2014 (1) TMI 1270 - AT - Income Tax

Fringe benefit u/s 115WB(2)(D) and u/s 115WB(2)(B) of the Act - Provision of free transport towards airport pickup and drop for airline crew members - Cost of transport charges for visiting guests - Night dropping of employees Held that - The Central Board of Direct Taxes in Circular No. 8 of 2005, dated August 29, 2005 clearly specifies that there must be an employer-employees relationship for the purpose of treating the expenses as fringe benefit - the airline crew members for whom the airport pick-up and drop has been incurred are not employees of the assessee, the expenditure cannot be treated as liable for fringe benefit tax under section 115WB(2)(D) of the Act. Also the visiting guests cannot be treated as employees of the assessee and the complimentary pick-up and dropping charges incurred on account of visiting guests also do not fall under the purview of the fringe benefit tax under section 115WB(2)(B) of the Act - In respect of the night dropping of the employees the shift ends in the early morning at 1.30 am, the same being on account of pick-up and drop of the employees from their residence to the place of work and returning them to their residence is not liable to be treated as fringe benefit also in view of the Circular issued by the Central Board of Direct Taxes in Circular No.8 of 2005 dated August 29, 2005 Decided in favour of Assessee.

Summary

Issues:
1. Whether expenditure on free transport for airline crew attracts fringe benefit tax.
2. Whether transport charges for visiting guests attract fringe benefit tax.
3. Whether expenditure on night dropping of employees attracts fringe benefit tax.

Analysis:

Issue 1:
The appeal raised concerns regarding the appropriateness of holding the expenditure on free transport for airline crew as liable for fringe benefit tax. The authorized representative argued that since the airline crew were not employees of the assessee, the fringe benefit tax should not apply. Reference was made to Circular No. 8 of 2005 by the Central Board of Direct Taxes, emphasizing the necessity of an employer-employee relationship for fringe benefit tax liability. The Tribunal concurred, ruling that as there was no such relationship with the airline crew, the expenditure could not be considered as liable for fringe benefit tax under section 115WB(2)(D) of the Act.

Issue 2:
Regarding the transport charges for visiting guests, the question of whether they attract fringe benefit tax was raised. The representative contended that since the guests were not employees of the assessee, the fringe benefit tax should not be applicable. Citing the same Circular, it was argued that the absence of an employer-employee relationship exempted the expenditure from fringe benefit tax under section 115WB(2)(B) of the Act. The Tribunal agreed with this argument, stating that the visiting guests could not be considered as employees, thus excluding the charges from fringe benefit tax liability.

Issue 3:
The appeal also addressed the expenditure on night dropping of employees, questioning its liability for fringe benefit tax. It was argued that since the transportation was related to employees' shifts ending late at 1.30 am, it should not be considered as a fringe benefit. Referring to the Circular, it was asserted that such transportation, from residence to work and vice versa, did not fall under fringe benefits. The Tribunal concurred, stating that as per the Circular, such expenses were not liable for fringe benefit tax, leading to the deletion of the additions confirmed by the Commissioner of Income-tax (Appeals).

In conclusion, the Tribunal allowed the appeal, emphasizing that the expenses in question did not meet the criteria for fringe benefit tax liability as outlined in the Circular by the Central Board of Direct Taxes. The judgment was delivered on July 19, 2013.