2015 (5) TMI 518 - HC - Income Tax

Imposition of fringe benefit tax - Tata Brand equity contribution - Tribunal deleted tax imposed - Held that - Budget Speech of the Minister of Finance while presenting the Budget for the year 2005-2006 the explanatory notes and the circulars have been rightly understood by the Tribunal to mean that the basis of tax is the benefits or perquisites which emanate out of an employer-employee relationship. That is a prerequisite and for levy of fringe benefit tax. The Tribunal in paragraph 8 and 9 has concluded that in the present facts and circumstances no such case as would enable charging fringe tax emerges. The subscription amount has been paid as per the contractual agreement between the assessee and M/s. Tata Sons Limited. The invoices raised by M/s. Tata Sons Limited are for the services provided and there is no employer employee relationship between the parties. We do not find that such a conclusion is perverse. Mr. Andhyarujina is therefore right in relying on the materials which have been handed in to us and which find place equally in the Tribunal s order. Those have been referred to and in the relevant factual backdrop so also on perusal of the agreement in its entirety that the Tribunal concluded that there is no merit in the Revenue s appeal. - Decided in favour of assessee.

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal regarding fringe benefit tax on Tata Brand equity contribution.

Analysis:
The appeal before the High Court involved a challenge by the Revenue against the order of the Income Tax Appellate Tribunal concerning the assessment year 2007-08. The main contention was whether the payment made by the assessee towards Tata Brand equity contribution should be considered as a fringe benefit. The Revenue argued that the Tribunal failed to recognize this payment as a fringe benefit, relying on Circular No.8 of 2005. On the other hand, the assessee contended that the Tribunal's understanding was correct based on the agreement and the nature of the payment made. The Tribunal had considered the provisions related to fringe benefit tax, emphasizing the employer-employee relationship as a basis for determining taxable benefits.

The High Court analyzed the provisions related to fringe benefits and the employer-employee relationship. It noted that the legislative intent was to tax benefits provided by the employer to the employees, and the Tribunal's interpretation was based on a thorough understanding of the law. The Court examined the Tata Brand Equity And Business Promotion Agreement, highlighting the cooperative effort among Tata companies to enhance the TATA brand collectively. The Court found that the agreement did not establish a basis for levying fringe benefit tax on the subscription amount paid under it.

Regarding the Revenue's argument on the circular justifying the taxation of perquisites or fringe benefits, the Court acknowledged the rationale behind introducing fringe benefit tax to capture benefits that are collectively enjoyed and challenging to attribute directly to individual employees. The circular emphasized the taxation of benefits arising from an employer-employee relationship, which formed the basis for levying fringe benefit tax.

Ultimately, the High Court upheld the Tribunal's order, concluding that it was not erroneous or perverse. The Court found no substantial question of law raised in the appeal and dismissed it. The decision was based on a comprehensive analysis of the agreement, provisions related to fringe benefits, and the legislative intent behind introducing fringe benefit tax.