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2021 (6) TMI 496 - AT - Income TaxFringe benefit Tax on account of free / concessional tickets given to employees and their family members - HELD THAT - We find that the issue in dispute with regard to valuation of fringe benefits on account of free / concessional air tickets given to employees and their family members is squarely covered by the decision rendered by this Tribunal in the case of Jet Airways India Ltd., vs DCIT 2013 (1) TMI 722 - ITAT MUMBAI wherein held we agree with the submissions of the counsel that the nearest available, logical and acceptable method is to value the benefit as per the cost assigned for provisions for the frequent flyer programme in the books of account. More so, because such provision has been accepted by the Department in the assessee' s own case from the assessment year 1999-2000 till assessment year 2005-06 and as this method is scientific and has attained finality in due course of time since the assessment year 1999-2000, keeping in mind that the members of the frequent flyer programme scheme are from the general public. Thus restore this issue back to the files of the Assessing Officer who directed to value the fringe benefit of free/concessional tickets as per the valuation of frequent flyer programme as provided by the assessee in its books of account as the same has also been accepted by the Department while making provisions for frequent flyer programme for earning JP mileage, and if there are costs for foreign travels the same should be eliminated from the same, thereafter, the Assessing Officer is also directed to reduce the cost recovered from the employees. Direct the Assessing Officer to verify from the special auditor' s report about the actual figure of the tickets issued.The assessee is directed to furnish the details of the amount recovered from the employees towards the cost/concession/free tickets. The Assessing Officer is directed to reduce the value of the fringe benefit to the extent of the cost of benefit recovered by the assessee from its employees - Ground raised by the Revenue is allowed for statistical purposes.
Issues Involved:
1. Valuation of fringe benefits in respect of free/concessional tickets provided to employees. 2. Method of computation of Fringe Benefit Tax (FBT) on such tickets. Issue-Wise Detailed Analysis: 1. Valuation of Fringe Benefits in Respect of Free/Concessional Tickets Provided to Employees: The primary issue in this case revolves around the valuation of fringe benefits concerning free or concessional tickets given to employees and their family members. The assessee had declared the value of these fringe benefits as 'Nil' in their Fringe Benefit Tax (FBT) return for the Assessment Year (A.Y.) 2006-07. However, the Assessing Officer (AO) determined the value of these fringe benefits to be ?86,42,22,000/-. The assessee contested this assessment before the Commissioner of Income Tax (Appeals) [CIT(A)], who directed the AO to verify the fringe benefit value in line with the Frequent Flyer Programme (FFP) provisions. The Tribunal found that the issue of valuation of fringe benefits was already covered by a previous decision in the case of Jet Airways India Ltd. vs. DCIT, where it was held that the valuation of free/concessional tickets should be done considering the specific nature of these tickets, which are subject to load and vacancies and cannot be equated with tickets sold to the general public. The Tribunal noted that the tickets provided to employees are standby tickets, which means they are only provided if there are vacant seats, unlike tickets sold to the general public that guarantee a seat. 2. Method of Computation of Fringe Benefit Tax (FBT) on Such Tickets: The Tribunal referred to the previous case of Jet Airways, where three methods of valuation were discussed: - Minimum Fare Method: Adopting the minimum value at which a ticket is sold to the general public. - Cost to the Company Method: Evaluating the fringe benefit value based on the break-up value, considering costs like aircraft fuel, CRs charges, food and cabin charges, and printing & stationery, resulting in a value per ticket of ?446.06. - J.P. Mileage Method: Valuation based on the net concession given to frequent flyers. The AO had rejected the assessee's methods and adopted the value of ?5510 per ticket as determined by special auditors. However, the Tribunal found that the AO's method was not appropriate, as the tickets issued to employees do not guarantee boarding and are subject to availability, unlike tickets sold to the general public. The Tribunal concluded that the valuation method used for the Frequent Flyer Programme (FFP) should be adopted for computing the fringe benefit value of free/concessional tickets provided to employees. This method had been accepted by the department in earlier years and was considered scientific and reasonable. The Tribunal directed the AO to value the fringe benefits as per the FFP valuation method, reducing the cost recovered from the employees accordingly. Conclusion: The Tribunal restored the issue back to the AO with directions to value the fringe benefits of free/concessional tickets as per the FFP valuation method and to reduce the costs recovered from the employees. The appeal of the Revenue was allowed for statistical purposes. Order Pronouncement: The order was pronounced on 04/06/2021 by way of proper mentioning in the notice board.
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