2020 (9) TMI 494 - HC - Income Tax

Fringe benefit tax u/s 115WB(2)(c) - Sales Promotion Expenses and conference charges - HELD THAT - Admittedly, the expenditure was incurred by the assessee for the purpose of holding dealers conference. Therefore, the aforesaid expenditure would not have arrived at for determining assessee's liability towards fringe benefit tax under Section 115WB(2)(c). Similarly, the expenses incurred by the assessee towards sales promotion cannot be taxed in view of provision contained in Section 115WB(2)(d). CIT (Appeals) therefore, rightly allowed the assessee's appeal in respect of dealers trading expenses and sales promotion expenses. It is pertinent to note that the Tribunal has recorded a finding that expenditure incurred by the assessee on sales promotion had no nexus on employer-employee relationship and for expenses incurred in holding dealers meet, the question of employer-employee relationship does not arise. Therefore, the order passed by the Commissioner of Income Tax (Appeals) was rightly upheld. - Decided in favour of assessee.

Summary

Issues:
Interpretation of Section 115WB of the Income Tax Act, 1961 regarding fringe benefits in relation to sales promotion expenses and conference charges for Assessment year 2009-10.

Analysis:

1. Fringe Benefits Tax Liability:
The case involved a dispute over the liability of fringe benefit tax on expenses incurred by the assessee for sales promotion and holding dealers conference. The Assessing Officer determined the taxable value of fringe benefits, but the Commissioner of Income Tax (Appeals) allowed the appeal in favor of the assessee concerning certain expenses. The Tribunal upheld the Commissioner's decision, emphasizing the lack of employer-employee relationship nexus in the expenses. The court analyzed Section 115WB of the Act, which defines fringe benefits, and concluded that the expenses for sales promotion and dealers conference did not attract fringe benefit tax as they did not establish an employer-employee relationship, as per the Tribunal's findings.

2. Legal Interpretation of Section 115WB:
The court delved into the provisions of Section 115WB of the Income Tax Act, which outlines the scope of fringe benefits provided by an employer to employees. The section encompasses various considerations for employment, including entertainment, hospitality, and sales promotion. The court highlighted the specific exclusions under Section 115WB(2) regarding expenses like advertisement and sponsorship, clarifying that certain expenses do not fall under the purview of sales promotion for fringe benefit tax purposes.

3. Tribunal's Decision Upheld:
The court upheld the Tribunal's decision regarding the expenses incurred by the assessee for sales promotion and dealers conference. It emphasized that the expenses lacked a direct link to an employer-employee relationship, thus exempting them from fringe benefit tax liability. The court reasoned that the Tribunal's findings were valid, supporting the Commissioner's decision to allow the assessee's appeal against the Assessing Officer's order. Consequently, the court ruled in favor of the assessee, dismissing the appeal and answering the substantial questions of law against the revenue.

In conclusion, the judgment clarified the interpretation of Section 115WB concerning fringe benefits and upheld the decision regarding the non-taxability of sales promotion and conference expenses due to the absence of an employer-employee relationship nexus.