2014 (4) TMI 1050 - AT - Income Tax

Disallowance u/s 115WB - whether provision of Fringe Benefits get attracted to the benefits on employees stationed outside India - Held that - when the Board itself has clarified the issue and the coordinate Bench at Bangalore in the case of Toyota Kirloskar Motor Pvt Ltd (2012 (6) TMI 484 - ITAT, Bangalore) have further clarified the deeming provision of section 115WB(2). Besides the above, nowhere in either order of the revenue authorities, it could be ascertained that the assessee has crossed the parameters outlined either in the provisions of section 115WB(1) or 115WB(2) or the circular. The DR also could not convince, as to which benefit to the employee stationed at Dubai would attract FBT. A bald statement conceived out from the details provided by the assessee cannot attract disallowance. To justify the addition on FB, the revenue authorities should have relied on some evidence to justify that a particular employee received a certain benefit. In the instant case, the FBT has been imposed on the assessee for the payments made to employees in Dubai on account of sales promotion. The revenue authorities have not specified anything to prove that the expense was either not for the sales promotion or were actually utilized by the employees. - Disallowance deleted - Decided in favour of assessee.

Summary

Issues:
Addition on account of Rs. 3,22,115/- u/s 115WB, i.e. FBT provisions.

Analysis:

Issue 1: Addition on account of FBT provisions

The appeal pertains to the addition made by the Assessing Officer under section 115WB, i.e., Fringe Benefit Tax (FBT) provisions. The assessee, engaged in manufacturing and exporting garments, maintained a Foreign Representative office in Dubai, UAE, for various purposes related to its business operations. The CIT(A) upheld the addition, stating that the expenses incurred on the foreign representative office fell under the purview of FBT as per the provisions of section 115WB. However, the Appellate Tribunal (ITAT) considered the arguments presented by the assessee's representative (AR) that FBT should not apply to employees stationed outside India. The AR relied on Circular No. 8 of 2005, which clarified that FBT is payable on fringe benefits provided to employees based in India and determined on a presumptive basis. The ITAT also referred to decisions by coordinate Benches in similar cases, emphasizing that FBT is applicable only when benefits are collectively enjoyed by employees and personal attribution poses difficulty. The ITAT concluded that the provisions of FBT do not extend to employees stationed outside India and directed the Assessing Officer to delete the disallowance, thereby allowing the appeal filed by the assessee.

This detailed analysis of the judgment provides insights into the legal reasoning behind the decision and the interpretation of FBT provisions concerning employees stationed outside India.