2012 (5) TMI 718 - AT - Income Tax

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Deletion of disallowance of expenses by adding value of Fringe Benefit on the basis of 40% of the expenses incurred under specified heads.
3. Direction to consider expenses of Rs. 43,26,760/- under clause 115WB(2)(Q) of the Act.

Summary:

Condonation of Delay:
The appeal by the revenue was time-barred by 125 days. The revenue filed a condonation petition, which was conceded by the counsel for the assessee. The delay was condoned, and the appeal was admitted for hearing.

Fringe Benefit Tax (FBT) on 40% of Expenses:
The first issue was regarding the deletion of disallowance of expenses by adding the value of Fringe Benefit on the basis of 40% of the expenses incurred under specified heads. The CIT(A) had allowed the claim of the assessee by relying on his own order for the assessment year 2006-07, where it was held that for assessing the value of fringe benefit u/s 115WE(3), only 40% of the expenses incurred under specified heads can be taken into account. The Tribunal, however, reversed the order of the CIT(A) by following its earlier decision in the assessee's own case for the assessment year 2006-07, where it was held that FBT is not linked with the income of an employer but with the expenditure incurred by the employer on the benefits provided to its employees. Therefore, the Tribunal upheld the action of the Assessing Officer, allowing the revenue's appeal on this issue.

Consideration of Expenses under Clause 115WB(2)(Q):
The second issue was against the order of CIT(A) directing the Assessing Officer to consider the expenses of Rs. 43,26,760/- under clause 115WB(2)(Q) of the Act. The CIT(A) had allowed the claim of the assessee by adopting a "purposive approach" for classification of expenses, considering all expenses incurred in connection with foreign tours and travel as part of "tour & travel expenses" under clause 115WB(2)(Q). However, the Tribunal noted that the nature of these expenses was not explained by the assessee before the Assessing Officer, CIT(A), or even before the Tribunal. Therefore, the Tribunal set aside this issue to the file of the Assessing Officer, directing the assessee to explain the nature of these expenses, and the Assessing Officer to decide accordingly. This ground of appeal was allowed for statistical purposes.

Conclusion:
The appeal of the revenue was partly allowed for statistical purposes, with the Tribunal reversing the CIT(A)'s order on the first issue and remanding the second issue back to the Assessing Officer for further examination.