2012 (9) TMI 1066 - AT - Income Tax

Fringe Benefit Tax computation - excluding Sales Promotion expenses and Promotion event expenses om Fringe Benefit Tax - Hel that - 1After carefully considering the details filed by the assessee and the explanations given by the CBDT in its circular 8/2005 dt. 29.8.2005, we have no hesitation to hold that all these expenses hereinabove are outside the purview of FBT. We also find that the Ld. CIT(A) has allowed the appeal relying upon the aforementioned Circular of CBDT. Therefore, we do not find any reason to tinker with the findings of the Ld. CIT(A) which we confirm.

Summary

Issues:
Challenge to the exclusion of Sales Promotion and Promotion Event expenses from Fringe Benefit Tax (FBT) by the Revenue for assessment year 2006-07.

Analysis:
1. Facts of the Case: The assessee filed a return of FBT at Rs. 1,64,81,201 for the year under consideration. The Assessing Officer observed expenses under Sales Promotion and Promotion Events, totaling Rs. 7,84,27,081, as liable for FBT. The assessee contended that these expenses were not subject to FBT.

2. Appellate Proceedings: The assessee submitted detailed explanations during the appellate proceedings, which led to a Remand report being submitted by the AO. The Ld. CIT(A) allowed the appeal, directing the exclusion of expenses from FBT.

3. Revenue's Challenge: The Revenue contested the Ld. CIT(A)'s decision, arguing that the assessee failed to substantiate its claim despite opportunities provided. The Revenue emphasized the need for an employer-employee relationship for FBT applicability.

4. Legal Interpretation: The CBDT clarified various issues related to FBT, including the necessity of an employer-employee relationship for FBT levy and the exclusion of certain expenses like sales discounts and incentives to distributors from FBT liability.

5. Decision: After reviewing the assessee's explanations and the CBDT circular, the Tribunal confirmed that the expenses in question were outside the scope of FBT. The Tribunal upheld the Ld. CIT(A)'s decision to exclude the expenses, dismissing the Revenue's appeal.

6. Conclusion: The Tribunal's decision, based on the CBDT circular and the nature of expenses incurred by the assessee, affirmed the exclusion of Sales Promotion and Promotion Event expenses from FBT. The appeal filed by the Revenue was ultimately dismissed, upholding the Ld. CIT(A)'s order.

This comprehensive analysis highlights the key legal arguments, interpretations, and the final decision rendered by the Tribunal in the case concerning the exclusion of specific expenses from Fringe Benefit Tax.