TaxTMI 
TaxTMI 
2013 (7) TMI 690
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....ring the years under consideration, the assessee was chargeable to tax in respect of fringe benefits for which the assessee had filed the returns of all the years under appeal. That the Assessing Officer made the addition of the expenses incurred by the assessee in respect of channel placement charges which is in the nature of distribution expenses alleging the same to be sales promotion. He stated that the assessee had to pay money to multi system operators and local cable operators to carry their channels on the desired band. Thus, the payment made by the assessee was for distribution of the channel and it has no relevancy to the advertising or sales promotion. He further stated that the FBT is chargeable in respect of fringe benefit provided by the employer to the employees, whether directly or indirectly. That sub-section (2) of Section 115WB of the Income-tax Act, 1961 provides the deeming provision where the fringe benefit is deemed to have been provided by the employer to the employees in respect of certain expenses. Clause (d) of such sub-section is "sales promotion including publicity". That the channel placement expenses which are incurred by the assessee for distribution....
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....[1993] 201 ITR 884 (Calcutta). 6. We have carefully considered the arguments of both the sides and perused the material placed before us. Fringe Benefit Tax was levied for the first time by the Finance Act, 2005 by introducing Chapter XII-H i.e. Sections 115W to 115WL to the Income-tax Act, 1961. Section 115WB(2)(d) under which the department has covered the payment of channel place charges reads as under:- "115WB. (2) The fringe benefits shall be deemed to have been provided by the employer to his employees, if the employer has, in the course of his business or profession (including any activity whether or not such activity is carried on with the object of deriving income, profits or gains) incurred any expense on, or made any payment for, the following purposes, namely:- (A) ................. (B) ................. (C) ................. (D) sales promotion including publicity: Provided that any expenditure on advertisement, - (i) being the expenditure (including rental) on advertisement of any form in any print (including journals, catalogues or price lists) or electronic media or transport system; (ii) being the expenditure....
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....ts is justified both on grounds of equity and economic efficiency. When fringe benefits are undertaxed, it violates both horizontal and vertical equity. A taxpayer receiving his entire income in cash bears a higher tax burden in comparison to another taxpayer who receives his income partly in cash and partly in kind, thereby violating horizontal equity. Further, fringe benefits are generally provided to senior executives in the organization. Therefore, under-taxation of fringe benefits are violates vertical equity. It also discriminates between companies which can provide fringe benefits and those which cannot thereby adversely affecting market structure. However, the taxation of fringe benefits raises some problems primarily because - (a) all benefits cannot be individually attributed to employees, particularly in cases where the benefit is collectively enjoyed; (b) of the present widespread practice of providing perquisites, wherein many perquisites are disguised as reimbursements or other miscellaneous expenses so as to enable the employees to escape/reduce their tax liability; and (c) of the difficulty in the valuation of the benefits. 2.2 In....
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....into force the same carries great weight." 10. That the Hon'ble Jurisdictional High Court has also expressed the similar view in the case of T & T Motors Ltd. and held as under:- "A careful reading of clauses (i), (ii), (iv), (v), (vi) and (vii) of section 115WB(2)(D) elucidates that the Legislature has excluded from fringe benefit expenditure in the form of payments to third persons because this is not a fringe benefit which is enjoyed by the "employee/recipient" but it is an expenditure incurred for the purpose of business and in the hands of the recipient the expenditure is taxable as income earned." 11. That in the case under appeal before us, admittedly, the expenditure was incurred by the assessee for channel placement which is made to third persons and there is no employer-employee relationship between the assessee and the recipient. Therefore, the Circular of the CBDT as well as the decision of Hon'ble Apex Court in the case of R & B Falcon (A) Pty.Ltd. (supra) would be squarely applicable. Moreover, Hon'ble Jurisdictional High Court in the case of T & T Motors Ltd. (supra) has stated that in respect of payment to third persons, FBT is not applica....