2012 (8) TMI 255 - AT - Income Tax

Telephone and mobile expenses are treated as deemed FBT No where from the reading of sub section 1 or sub section 2 of section 115WB, it is found that postage, email and courier have been treated to the part of FBT or deemed FBT - Postage and courier charges cannot be in any manner be treated as benefit of any kind to any employee as it is purely a business expense of the assessee - email expenses are also part of the business expenses as it does not give any fringe benefit to any employee, unless the company is paying for personal email expenses of the employees - assessee has rightly excluded the amount of expenditure debited under the head postage, email, lease line and courier from the FBT in favor of assessee Travelling expenses - Held that - assessee has offered sum of Rs 10,92,547/- under Section 115WB(2)(Q) and others under different clauses, which aggregates to Rs. 12,20,72,623/-. If the Assessing Officer would have carefully perused the said statement filed before him, then definitely he would not have come to the conclusion that there is a difference - Rate of 5% should be applied, in view of the provision of section 115WB (1)(e), wherein 5% of the tax has been prescribed for expenses referred to in clause Q of sub-section 2 of Section 115WB - Assessing Officer is directed to apply the rate of 5% on the fringe benefit value offered by the assessee under the head tour and travel expenses - appeal of the assessee is allowed.

Summary

Issues Involved:
1. Liability of communication expenses to Fringe Benefit Tax (FBT).
2. Liability of traveling expenses to FBT.
3. Applicability of FBT on expenses not attributable to employees.
4. Applicability of FBT on expenses not resulting in benefits to employees.
5. Levy of interest under Section 115WJ.
6. Initiation of penalty proceedings under Section 271(1)(c).

Issue-wise Detailed Analysis:

1. Liability of Communication Expenses to FBT:
The assessee contested the inclusion of Rs. 2,54,17,912/- under 'communication expenses' for FBT. The Assessing Officer (AO) noted a discrepancy between the profit and loss account and the amount offered for FBT, leading to an additional FBT liability of Rs. 50,83,448/-. The CIT(A) upheld this decision. However, the Tribunal found that the AO incorrectly included items such as postage, email, lease line, and courier charges, which are not covered under Section 115WB(2)(J). The Tribunal concluded that only telephone and mobile expenses are liable for FBT, thus deleting the addition of Rs. 50,83,448/-.

2. Liability of Traveling Expenses to FBT:
The AO added Rs. 10,70,86,818/- to the FBT base, citing a discrepancy in the traveling expenses reported. The CIT(A) confirmed this addition. The Tribunal, however, noted that the assessee had already offered Rs. 12,20,72,623/- for FBT, covering the disputed amount. The Tribunal found that the AO did not properly reconcile the figures and erroneously concluded a shortfall. The Tribunal deleted the addition, agreeing with the assessee's reconciliation.

3. Applicability of FBT on Expenses Not Attributable to Employees:
The Tribunal did not specifically address this issue separately, as the primary focus was on the reconciliation of figures and the correct application of FBT provisions. The deletion of additions under communication and traveling expenses implicitly addressed this concern.

4. Applicability of FBT on Expenses Not Resulting in Benefits to Employees:
The Tribunal emphasized that expenses like postage, email, lease line, and courier charges do not provide any fringe benefits to employees and are purely business expenses. This rationale was key in deleting the additional FBT liability under communication expenses.

5. Levy of Interest Under Section 115WJ:
This issue was not specifically addressed in detail by the Tribunal, as the primary focus was on the reconciliation and correct application of FBT provisions. The deletion of the additional FBT liabilities would naturally affect any interest calculations under Section 115WJ.

6. Initiation of Penalty Proceedings Under Section 271(1)(c):
The Tribunal did not delve into the penalty proceedings, as the main issues were resolved in favor of the assessee. The deletion of the contested FBT liabilities rendered the penalty issue moot.

Conclusion:
The Tribunal allowed the appeal of the assessee, deleting the additional FBT liabilities on communication and traveling expenses. The Tribunal emphasized the correct interpretation of Section 115WB and proper reconciliation of figures, leading to the deletion of Rs. 50,83,448/- under communication expenses and Rs. 10,70,86,818/- under traveling expenses. Other grounds were treated as infructuous due to the resolution of the primary issues.