2014 (5) TMI 934 - AT - Income Tax

Confirmation of FBT - Purchase of gift items Held that - Deduction is claimed after filing of return, then the AO is not empowered to entertain that claim made otherwise than by way of revised return required to be filed u/s 139(5) of the Act - Although after filing of return, the AO is not empowered to entertain the claim of the assessee for deduction otherwise than by filing a revised return - the observations on the issue are limited to the powers of the assessing authority and do not impinge on the powers of the Tribunal provided u/s 254 of the Act - the Assessing Officer is not empowered to entertain claim for deduction of the assessee, after filing of return otherwise than by filing a revised return but the powers of this Tribunal as an appellate authority u/s 254 of the Act do not impinge upon this decision. The expenditure incurred on accessories which were supplied to customers who have purchased cars cannot be treated as sale promotion including publicity expenses under clause (D) - the expenditure cannot be categorized as expense incurred for promotion of sales with a view to gain publicity and popularize the product - The assessee offered different schemes through a scratch card and purchaser/customer of a specific item manufactured by the assessee is offered various items as gift - the revenue did not invoke section 115WB(2)(o) of the Act - The AO rightly rejected the claim of the assessee which was filed by way of an application after filing of return because the AO was not empowered to entertain the claim of the assessee otherwise than by filing a revised return - the claim of deduction requires examination and verification at the end of AO thus, the matter is remitted back to the AO for fresh adjudication Decided in favour of Assessee.

Issues Involved:

1. Validity of the CIT(A)'s order.
2. Inclusion of sales promotion expenses in Fringe Benefit Tax (FBT).
3. Applicability of the Supreme Court's judgment in Goetze India Limited.
4. Powers of the CIT(A) and ITAT regarding claims not made through revised returns.
5. Classification of expenditure on gift items for FBT purposes.

Detailed Analysis:

1. Validity of the CIT(A)'s Order:
The assessee challenged the CIT(A)'s order as vague, based on incorrect appreciation of facts, bad in law, and void ab initio. The Tribunal noted that the CIT(A) confirmed the FBT assessment on the ground that the appellant had not made a claim by revising the return, thus supporting the Assessing Officer's decision.

2. Inclusion of Sales Promotion Expenses in FBT:
The assessee argued that the net expenditure on gift items incurred for sales promotion should not be regarded as a fringe benefit. The Tribunal considered the nature of the gift items, which were given to customers as part of sales promotion schemes and not as a benefit to employees. The Tribunal referred to the Delhi High Court's judgment in T&T Motors Ltd. vs ACIT, which clarified that such promotional expenses do not fall under FBT.

3. Applicability of the Supreme Court's Judgment in Goetze India Limited:
The CIT(A) relied on the Supreme Court's decision in Goetze India Limited, which stated that the Assessing Officer cannot entertain a claim for deduction otherwise than by a revised return. The Tribunal acknowledged this but emphasized that the Supreme Court's decision does not impinge upon the powers of the ITAT under section 254 of the Income Tax Act, 1961.

4. Powers of the CIT(A) and ITAT Regarding Claims Not Made Through Revised Returns:
The Tribunal highlighted that while the Assessing Officer is not empowered to entertain claims for deductions not made through revised returns, the appellate authorities, including the CIT(A) and ITAT, have the power to adjudicate such claims on merits. The Tribunal reiterated that the CIT(A) has coterminous powers with the Assessing Officer and should have considered the merits of the assessee's claim.

5. Classification of Expenditure on Gift Items for FBT Purposes:
The Tribunal examined whether the expenditure on gift items provided to customers under sales promotion schemes should be included in the value of fringe benefits. Referring to the Delhi High Court's judgment in T&T Motors Ltd. vs ACIT and CBDT Circular No. 8 of 2005, the Tribunal concluded that such expenses are akin to providing discounts or rebates and should not be classified as gifts for FBT purposes. The Tribunal directed the Assessing Officer to re-examine and verify the claim for deduction, emphasizing that the claim should not be denied merely on technical grounds in the absence of a revised return.

Conclusion:
The Tribunal allowed the assessee's appeals for statistical purposes, directing the Assessing Officer to re-examine the claim for deduction of sales promotion expenses and determine the value of fringe benefits afresh. The Tribunal's findings in ITA No. 2006/Del/2011 for AY 2007-08 were applied mutatis mutandis to ITA No. 4652 & 4653/D/2012 for AY 2008-09 and 2009-10, respectively. The order was pronounced in the open court on 17.4.2014.

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