2012 (3) TMI 339 - AT - Income Tax

Summary

Issues involved:
The issue involves the classification of customer promotion expenses as gifts for the purpose of levying fringe benefit tax.

Summary:
The assessee appealed against the Commissioner of Income-tax (Appeals) confirming the Assessing Officer's decision to classify customer promotion expenses as gifts and levy fringe benefit tax at 50% instead of 20% for sales promotion expenses. The assessee argued that the gifts were part of sales promotion and not voluntary gifts. The authorities held that specific provisions overrode general provisions, classifying the expenses as gifts. The Tribunal found that the gifts were not pure gifts as they were tied to membership conditions and directed the Assessing Officer to consider the amounts as sales promotion for fringe benefit tax assessment.

Detailed Judgment:
The assessee filed returns declaring taxable fringe benefit amounts for the assessment years. The Assessing Officer classified expenses on gifts like vouchers, electronics, and travel tickets as gifts under a specific provision, while the assessee considered them part of sales promotion expenses. The Commissioner of Income-tax (Appeals) upheld the classification as gifts, citing specific provisions overriding general provisions.

The assessee argued that the gifts were essential for promoting timeshare units and were not voluntary gifts. The Departmental representative contended that the gifts were without consideration and fell under the specific provision for gifts in the Act. The Tribunal noted that the gifts were tied to membership conditions and had a consideration attached, thus not qualifying as pure gifts.

The Tribunal referred to the definition of "gift" under the Gift-tax Act, emphasizing the element of voluntary transfer without consideration. It concluded that the gifts given by the assessee were not pure gifts as they had a quid pro quo element, leading to the decision that the expenses should be classified as sales promotion and not gifts for fringe benefit tax assessment.

The Tribunal set aside the lower authorities' orders and directed the Assessing Officer to consider the amounts as sales promotion for fringe benefit tax assessment, allowing the assessee's appeals for the assessment years.