2017 (12) TMI 1707 - AT - Income Tax

Fringe Benefit Tax - power of CIT(A) to entertain the revised computation of the value of fringe benefits filed by the assessee before the AO - computing the value of chargeable expenditure for fringe benefits the assessee had considered the reimbursement of medical expenses as chargeable expenditure for calculation of fringe benefit tax - assessee claimed that the return of fringe benefit filed by it should be treated so as not to include reimbursement of medical expenses - HELD THAT - Law is now well settled that the appellate authorities have the power to entertain a new claim by the assessee even in the absence of a revised return of income. CIT(A) erred in not examining the claim of the assessee for the reason that the claim made by the assessee to exclude certain items of the expenditure from value of fringe benefit was contrary to the return of fringe benefit filed by the assessee. The tax liability cannot be determined on the basis of admission and has to be in the light of the relevant statutory provision. We therefore hold that the CIT(A) was not justified in examining the claim of the assessee in this regard. We therefore proceeded to examine the correctness or otherwise of the claim by the assessee in this regard. It is not disputed by the revenue that reimbursement of medical expenses was perquisite in the hands of the employees and tax is payable on the employee on such perquisite subject to basic deduction and exemption allowed under the Act. Under section 115WB(3) such expenditure cannot be part of fringe benefit provided by the employer to the employees. Therefore the claim of the assessee to exclude the reimbursement expenses from the chargeable expenditure for calculation of fringe benefit tax has to be accepted. The decision of DCIT vs Wipro Ltd 2014 (9) TMI 953 - ITAT BANGALORE supports the plea of the assessee in this regard. As far as the plea of the assessee for excluding the expenditure of providing uniforms to the chauffeurs is concerned it is clear from the policy of the company and the nature of its business that these are necessary for the purpose of carrying on its business and cannot be regarded as any benefit or welfare facility provided to the employee by the employer. CBDT Circular referred to by the ld. Counsel for the assessee clearly provides that similar items of expenses cannot be considered for the purpose of arriving at the value of fringe benefit. We therefore agree with the submissions of the assessee that the aforesaid item of expenditure cannot be include as expenditure in providing the fringe benefit. The claims made by the assessee for exclusion of both the items of expenditure are accepted and the AO is directed to exclude the aforesaid expenditure from the chargeable expenditure for calculation of fringe benefit for levying of fringe benefit tax. - Decided in favour of assessee.

Summary

Issues:
1. Exclusion of medical expenses and uniform expenses from chargeable expenditure for fringe benefit tax calculation.

Analysis:

The case involves an appeal by the Assessee against the order of CIT(A)-2, Kolkata related to the assessment year 2007-08. The Assessee, a company engaged in transportation and car rental business, filed its return of Fringe Benefit Tax showing taxable fringe benefit. The Assessee claimed that reimbursement of medical expenses and uniform expenses should be excluded from the chargeable expenditure for fringe benefit tax calculation. The AO, however, did not consider the Assessee's revised computation and assessed the fringe benefit tax based on the original return.

During the assessment proceedings, the Assessee argued that the medical expenses and uniform expenses should not be included as they do not constitute fringe benefits. The CIT(A) disagreed, stating that since the Assessee had included these expenses in the return and paid tax on them, they cannot be excluded. Aggrieved by this decision, the Assessee appealed to the Tribunal.

The Tribunal considered the Assessee's arguments regarding the statutory obligations related to uniform expenses for drivers of meterless taxis. It also referred to a CBDT Circular stating that expenses to comply with statutory obligations are exempt from fringe benefit tax. Additionally, the Tribunal cited a decision where reimbursement of medical expenses to employees did not attract fringe benefit tax.

The Tribunal held that the Assessee's claims were valid. It ruled that reimbursement of medical expenses and uniform expenses for chauffeurs should be excluded from the chargeable expenditure for calculating fringe benefit tax. The Tribunal emphasized that these expenses were necessary for the business and did not constitute fringe benefits. Therefore, the appeal by the Assessee was allowed, directing the AO to exclude the specified expenses from the calculation of fringe benefit tax.

In conclusion, the Tribunal's judgment favored the Assessee's arguments regarding the exclusion of medical expenses and uniform expenses from the chargeable expenditure for fringe benefit tax calculation, based on statutory obligations and legal precedents.