2012 (11) TMI 1307 - AT - Income Tax

Summary

Issues Involved:
1. Revised Value of Fringe Benefit not considered.
2. Taxability of value of expenditure on non-employees.
3. Duplication of Expenses liable for Fringe Benefit.
4. Reimbursement of Medical Expenses not liable for Fringe Benefit.

Summary of Judgment:

Issue 1: Revised Value of Fringe Benefit not considered

The assessee-company argued that the revised value of expenditure liable for Fringe Benefit should be considered. The AO and FAA rejected this claim as the revised return was not filed within the stipulated time u/s 115WD(4) of the Income Tax Act, 1961. The Tribunal, referencing the decision in Pruthvi Brokers & Shareholders Pvt. Ltd., directed the FAA to decide the issue on merit, acknowledging that the FAA has the power to allow claims made during assessment proceedings even if a revised return was not filed.

Issue 2: Taxability of value of expenditure on non-employees

The assessee contended that expenses incurred on non-employees should not be included for computing Fringe Benefit Tax (FBT). The Tribunal agreed, citing settled law and previous judgments, including those of Kotak Mahindra Old Mutual Life Insurance Ltd. and Tata Asset Management Ltd., that expenditure incurred for non-employees is not liable for FBT. The Tribunal decided this issue in favor of the assessee for both AY 2006-07 and AY 2007-08.

Issue 3: Duplication of Expenses liable for Fringe Benefit

The assessee claimed that certain expenses were considered twice in the original return. The Tribunal acknowledged the possibility of miscalculation during the initial period of FBT provisions and restored the matter to the FAA to decide on merits whether there was a duplication of expenses resulting in double taxation. The Tribunal emphasized that only 'due taxes' should be collected, and if duplication resulted in double taxation, the assessee is entitled to relief.

Issue 4: Reimbursement of Medical Expenses not liable for Fringe Benefit

The assessee argued that reimbursement of medical expenses should not be liable for FBT as they are specifically exempted by Section 17(2) of the Income Tax Act. The Tribunal, referencing judgments in the cases of Godrej Properties Ltd. and Bosch Ltd., agreed that such reimbursements are not liable for FBT. The Tribunal decided this issue in favor of the assessee for AY 2007-08.

Conclusion:

The appeal for AY 2006-07 was partly allowed, and the appeal for AY 2007-08 was fully allowed. The Tribunal directed the FAA to re-examine certain issues on merit and provide relief where applicable.