2015 (2) TMI 722 - HC - Income Tax

Refund of fringe benefit tax (FBT) denied - Held that - The second respondent shall be under obligation to refund the amount collected towards the fringe benefit tax along with accrued interest to the respective stevedores from whom it was collected duly identifying them, within two months from the date of receipt of a copy of this order. Also the second respondent shall not be under any obligation towards fringe benefit tax for the benefits paid to the employees supplied by it to the stevedores.If any doubt is entertained in this behalf as to the identity, it is open to the second respondent to seek necessary information or clarification from the petitioner, and if the second respondent paid any service tax on the amount collected by it towards service tax, it need not refund the same. - Decided in favour of assessee.

Issues:
1. Refund of fringe benefit tax collected by Visakhapatnam Port Trust between 2005 and 2009.
2. Obligation of Visakhapatnam Port Trust to pay fringe benefit tax.
3. Justification for withholding the amount collected.
4. Identification of agencies for refund and undue enrichment concerns.

Issue 1: Refund of Fringe Benefit Tax
The writ petition sought a declaration that the action of Visakhapatnam Port Trust in not refunding the amount collected as fringe benefit tax between 2005 and 2009 from the members of the petitioner-association was illegal, arbitrary, and contrary to the provisions of the Income-tax Act, 1961. The petitioner demanded a refund of the amount of Rs. 7,40,69,450 with interest at the rate of 14.75% per annum. The petitioner argued that despite the Tribunal's decision in 2010 that Visakhapatnam Port Trust was not liable to pay the fringe benefit tax, the amount collected should have been refunded.

Issue 2: Obligation to Pay Fringe Benefit Tax
The judgment highlighted that the employer, in this case, Visakhapatnam Port Trust, was obligated to pay the fringe benefit tax as per the provisions introduced by Parliament through the Finance Act, 2005. The employees on the rolls of the Port Trust, though paid by stevedore contractors, were considered employees of the Port Trust, making it the actual employer responsible for paying the fringe benefit tax.

Issue 3: Justification for Withholding Amount
Visakhapatnam Port Trust argued that the fringe benefit tax amount collected was kept in a separate account as a precautionary measure, anticipating a demand from the Income-tax Department. However, no demand was made, and the amount remained unutilized. The Court noted that the Port Trust did not provide a valid justification for withholding the amount and acknowledged the Port Trust's inclination to refund the collected amount.

Issue 4: Identification of Agencies for Refund
The Court addressed concerns about undue enrichment and the difficulty in identifying the agencies to be refunded. It clarified that the refund should be made to the respective stevedores from whom the amount was collected, ensuring proper identification. The judgment emphasized that the Port Trust should not be obligated to pay fringe benefit tax for benefits provided to employees supplied to stevedores and allowed for necessary verification to ensure accurate refunding.

In conclusion, the High Court of Andhra Pradesh directed Visakhapatnam Port Trust to refund the amount collected as fringe benefit tax along with accrued interest to the respective stevedores within two months, duly identifying them. The judgment clarified the Port Trust's obligations regarding fringe benefit tax and addressed concerns about undue enrichment and agency identification for refunds.

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