenses. Though the assessee had paid FBT yet the disallowance made on the said ground was valid and that the action of the CIT(A) is not valid." 3. Brief facts giving rise to this appeal are that the Assessing Officer made certain additions on account of salary paid to the partners and also made certain additions with regard to various expenses on which assessee had paid Fringe Benefit T....

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....artners to exempt units and taxable units on the basis of turn over. The sales including job work of taxable units is Rs. 83,45,26,173/- and that of the exempted units is Rs. 54,88,14,641/-. The AO disallowed the salary allocable to exempt units of Rs.9,52,155/-, worked out on the basis of turnover. The above action of the AD was contested in ground no. 3 of appeal. Before me, the AR submitted that there was no material to conclude that part of salary paid to partners pertains to exempt units and as such the disallowance is based on surmises and conjectures. The AR submitted that the AD has no power to allocate expenses arbitrarily as held in the case of DCIT Vs Delhi Press Samachar Patra (P) Ltd. 296 ITR 210 (Del.). Further, in the case of....

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....h expenses, as has been done in the present case, it follows that the same are treated as fringe benefit provided by the assessee as employer to its employees and the same have to be appropriately allowed as expenses incurred wholly and exclusively for the purpose of its business by the assessee. The relevant para 17 of above ITAT reads as under:- "17. We have heard the arguments of both the sides and also perused the relevant material on record. The learned counsel for the assessee has taken us through the CBDT Circular No. 8/2005 dated 29-08-2005 giving explanatory notes on the provisions relating to fringe benefit tax as introduced by the Finance Act, 2005 and invited our attention to the relevant portion thereof to explain the object b....

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....expenses incurred by the employer irrespective of whether the same are incurred for official or personal purposes. In our opinion, once fringe benefit tax is levied on such expenses as has been done in the present case, it follows that the same are treated as fringe benefits provided by the assessee as employer to its employees and the same have to be appropriately allowed as expenses incurred wholly and exclusively incurred by the assessee for the purpose of its business. In that view of the matter, we delete the disallowance made by the Assessing Officer and confirmed by the learned Commissioner of Income Tax(A) out of conveyance and telephone expenses and allow ground No. 4 and 5 of the assessee's appeal." 7. In the present case, the DR....