2016 (5) TMI 974 - AT - Income Tax

Fringe benefits - Assessment u/s 115 WE(e) - addition to the value of fringe benefits on account of relocation expenses and conveyance expenditure - Held that - In the case of relocation expenses, the expenditure is incurred by the employee and later on the same is reimbursed to the employee by the assessee. It is not a case of the assessee company paying an amount directly to a third party. In the case of conveyance expenditure it is a payment made by the assessee company to a third party and not to the employee. Hence in the case of relocation expenses, no FBT can be levied, as it is a direct payment to a specific employee against bills submitted by him. In case of conveyance expenditure incurred for travel of the employee from place of residence to place of work and vice versa the payment is made to a third party. Applying the propositions laid down in the case of T.V. Today Net Work Ltd. (2013 (7) TMI 690 - ITAT DELHI) to these facts, we have to hold that FBT is not leviable on this payment also. Regarding expenditure incurred on advertising and sales promotion, it is clear from the order of the Ld.CIT(A) that the assessee has provided 75% of the details. The assessee claims that it had submitted given the entire details before the revenue authorities. As the dispute is whether the requirement documents and details were furnished to the AO or not, we deem it fit and proper to set aside this issue to the file of the A.O. for fresh adjudication in accordance with law.

Summary

Issues:
1. Addition to the value of fringe benefits on account of relocation expenses.
2. FBT addition under the head "advertising, publicity, and sales promotion."

Analysis:

Issue 1: Addition to the value of fringe benefits on account of relocation expenses
The appeals were filed against the orders of the Ld.CIT(A) pertaining to the A.Y. 2006-07 and 2007-08 confirming the AO's order under section 115 WE(3) of the Income Tax Act, 1961. The assessee, a soft drink manufacturing company, filed its FBT returns for both years. The AO determined the fringe benefit value for 2006-07 at &8377; 11,91,48,469/- and for 2007-08 at &8377; 18,44,29,059/-. The assessee contended that certain expenses under "conveyance, tour, and travels" were not liable to FBT as they were for employee relocation and conveyance. The A.O. rejected this explanation.

The Ld.CIT(A) upheld the AO's decision, stating that the assessee failed to prove the actual expenses incurred by employees for relocation. The Ld.Counsel for the assessee argued that detailed evidence was submitted, including expenses for transportation of household goods and conveyance of employees, which were not subject to FBT. Referring to the Tribunal's decision in a similar case, the counsel emphasized that payments to third parties for transportation were not FBT applicable. The A.O.'s acceptance of relocation expenses being reimbursed was highlighted. The Tribunal found in favor of the assessee, stating that FBT was not applicable to these expenses.

Issue 2: FBT addition under the head "advertising, publicity, and sales promotion"
For the A.Y. 2007-08, an amount was offered to FBT under this head, but the AO determined a higher value without considering the submissions of the assessee. The Ld.CIT(A) noted that 75% of the details were furnished, but the full details were claimed to have been provided. The Ld.Counsel argued that all details were submitted, supported by vouchers and documents. The Ld.D.R. contended that the assessee failed to provide sufficient evidence. The Tribunal decided to set aside this issue for fresh adjudication by the AO.

In conclusion, the Tribunal allowed the appeal for the A.Y. 2006-07 and partially allowed the appeal for the A.Y. 2007-08, ruling in favor of the assessee on both issues.