2010 (7) TMI 762 - AT - Income Tax

Value of fringe benefits under s. 115WB(2)(H) - inclusion of Salary of drivers & Interest on loan taken for purchase of motor cars in the taxable value of fringe benefits - Held that - in absence of specific provision laid down under clause. (H) to sub-section. (2) to s. 115WB of the Act, the AO was not justified in including the expenditure on payment of interest on loan taken for purchases of motor cars i.e., Rs. 3,11.580 to compute the fringe benefits. Every required related expenses like repairs, running (including fuel), maintenance of motor cars and the amount of depreciation thereon have been mentioned in specific wordings in the provision, hence the AO was not justified in including the interest expenditure incurred on loan taken for purchase, of motor cars for working out fringe benefits. For expenses incurred on payment of salary to drivers - running of motor cars is a wider term to include payment of salary to drivers. In the provisions laid down under cl. (H) running has been supplemented by wordings including fuel under brackets. It reflects the very aim and object of the Legislature as expenditure incurred on running of car besides other will also include fuel expenses. It is a common knowledge that for running of a car besides fuel a driver is also required. It may be a sell driven car or a driver is employed to drive the car. Thus expenditure incurred on payment of salary to driver will be included in computing the expenses on running of the car within the meaning of the provision laid down under section. 115WB(2)(H) - Partly in favour of assessee.

Summary

Issues:
1. Inclusion of expenses in the taxable value of fringe benefits under s. 115WB(2)(H).
2. Interpretation of statute regarding expenses on interest and salary in relation to motor cars.

Analysis:
1. The assessee contested the inclusion of expenses in the taxable value of fringe benefits under s. 115WB(2)(H), specifically related to the salary of drivers and interest on a loan for motor cars. The AO added back a portion of the expenses to the total value of fringe benefits. The CIT(A) upheld this decision, leading to the appeal by the assessee.

2. The Authorized Representative argued that interest paid on loans for car purchases and salary of drivers should not be included in the expenses related to motor cars. The Representative cited various decisions to support this argument. The Tribunal found merit in the Representative's contention, stating that the AO was not justified in including interest expenditure on car loans as it was not explicitly mentioned in the statute. Therefore, the AO was directed to delete the addition made for interest expenses.

3. However, regarding the salary of drivers, the Tribunal disagreed with the Authorized Representative's argument. The Tribunal noted that the term "running" of motor cars, as mentioned in the statute, includes expenses like fuel and, by extension, the salary of drivers. The Tribunal differentiated this case from previous decisions cited by the Representative, emphasizing the specific wording of the statute. The Tribunal upheld the lower authorities' decision to include driver's salary in the expenses related to running motor cars.

4. The Tribunal highlighted that previous decisions focused on whether driver's salary falls under maintenance of motor cars, which is distinct from the current statute's wording. The Tribunal noted that the statute explicitly includes expenses beyond fuel in the running of cars, which encompasses the salary of drivers. As a result, the Tribunal partially allowed the appeal, affirming the inclusion of driver's salary in the computation of expenses related to running motor cars.

5. In conclusion, the Tribunal partially allowed the appeal, directing the AO to exclude interest expenses but uphold the inclusion of driver's salary in the computation of expenses related to running motor cars under s. 115WB(2)(H).