2013 (7) TMI 254 - AT - Income Tax

Expenses incurred on account of sale promotion - whether be charged under Fringe Benefit Tax (FBT)? - Held that - Expenditure on account of sales promotion cannot be brought under FBT provisions as they are not incurred by the employees of the company having no direct or indirect benefit accrued to the employees of the assessee. See ACIT vs. Tata Motors Ltd. 2013 (5) TMI 372 - ITAT MUMBAI . - Decided against the revenue.

Summary

Issues:
Challenge to the action of holding expenses of Rs. 16.52 crores incurred on sale promotion not chargeable under Fringe Benefit Tax (FBT).

Analysis:
The appeal was filed by the Revenue against the order of the ld. CIT(A) challenging the action of holding that expenses incurred on sale promotion are not chargeable under FBT. The Revenue contested the expenses of Rs. 16.52 crores incurred by the assessee, claiming they should be included in computing the value of fringe benefits. The A.O. noted that the expenditure represented payment made by the assessee for the use of Tata name, marks, and marketing Indica, enhancing the credibility of the assessee in the market. Consequently, the A.O. treated the expenditure as sales promotion and publicity, including 20% of it in the computation of fringe benefits.

The ld. CIT(A) deleted the addition made by the A.O. on account of Brand Equity expenditure, citing a previous decision in the assessee's own case for A.Y. 2007-08, where it was held that FBT cannot be levied on Brand Equity as it does not benefit employees directly or indirectly. The Revenue appealed this decision before the Tribunal.

During the hearing, both parties agreed that the issue was in favor of the assessee based on a decision by a co-ordinate Bench of the Tribunal in a similar case involving Tata Motors Ltd. The Tribunal's decision emphasized that FBT is applicable only when there is a benefit to employees directly or indirectly. The Tribunal concluded that the expenditure on sales promotion cannot be brought under FBT provisions as it was not incurred by the employees of the company. Therefore, the Tribunal upheld the ld. CIT(A)'s decision that the expenditure on Brand Equity payment cannot be included in computing the value of FBT.

In conclusion, the Tribunal dismissed the appeal filed by the Revenue, following the decision in the Tata Motors Ltd. case. The Tribunal held that the expenditure incurred on Brand Equity payment, related to sales promotion, cannot be included in the computation of FBT as it did not benefit the employees directly or indirectly.