TaxTMI 
TaxTMI 
2013 (2) TMI 747
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....,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. 4,77,86,000/- and 'financial charges' amounting to Rs. 4,000/- treating them as incentive to agents and n....
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....ents 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 by way of------". The presence of the expression "any consideration for employment" is significant in section 115WB(1), inasmuch as the benefits by way of clauses (a)....
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....f 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 (ii) mitigate occupational hazards; or (iii) provide first aid facilities in the hospital or dispensary run by the employer; or (iv) provide creche facility for the children of the employee; or (v) sponsor a sportsman, being an employee; or (vi) organise sports events for employees, shall not be c....
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....tion 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 (viii) any expenditure by way of payment to any person of repute for promoting the sale etc. also has no connection with the employee-employer relationship or any benefit element to the employees. The Parliament in its own wisdom has not used the word "any employee of repute" rather has used "person of repute" under clause (viii) of clause (D) of subsection 115WB(2). g) Under clause (E) of sub-section 115WB(2), the expenses as mentioned therein are relating to the wel....
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....een 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 excluded under the statute is not liable to fringe benefit tax, but the remaining as mentioned under different heads of sub-section (2) relating to payment to third parties is subjected to fringe benefit tax. It is further revealed that where the expenditure in the form of payment to the employees has to be included, the word "employee" has been specifically usede.g. clause (E) of section 115WB(2), but not otherwise. 10. In our view this Tribunal has no jurisdiction to add or substitute the wor....
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....cer,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 the legislature's intention can be deduced only from the language through which it has expressed itself. The bare words of the Act must be construed to get the meaning of the statute and one need not probe into the intention of the legislature. The words of a statue must prima facie be given their ordinary meaning, this interpretation is called the golden rule of interpretation. Hon'ble Supreme Court in the case of Southern Petrochemical Industries Co. Ltd. Vs. Electricity Inspector and E.T.I.O &....
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....e 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 Supreme Court referring to R.K. Garg's case observed that the Constitutional Bench of the Supreme Court stated that loss relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. Hon'ble Supreme Court after making discussion upon the law laid down by Hon'ble Supreme Court in various cases has summed up the following principles :- (i) There is always presumption in favour of constitutionality of a law made by Parliament or a State Legislature ....
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....ereas 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 Company Ltd. v. Nusli Neville Wadia and Anr. [2007 (14) SCALE 556]; Tanna and Modi v. C.I.T., Mumbai XXV and Ors. [2007 (8) SCALE 511] and Udai Singh Dagar and Ors. v. Union of India (UOI) and Ors. [2007 (7) SCALE 278]}. 18. The Parliament, in introducing the concept of fringe benefits, was clear in its mind in so for as on the one hand it avoided imposition of double taxation, i.e., tax both on the hands of the employees and employers; on the other, it intended to bring succour to the employers offering some privilege, service, facility or amenity which was otherwise thought to be....
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....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 for the purposes of conference is liable to FBT irrespective of whether the conference is of agents or dealers or development advisors or any other persons. Therefore, the expenditure incurred for the purposes of agents or dealers or development advisors is liable to FBT". 18. The validity of the said circular also came in question before Hon'ble Supreme Court in R& B Falcon (A) Pty Ltd. Vs. CIT (supra) case. Hon'ble Supreme Court in paragraph 22 has observed as under :- "CBDT has the requisite jurisdiction to interpret the provisions of Income-tax Act. The interpretation of CBDT being in the realm of executive c....
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.... 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 provisions of Chapter XIIH. The said contention may or may not have merit but for the purpose of present case, we do not think we are required to go into this larger question." So the Hon'ble High Court did not deem it fit to decide this question of law for the purpose of deciding the lis before it. So, under such circumstances any observation made by the Hon'ble High Court while deciding the said case has no effect so as to point in dispute before us is concerned. It may be further observed that mere direction of the Supreme Court without laying down any principle of law is not precedent. Hon'ble Supreme Court in "State of U.P. Versus....
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....d 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 retraining. More often after achieving a particular target or continuation as an agent for a specific period they are also absorbed as regular employees as filed officers or development officers in the same Insurance company with which they work. The agents are provided not only the training but also selling material, brochure etc. by the employer company. An agent like an employees, do not have any risk of loss in case of the loss to or failure of the company as except the only risk of loss employment as compared to the independent contractors. No investment of the agent is involved in rendering his services to the insurance company. The company provides not only the work a....
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....y 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 expenses incurred on printing of product brochure, forms, product booklets etc. are ordinary business expenses. These cannot be said to be expenses relating to sales promotion. The Assessing Officer has subjected the said expenses to fringe benefit tax as the assessee has claimed the said expenses under 'sales promotion' head. The assessee has not filed any details/bifurcation as to which of the expenses are covered under sales promotion and which of the expenses are covered under print of brochure and forms which can be said to be ordinary business expenses. Under such circumstances, a proper course will be to remand back the case to the file of the Assessing Officer for de-nov....