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2013 (10) TMI 607 - AT - Income TaxPayment of fringe benefits - it was contended that the assessee provided Fringe Benefits to its employees in course of his business activities and incurred expenses. Therefore Rule-8 will also apply to value of Fringe Benefit.- CIT rejected revised computation of Taxable Fringe Benefit by excluding 60% of the expenditure as relatable to agricultural activities - Held that - an employer assessee is liable to pay Fringe Benefit Tax u/s. 115WA of the Income Tax Act, in relation to Fringe Benefits provided by him to its employees - an employer is liable to pay Fringe Benefit Tax even when no income-tax is payable by an employer on his total income computed in accordance with the provisions of the Income Tax Act - Fringe Benefit Tax is not payable on the income of an assessee but only Fringe benefits provided by an employer to its employees - Decided against assessee.
Issues:
1. Interpretation of Rule 8 of Income Tax Rules, 1962 in relation to Fringe Benefit Tax computation. 2. Rejection of revised computation of Taxable Fringe Benefit by excluding expenditure related to agricultural activities. 3. Computation of value of Fringe Benefit under Section 115WE(3) of Income Tax Act, 1961. Analysis: 1. The appeal was filed against the order of Ld. CIT(A) for assessment year 2006-07 regarding Fringe Benefit Tax (FBT) computation. The dispute arose from the application of Rule 8 of Income Tax Rules, 1962. The appellant contended that only 40% of the benefits provided by the employer should be considered taxable under Rule 8, contrary to the Assessing Officer's decision to tax 100% of such benefits. The Assessing Officer argued that Rule 8 does not apply to the taxable value of Fringe Benefit, emphasizing that FBT is charged on expenses incurred to provide privileges to employees, not on the income of the assessee. The Tribunal upheld the Assessing Officer's decision, stating that FBT is payable by the employer on the benefits provided to employees, regardless of the income tax liability of the employer. 2. The second issue involved the rejection of the revised computation of Taxable Fringe Benefit by the Assessing Officer, who did not accept the exclusion of 60% of the expenditure as related to agricultural activities. The appellant argued that since 60% of the income represented agricultural income, a proportionate amount of expenditure should also be considered for agricultural purposes. However, the Assessing Officer maintained that FBT is charged on expenses related to employee privileges, not on income allocation between agricultural and non-agricultural activities. The Tribunal supported the Assessing Officer's decision, emphasizing that FBT is based on benefits provided to employees, not on the nature of income. 3. The final issue revolved around the computation of the value of Fringe Benefit under Section 115WE(3) of the Income Tax Act, 1961. The appellant challenged the calculation of the Fringe Benefit value by the Assessing Officer and Ld. CIT(A), arguing for the application of Rule 8 to determine the taxable value. However, the Tribunal reiterated that FBT is specifically charged on privileges provided by the employer to employees, as outlined in Section 115WA and 115WB of the Income Tax Act. The Tribunal upheld the decision of the Ld. CIT(A) and dismissed the appeal, emphasizing that FBT is distinct from income tax and is based on benefits provided to employees, irrespective of the employer's income tax liability. In conclusion, the Tribunal's judgment clarified that the computation of Fringe Benefit Tax is based on benefits provided by the employer to employees, distinct from income tax considerations. The application of Rule 8 of Income Tax Rules, 1962 was deemed irrelevant in determining the taxable value of Fringe Benefits, as FBT is specifically charged on privileges provided to employees, regardless of the employer's income tax liability.
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