TaxTMI 
TaxTMI 
2016 (6) TMI 731
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....ed order for the sake of convenience and brevity. At the first instance, we will deal with the appeal of Punjab National Bank in ITA No. 4493/Del/2009 for the assessment year 2006-07. Only effective ground raised in this appeal reads as under : " 2. That on facts and in the circumstances of the case and in law the authorities below erred in holding that statutory contribution to Pension Fund in a sum of Rs. 471,43,65,330/- is a fringe benefit provided by the company to the employees in terms of section 115WB(1) of the Income Tax Act, 1961 and thereby determining the value of fringe benefits at Rs. 502,01,03,796/- as against the returned value of Rs. 30,58,38,466/-. The action being most arbitrary, palpably erroneous and grossly unlawful, must be quashed with directions for appropriate relief to the appellant." 3. From the above ground, it is clear that the only grievance of the assessee relates to the contribution to the pension fund which was considered by the AO as a fringe benefit provided by the assessee to its employees in terms of section 115WB(1) of the Income-tax Act, 1961 (hereinafter referred to as the "Act" in short). 4. Facts of the case in brief are that....
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....nt extract is reproduced herewith : " Question No. 35 : Whether expenses disallowed under section 37 of the Income Tax Act on the plea that the expenses are personal in nature, would also be liable to Fringe Benefit Tax ? Section 37 of the Income Tax Act provides that any expenditure laid out or expended wholly and exclusively for the purpose of the business or profession shall be allowed in computing the income chargeable under the head 'profits and gains of business or profession'. Accordingly, any expenditure that is incurred for personal purposes is not allowable as deduction. Sub-section (2) of section 115WB provides for a levy on Fringe Benefit estimated on a presumptive basis using certain expenses as a measure. To the extent the expense incurred by the employer are personal in nature and have, therefore, been disallowed under section 37 of the Income Tax Act, such disallowance would not be liable to Fringe Benefit Tax. For example, let us assume a firm being an employer, has incurred an expenditure of Rs. 100 towards tour and travel, of which Rs. 40 is personal in nature. Therefore, the amount of Rs. 40, being personal in nature, will be disaloowed under s....
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....the contribution made to supearannuation fund to Fringe Benefit Tax." 7. The AO after considering the submissions of the assessee observed that the FBT applies to expenses incurred or the payment made for the purpose of business. He further observed that from the scheme of the FBT and CBDT's Circular, the following possibilities can arise :- a. Disallowance as well as no FBT b. Disallowance and FBT-both c. Disallowance but no FBT d. No. disallowance and no FBT 8. The AO elaborated the aforesaid four facilities and observed that if an expense is covered by clauses (A) to (Q) of section 115WB(2) is disallowed as personal expenses u/s 37(1) of the Act then FBT can not be imposed on it and if the expense is actually incurred then FBT can be imposed and there is nothing in law which deems that bogus expenses booked are expenses liable to FBT. Therefore, bogus expenses have to be disallowed and there can be no FBT on those expenses. The AO referred to CBDT's Circular no. 8/2005 dated 29.08.2005 which states that no FBT can be charged on the capital expenditure resulting in acquisition of an asset eligible for depreciation and in case capital expe....
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....er book page no. 4 to 5] It may be noticed that the notification is being issued by the Central Government and applies to all public sector banks. The Public Sector Banks are therefore bound to comply with the above notification. Further, at the time of origin of this notification the person who participated are no less than the Central Government, RBI, and also the Apex Body of the Bank namely Indian Bank Association who have come to above understanding resulting in the above notification. Therefore, it has statutory value based on the notification issued referred above on 29.09.1995 by the Central Government. It is reiterated that it is not a non-statutory payment. It is a statutory payment backed by a notification by Central Government. b) The above pension fund is an approved superannuation fund created in consultation with RBI and previous sanction of the Central Government. The said fund was approved under Rule 2(1) of Part-B of the Fourth Schedule [Refer paper book page no. 42] to the Income Tax Act, 1961. c) The above Pension Fund set up by the Bank is not voluntary in the sense that while opting for the Fund may be voluntarily; the employee has t....
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....ax those benefits which were not taxed in the hands of employees as perquisites. However, if contribution to Pension Fund was taxed as fringe benefit and also as pension when the employee retires, that results in double taxation which defeats the purpose of the legislation. It was contended that there was no comparison of pension fund of the nationalised bank like the assessee with any other body corporate as compared by the AO. It was accordingly submitted that the contribution to Pension Fund by the assessee being statutory and in lieu of Provident Fund was subjected to same provisions of law as applicable to provident fund and since the contribution of Provident Fund was not subject to fringe benefit tax, the contribution to pension fund too could not be subjected to fringe benefit tax. 11. The ld. CIT(A), however, did not find merit in the submissions of the assessee and upheld the view taken by the AO by observing in para 4.2 of the impugned order as under :- "4.2 I have carefully considered the facts of the case, order of the AO and submissions made by the ld. AR. The only issue of the dispute in this appeal is regarding the taxability of the fringe benefits in re....
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....ing case law :- 1. Yoshio Kubo vs. CIT, 357 ITR 452 (Del) [2013] 2. The Royal Bank of Scotland, M.V., In Re (2014) 364 ITR 373 (AAR) 13. In his rival submissions, the ld. DR strongly supported the orders of the authorities below and reiterated observations made by the AO and the Ld. CIT(A) in their respective orders. 14. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the assessee is a schedule bank governed by the provisions of the Banking Regulation Act, 1949 and made the contribution towards Pension Funds of the employees. The said contribution by the assessee as an employer was brought to tax as eligible fringe benefit tax value during the year by the AO. The contention of the assessee before the ld. CIT(A) was that the contribution to Pension Fund was made in lieu of Provident Fund, it was statutory liability and since the contribution of provident fund was not considered for valuation of Fringe Benefit Tax, the contribution to pension fund also did not attract the provisions of fringe benefit tax. The said contention of the assessee ....
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....tribution' as defined in the provision means any sum credited to the individual account. Rationalizing the provision of fringe benefit tax the memorandum explaining the Finance Bill 2006 has clarified as under : "It is proposed to amend the said clause (b) so as to provide that contribution by an employer to an approved superannuation fund to the extent it does not exceed rupees one lakh per employee in respect of whom contribution is made, shall not be liable to fringe benefit tax. For example, consider an employer who has three employees: A, B and C and he makes contribution to their account in the approved superannuation fund in the following manner : Employee Contribution to approved superannuation fund by the employer. A Rs. 50,000 B Rs. 90,000 C Rs. 2,00,000 In case of employees A and B, the value of fringe benefits shall be taken to be nil since contributions by the employer in respect of these employees does not exceed Rs. 1,00,000/- in each case. However, in the case of employee C the value of fringe benefit shall be Rs. 1,00,000/- (Rs. 2,00,000-1,00,000/-) for the purposes of levy of fringe benefit tax" . 9.4.....
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....ired to be considered as retrospective in operation so that a reasonable interpretation can be given to the scheme of levy of fringe benefit tax on contribution to superannuation fund as a whole. We, therefore, hold that the contribution to superannuation fund in present case being less than Rs. 1.00 lac per employee, is not liable for fringe benefit tax. In the result, this ground of assessee is allowed." 18. From the above said discussion, it is clear that the provisions u/s 115WB(1)(c) are held to be applicable for the assessment year under consideration i.e. the assessment year 2006-07. It is also not in dispute that "Bank Employees Pension Schemes" was introduced in lieu of "contributory provident fund" at the option of employees and accordingly a settlement was signed between Indian Banks Associations represented by 52 member banks which included the assessee bank and representatives of workmen unions introducing a pension scheme in the Banking Industry and in terms of the settlement, an employee in service as on 1.11.1993 was to exercise his option to switch over to the "Pension Scheme" from the "Provident Fund Scheme", upon which the amount of CPF ( banks' contribution) ....
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....the Actuarial Valuer appointed by the bank. 20. An identical issue has been adjudicated by the ITAT Hyderabad Benches A, Hyderabad in ITA no. 601/Hyderabad/2012 for the assessment year 2006-07 in the case of Andhra Bank Hyderabad vs. DCIT Circle 1 (1) Hyderabad and the relevant findings have been given in para 11.1 to 13 of the order dated 16th July 2014 which read as under :- 11.1. In the present case, assessee made a single contribution during the year to the superannuation fund for all its employees who were governed by this scheme taken together based on the actuarial valuation provided by the Actuarial Valuer. There is no dispute with reference to the fact that the amount of Rs. 75,25,49,000/- was provided as short fall to the fund from making pension payable to eligible employees and this amount was arrived at on the basis of valuation of Actuarial Valuer appointed by the Bank. In respect of such single contribution made under defined benefit scheme, the details of contribution pertaining to each employee are not available in the Actuarial Valuation Report, since the amount is lump sum amount calculated based on the Actuarial Valuation having several underlying as....
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....the event of contingency, the payment made by the employer does not vest in the employee. In view of the above principles laid down by the Hon'ble Delhi Court as well as the advise given by Authority for Advanced Rulings which, in turn, followed the Hon'ble Supreme Court decision in the case of CIT vs. L.W. Russel (1964) 53 ITR 91 (SC), the amount paid during the year cannot be considered as a contribution to superannuation fund as contemplated under the provisions of section 115WB(1)(c). 12.1. In view of the above, since the amount is not paid to the benefit of any individual employee, the lump sum contribution made under the defined benefit scheme, in our opinion, does not attract provisions of 115WB(1)(c). As per the definition of 'contribution', no individual employee had any benefit earmarked, the payment cannot be considered as covered by the provisions of 115WB(1)(c). 13. As briefly stated earlier, the Ld. CIT(A) followed the Coordinate Bench decision in giving benefit of amendment brought in later year to the year under consideration. It was submitted that the order of the Ld. CIT(A) could not be implemented as benefit of employee could not be ascertained ....