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2013 (6) TMI 516 - AT - Income TaxLevy of FBT towards Tata brand equity contribution - assessee argued that the payment made to Tata Sons Ltd. is towards subscription fees not covered under sales promotion and publicity - Held that - As per the Tata brand equity and business promotion agreement between Tata Sons Ltd., and the assessee, the assessee is under contractual obligations to make payment towards the subscription fees. In consideration of this subscription fees, Tata Sons Ltd., is, inter alia, responsible for organising corporate identity and brand promotional activities and campaigns, engage professional consultants, make available a pool of sharable resources of the Tata group to the company and provide assistance in accessing the network of domestic and international business contacts and also permit the company to use the business name. Considering the circular No. 8 of 2005 dated August 29, 2005 employer/employee relationship is a pre-requisite for the levy of fringe benefit tax. Thus no such thing present on the facts of the present case. The subscription amount has been paid as per contractual agreement between the assessee and M/s. Tata Sons Ltd. The invoice raised by M/s. Tata Sons Ltd. is for the services provided for it. As no employer-employee relationship exists between the assessee and M/s. Tata Sons Ltd. subscription payment deserves to be kept out side the purview of FBT. In favour of assessee.
Issues:
Challenge to correctness of Ld. CIT(A)-LTU order regarding deduction from Fringe benefits towards Tata brand equity contribution for assessment year 2007-08. Analysis: The Revenue challenged the Ld. CIT(A)-LTU order regarding the deduction from Fringe benefits towards Tata brand equity contribution for the assessment year 2007-08. The Revenue contended that the Ld. CIT(A) erred in allowing the deduction. The case involved the assessee company engaged in the business of computer hardware, software, consultancy, and I.T. enabled services. The Assessing Officer observed that the assessee claimed expenses towards Tata Brand equity contribution under the account head "sales promotion," totaling Rs. 27,57,12,999/-. The AO included these expenses for calculating the total value of FBT, relying on a Supreme Court ruling. The assessee argued before the Ld. CIT(A) that the payment to Tata Sons for brand equity contribution should be excluded from FBT as it does not provide any personal benefit to employees. The Ld. CIT(A) allowed the appeal, stating that the subscription fees paid to Tata Sons cannot be treated under sales promotion or publicity, as it does not result in personal benefits for employees. The Revenue appealed against this decision, arguing that the expenses were shown under "business promotion" and publicity in the original and revised returns. The Ld. Counsel for the assessee contended that the payment to Tata Sons was a subscription fee not covered under sales promotion, and it was linked to profitability, with no direct or indirect benefit to employees. The Tribunal carefully examined the contractual agreement between the assessee and Tata Sons regarding the brand equity and business promotion agreement. It noted that the subscription fees were paid as per the agreement, and Tata Sons provided various services in return. The Tribunal referred to a Circular by CBDT and previous rulings to establish that FBT applies only to expenses with a personal benefit element to employees. As no employer-employee relationship existed between the assessee and Tata Sons, the Tribunal upheld the Ld. CIT(A)'s decision to keep the subscription payment outside the purview of FBT. Consequently, the Revenue's appeal was dismissed, affirming the Ld. CIT(A)'s order.
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