2011 (5) TMI 1018 - AT - Income Tax

Summary

Issues: Whether the assessee is liable to fringe benefit tax on the payment of commission of Rs. 52,95,896.

Summary:
The appeal was filed by the revenue against the order passed by the Commissioner of Income Tax(A)- VIII, Mumbai for the Assessment Year 2006-07. The assessee, a private limited company in the business of field measuring instruments, declared total fringe benefits of Rs. 59,36,353. The Assessing Officer (AO) observed that commission of Rs. 52,95,896 was paid without paying fringe benefit tax, considering it as sales promotion. The AO added this amount to the fringe benefits. The assessee contended that the commission was paid to a Field System Integrator, not an employee, and thus no fringe benefit tax was applicable. The Commissioner (CIT(A)) agreed with the assessee, citing the lack of an employer-employee relationship and deleted the addition made by the AO.

The revenue appealed to the Tribunal, with the Departmental Representative (DR) supporting the AO's order. The counsel for the assessee argued that for sec. 115 WB(2)(D) to apply, an employer-employee relationship must exist, which was not the case here. After considering the arguments and orders, the Tribunal found that no employer-employee relationship existed in this case, as the commission was paid to an agent, not an employee. Therefore, sec. 115 WB(2) did not apply, and the appeal of the revenue was dismissed.