2014 (3) TMI 628 - AT - Income Tax

Levy of FBT - Nexus between levy of FBT to the employees - Whether the CIT(A) erred in confirming the order of AO levying Fringe Benefit Tax in respect of expenses not related to employees and their families Held that - The AO has estimated Fringe Benefit amount at 20% of the expenditure - He has not brought any material on record to show that the above expenditure gave any benefit to the employees of the assessee company - In absence of any such nexus being proved by the Assessing Officer, levy of Fringe Benefit Tax on the expenditure is not warranted Relying upon M/s. Toyota Kriloskar Motor Pvt Ltd. vs. ACIT 2012 (6) TMI 484 - ITAT, Bangalore the levy of Fringe Benefit Tax is set aside Decided in favour of Assessee.

Summary

Issues Involved:
Whether the CIT(A) erred in confirming the order of AO levying Fringe Benefit Tax in respect of expenses not related to employees and their families.

Detailed Analysis:

1. Assessors' Appeals Against CIT(A) Order:
The appeals were filed by assessors against the separate order of Ld. CIT(A)-VI Ahmedabad dated 19-10-2010. The only issue involved was whether Ld. CIT(A) erred in confirming the order of AO levying Fringe Benefit Tax in respect of expenses not related to employees and their families. The appeals were disposed of by a consolidated order based on the facts of ITA No. 3508/Ahd/2010.

2. AO's Decision and Assessor's Submission:
The AO had not paid FBT on certain Fringe Benefit Values related to non-employees. The assessor submitted that the expenses not directly benefiting employees should not be subject to Fringe Benefit Tax. The CIT(A) confirmed the AO's action, stating that the provisions of the Fringe Benefit Tax do not require a direct benefit to employees for the tax to apply.

3. Tribunal's Decision and Precedents:
The Tribunal considered the decision in the case of Adani Retail Ltd vs. DCIT and relied on judgments from other benches. It was held that Fringe Benefit Tax cannot be invoked for expenses not incurred on employees or their family members. The Tribunal allowed the appeals based on these precedents and deleted the levy of Fringe Benefit Tax on the stated expenditure.

4. Final Decision and Conclusion:
The Tribunal allowed both appeals filed by the assessors, following the precedent that expenses not directly benefiting employees should not be subject to Fringe Benefit Tax. The decision was pronounced in open court, allowing the appeals and setting aside the levy of Fringe Benefit Tax on the specified expenses not related to employees or their families.

This detailed analysis reflects the progression of the case, from the initial appeals to the AO's decision, the CIT(A)'s confirmation, and finally, the Tribunal's judgment based on relevant precedents and legal interpretations regarding the applicability of Fringe Benefit Tax to expenses not directly benefiting employees.