2018 (3) TMI 1564 - AT - Income Tax

Revision u/s 263 - omission to carry out the stated adjustment in the Book profits for FBT as envisaged by Ld. CIT has made the quantum order erroneous and prejudicial to the interest of the revenue - Held that - Taxes borne by the assessee on non-monetary perquisites provided to employees forms part of Employee Benefit cost and akin to Fringe Benefit Tax since they are certainly not below the line items since the same are expressively disallowed u/s 40(a)(v) and the same do not constitute Income Tax for the assessee in terms of Explanation-2. See ITO Vs. Vintage Distillers Ltd. 2010 (1) TMI 56 - ITAT DELHI-H where the Tribunal has taken the view that the term tax was much wider term than the term Income Tax since the former, as per amended definition of tax as provided in Section 2(43) included not only Income Tax but also Super Tax & Fringe Benefit Tax. Therefore, without there being any corresponding amendment in the definition of Income Tax as provided in Explanation-2 to Section 115JB, Fringe Benefit Tax was not required to be added back while arriving at Book Profits u/s 115JB. The adjustment of impugned item as suggested by Ld. CIT was not legally tenable in law which leads us to inevitable conclusion that the omission to carry out the said adjustment did not result into any loss of revenue. Therefore, one of the prime condition viz. prejudicial to interest of revenue to invoke the revisional jurisdiction under the provisions of Section 263 has remained unfulfilled in the present case - Decided in favour of assessee

Summary

Issues:
1. Invocation of revisional jurisdiction u/s 263 by the Commissioner of Income Tax.
2. Addition of taxes paid on perquisites to employees while computing "book profits" under section 115JB of the Income-tax Act, 1961.

Issue 1: Invocation of revisional jurisdiction u/s 263 by the Commissioner of Income Tax:
The appeal contested the Commissioner of Income Tax's invocation of revisional jurisdiction u/s 263 for Assessment Year 2012-13. The grounds of appeal challenged the Commissioner's order as perfunctory and ultra vires, arguing that the Assessment Order passed by the Assessing Officer was not erroneous. The appellant contended that the assessment was done after due consideration of facts and law. The Tribunal noted discrepancies in the Commissioner's order but proceeded to analyze the core issue of whether the omission of a specific adjustment in book profits made the quantum order erroneous and prejudicial to the revenue's interest.

Issue 2: Addition of taxes paid on perquisites to employees while computing "book profits" under section 115JB:
The dispute arose from the Commissioner directing the Assessing Officer to increase book profits under section 115JB by the amount of taxes paid on non-monetary perquisites to employees. The appellant argued that the taxes paid on perquisites were allowable while computing book profits, citing legal grounds and judgments. The Tribunal examined the statutory provisions under Section 115JB, emphasizing that the computation of book profits must strictly adhere to the provisions. It noted that the adjustment suggested by the Commissioner was not legally tenable, as the taxes on non-monetary perquisites were not considered income tax under Explanation-2 to Section 115JB. Relying on precedents, the Tribunal concluded that the omission to carry out the adjustment did not result in any loss of revenue, thus not meeting the criteria of being prejudicial to the interest of revenue. Consequently, the Tribunal set aside the Commissioner's order, allowing the appellant's appeal.

In conclusion, the Tribunal's detailed analysis focused on the legal and procedural aspects of both issues, ultimately leading to the setting aside of the Commissioner's order based on the specific legal interpretations and precedents cited during the proceedings.