2014 (5) TMI 277 - AT - Income Tax

Chargeability of FBT on Sales Promotion Expenses Expenses incurred for non-employee for the business purpose Held that - Relying upon Intas Pharmaceuticals Ltd. Versus DCIT, Cent. Cir. 2(1), Ahmedabad 2014 (3) TMI 685 - ITAT AHMEDABAD - there is no finding of AO or CIT(A) as to whether the expenses which have been incurred were for employees or nonemployees and whether the expenses were for the purpose of business - the provision of FBT could not be invoked in respect of the expenses which were not incurred on employees or their family members thus, the matter is required to be remitted back to the AO for fresh adjudication Decided in favour of Assessee.

Summary

Issues:
Levy of Fringe Benefit Tax (FBT) on expenses incurred for non-employees and business purposes.

Analysis:
1. The appeal was filed against the order of CIT(A)-VI, Ahmedabad for A.Y. 2006-07 related to the assessment of Fringe Benefit Tax (FBT) on expenses. The Assessee, a company engaged in Manufacturing and Marketing of Readymade Garments, declared a value of FBT in its return. The assessment under section 115WB of the Act resulted in a higher FBT value, leading to an appeal by the Assessee.

2. The key contention revolved around the addition of FBT on expenses not incurred for employees but for non-employees and business purposes. The CIT(A) upheld the addition, citing the deeming provision under Section 115WB(2) of the Act, which considers certain expenses as Fringe Benefits provided to employees. The CIT(A) emphasized that the Act provides specific percentages for calculating FBT, leaving no room for discretion to exclude expenses related to non-employees.

3. The Assessee argued that FBT should only apply to expenses benefiting employees, not non-employees. Referring to a similar case, the Assessee requested a remand to the Assessing Officer (A.O) for a clear determination on whether the expenses were for non-employees and business purposes. The A.O and CIT(A) had not established this crucial fact in the present case.

4. The Tribunal, following precedent and the principle of justice, remitted the issue back to the A.O to ascertain if the expenses were indeed for non-employees and business purposes, aligning with the decision in a prior case. The Tribunal emphasized the need for a clear finding on this matter and directed a fresh decision after providing a fair hearing to the Assessee.

5. Ultimately, the Tribunal allowed the Assessee's appeal for statistical purposes, ordering a reevaluation by the A.O to determine the applicability of FBT on expenses related to non-employees and business activities. This decision aimed to ensure a fair assessment based on the specific circumstances of the case.

This comprehensive analysis highlights the legal intricacies and the Tribunal's approach to resolving the issue of FBT on expenses incurred for non-employees and business purposes in the context of the given judgment.