TaxTMI 
TaxTMI 
2013 (2) TMI 747
X X X X Extracts X X X X
X X X X Extracts X X X X
....ge benefit tax :- A Sales promotions Rs. 3,79,14,000 B Advertisement sponsorship Rs. 89,000 C Incentive and conference Rs. 4,77,86,000 D Financial charges other Rs. 4,000 E Agents retraining Rs. 6,000 F Agents sales material Rs. 3,06,00,000 G Agents training Rs. 1,56,80,000 Rs. 13,20,79,000 The Assessing Officer thus included the above amount in the value of fringe benefit and 20% thereof as provided u/s. 115WE was computed to be liable for fringe benefit tax which worked out at Rs. 2,64,15,800/- and as such added the same to the value of fringe benefit. Aggrieved against the order of the Assessing Officer, the assessee filed appeal before learned CIT(A). Learned CIT(A) after considering submissions of the learned AR deleted some of the additions made under certain heads i.e. under the head "advertisement sponsorship expenses" amounting to Rs. 89,000/- holding that the same were on account of participation fee for conference for employee and thus were liable to be excluded as per clause (C) of section 115WE(2),further under the head 'incentive and conference' amounting to Rs. 4,77,86,....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... employee benefit is necessary for subjecting the expenditure under different heads as listed u/s. 115WB(2) to fringe benefit tax; and (ii) whether the agents are the third parties and the expenses incurred in providing incentives, training etc. to the agents, being third parties, are not liable to be subjected to fringe benefit tax. Our findings in this respect are as under :- 7. Chapter XIIH of the Act creating additional tax liability on the prescribed assessees in the form of FBT was inserted by the Finance Act, 2005 with effect from 1.4.2006. Section 115WA of the Act prescribes that in addition to the income-tax chargeable under the Act, there shall be charged for every assessment year commencing on or after 1.4.2006, a FBT at a specified rate on the value of the fringe benefits provided or deemed to have been provided by an employer to his employees during the relevant previous year. Section 115WB of the Act describes the fringe benefits which are liable for charge of FBT as prescribed in section 115WA of the Act. Sub-section (1) of section 115WB prescribes that "For the purposes of this Chapter, "fringe benefits" means any consideration for employment provided....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sports event or any other event organised by any Government agency or trade association or body; (iv) being the expenditure on the publication in any print or electronic media of any notice required to be published by or under any law or by an order of a court or tribunal; (v) being the expenditure on advertisement by way of signs, art work, painting, banners, awnings, direct mail, electric spectaculars, kiosks, hoardings, bill boards [, display of products] or by way of such other medium of advertisement; [***] (vi) being the expenditure by way of payment to any advertising agency for the purposes of clauses (i) to (v) above; [(vii) being the expenditure on distribution of samples either free of cost or at concessional rate; and] (viii) being the expenditure by way of payment to any person of repute for promoting the sale of goods or services of the business of the employer,] shall not be considered as expenditure on sales promotion including publicity; (E) employees' welfare. [Explanation.-For the purposes of this clause, any expenditure incurred or payment made to- (i) fulfil any statutory obligation; or....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... "sales promotion including publicity" the head itself suggests that these type of expenses have nothing to do with employees-employer relation or any benefit to the employees. c) Further under the exclusion clause of clause (D), we may observe that as mentioned under sub-clause (i), any expenditure incurred by the employer on advertisement in any print, electronic media and transport system cannot be said in any manner relating to consideration for employment. d) Similarly, as mentioned under sub-clause (iii) any expenditure incurred on sponsorship of any sports event or any other event organized by any Government agency or trade association or body are also exempt. Again such type of expenditure has nothing to do with employee-employer relationship or any benefit to the employees. e) Any expenses incurred as per clause (iv) being publication of any notice required by an order under any law or any court or Tribunal has no connection with any employee-employer relationship. f) Any expenditure as mentioned under sub-clauses (v) and clause (vi) i.e. expenses relating to advertising or payment to any advertising agency and further under sub clause ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ading of section 115WB(2) reveals that if the employer incurs any of the expenditure as mentioned under Clauses (A) to (Q), though may or may not have been incurred by the employer in consideration of employment or for providing any benefit or incentive to the employees, but also for benefit to any third person, but in the course of business or profession, is deemed to have been provided by the employer to the employees. With this deeming provision the scope of the fringe benefit tax has been expended covering those expenses, which have been mentioned under the sub-section (2), even though the employee-employer relationship may or may not be present or even though any benefit is derived out or not to the employees. Now coming again to the wordings of section 115WB(2), we may observe that a careful reading of clause (B) as well as clauses (i),(ii)(iv)(v)(vi) & (viii) of section 115WB(2)(D) reveals that the legislature has excluded from the purview of fringe benefit tax certain specific forms of payments to third parties as detailed therein. The reasonable presumption is that the specific type of expenditure in the form of payment to third persons which have been specifically excl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve mentioned type of expenditure under FBT. 12. As per the settled law, the words cannot be added or substituted in a statute to give it a different meaning when the words or language of the Statute is clear and unambiguous. The question of interpretation of statute arises only when there is any doubt, ambiguity, inconsistency, incompleteness or lacuna in the language or construction of the Statute. Hon'ble Supreme Court in the case of Calcutta Jute Manufacturing Co. Vs. Commercial Tax Officer,1997 AIR 2920, has held that in case of interpreting a taxing statute, one has to look into what is clearly stated. There is no room for searching the intentions, presumptions or equity. Giving words their ordinary and natural meaning is known as literal interpretation or litera legis. It is the duty of the court not to modify the language of the Act and if such meaning is clear and unambiguous, effect should be to the provisions of a statute whatever may be the consequence. The idea behind such a principle is that the legislature, being the supreme law making body must know what it intends in the words of the statue. Literal interpretation has been called the safest rule because th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....endment of 1998. 21. It has been held by a Constitution Bench of this Court in ITO v. T.S. Devinatha Nadar (vide AIR paras 23 to 28) that where the language of a taxing provision is plain, the court cannot concern itself with the intention of the legislature. Hence, in our opinion the High Court erred in its approach of trying to find out the intention of the legislature in enacting the impugned amendment to the Stamp Act." 13. Hon'ble Supreme Court in the above said authority has further held that the Court must make every effort to uphold the constitutional validity of a statute, even if that requires giving a strained construction or narrowing down its scope. It is none of the concern of the court whether the legislation in its opinion is wise or unwise. Court must not invalidate a statute lightly for as observed above invalidation of a statute made by the legislature elected by the people is a grave step. Hon'ble Supreme Court, while relying upon various earlier judgements of Hon'ble Supreme Court itself, further observed that the legislature is the best judge of what is good for the community, by whose suffrage, it comes into existence. Hon'ble Supr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oviding its employees certain benefits. Those benefits which are directly provided are contained in sub-section (1). Some other benefits, however, which the employer provides to the employees by incurring any expenditure or making any payment for the purpose enumerated therein in the course of his business or profession, irrespective of the fact as to whether any such activity would be carried on a regular basis or not, e.g., entertainment would, by reason of the legal fiction created, also be deemed to have been provided by the employer for the purpose of sub-section (2). Whereas sub-section (1) envisages any amount paid to the employee by way of consideration for employment, what would be the limits thereof are only enumerated in sub- Section (2). We, therefore, are of the opinion that sub-sections (1) and (2), having regard to the provisions of Section 115WA as also sub-section (3) of Section 115WB, must be held to be operating in different fields." Hon'ble Supreme Court further in paragraphs 17 to 19 has observed as under :- "17. It is now a well settled principle of law that a statute should ordinarily be given a purposive construction. {See New India Assurance....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tly asked questions, the Question No. 14 and its answer by the said circular is relevant, which part of the circular for the sake of convenience is reproduced as under :- "Do the words 'any expense' in sub-section (2) of section 115WB refer to all expenses or restricted to those incurred on the employees and their families? 14.Under sub-section (2) of section 115WB, fringe benefits shall be deemed to have been provided by the employer to his employees, if the conditions specified therein are satisfied. Hence, if the employer has incurred any expense for any one of the purposes enumerated in clauses (A) to (P) of sub-section (2) of section 115WB, the whole of that expense falling under the relevant head shall be deemed to have been provided. No segregation as 'expenses incurred on employees' or 'expenses incurred on others' is permissible". 17. Further Question No. 56 is also relevant, which is reproduced as under :- "Whether FBT will apply to the expenditure incurred for the purposes of conferences of the agents or dealers or development advisors? 56. In terms of the provisions of clause (C) of sub-section (2) of section 115WB, any expenditure incurred....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isions of the statute. However this Jurisdiction does not vest with this Tribunal. The provisions of the statute cannot be quashed or struck down by judicial interpretation by the ITAT so as to render the same otiose or meaningless. The principle of judicial interpretation has the limited scope, whereas if the provisions of the statute are arbitrary or unconstitutional, the same can only be struck down by the court of competent jurisdiction but cannot be nullified by way of judicial interpretation. 21. Our attention has been drawn to certain passing referances made by the hon'ble High Court of Delhi in 'T&T Motors Ltd. Vs. ACIT', Income Tax appeal No. 899 of 2010 decided on 24.1.2012 and the hon'ble supreme court in R& B Falcon (A) Pty Ltd. Vs. CIT (supra). The hon'ble Delhi High Court while dealing with the contention to the effect that the customers of a company are neither the employees nor are deemed to be employees, hence the employer cannot be subjected to fringe benefit tax, has observed in para 8 of the judgement as follows :- "One of the contentions raised by the appellant is that customers are not employees and are not deemed to be employees under any of the provisi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the hon'ble Apex Court of the country perhaps was not brought into the notice of the ld. Co-ordinate benches of the tribunal at the time of adjudication in cases M/s. Toyota Kirloskar Motor Pvt. Ltd. Vs. Addl. CIT, LTU Bangalore(supra) & Intervalve (India) Ltd. Vs. Add. CIT (supra). With due respect, in our view, the law laid down by the ld. Coordinate benches of the tribunal does not hold a binding precedent in view of the findings of the Apex Court in 'F & B Falcon(A) Pty Ltd.'(supra), which we are bound to follow and thus we do accordingly. 23. Now coming to the next point, admittedly the assessee is a life insurance company, life insurance agents are appointed under the statute and they are given licenses by the Government to act as such. They are given extensive training by the insurance companies. The success of the business of the insurance company depends upon the services and continuation in service of the agents. The services are rendered by the agents personally as no one can act on their behalf and they cannot delegate further their authority to any other person. They perform work for significant period and at regular interval they are provided training and retrain....
X X X X Extracts X X X X
X X X X Extracts X X X X
....such type of cases by way of expanding the scope of fringe benefit tax. 24. Now, coming to the factual matrix of the case. We hereby discuss the different heads one by one. (A) Sales Promotion - Rs. 3,79,14,000/- :- Learned AR has submitted that these expenses are in the nature of printing product brochure, forms, product booklets etc. and has further pleaded that these type expenses have been specifically excluded from the ambit of fringe benefit tax by provisos (i) and (iv) to clause (D) of section 115WB(2). A perusal of clause (D) of section 115WB(2) reveals that the expenses incurred on the activities of sales promotion including publicity have been specifically included and subjected to fringe benefit tax. What has been excluded is the advertisement in any print or electronic media or transport system as per clause (i); and further as per clause (iv) any expenditure on publication of any notice required to be published by or under any law or by an order of a court or Tribunal has been excluded. So the contention of the assessee that the said expenses are excluded under clause (i) & (iv) of clause (D) of section 115WB(2) is wrong. However, we may observe that the expen....