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2016 (6) TMI 843 - AT - Income TaxRevision u/s 263 - default FBT computation - as per CIT(A) no query was raised with respect to an amount for medical reimbursement expenses by AO - Held that - In light of the clarification issued by the CBDT on 29.8.2005, the AO was required to examine the details of medical reimbursement to employees, whether the expenditure is incurred for the medical treatment in unapproved hospital and it exceeds ₹ 15,000 or not. If it does not exceed ₹ 15,000, the entire reimbursement of expenditure would be fringe benefit in the hands of the employer and subjected to FBT. Since the AO has not applied his mind to reimbursement of medical expenses to the employees, his order is erroneous and prejudicial to the interests of revenue and we therefore do not find any infirmity in the order of the CIT in exercising his jurisdiction u/s. 263 of the Act. Dealer training expenditure AO should have examined the nature of expenditure incurred on dealers training, but he did not make any query from the assessee in this regard. Therefore, the AO has not at all applied his mind to the expenditure incurred on dealers training and non-application of mind to a particular issue which results into loss to the revenue makes the assessment order to be erroneous and prejudicial to the interests of revenue. We are of the view that where as per the provisions of the Act and clarification issued by the CBDT through Instruction No.8/2005, the dealers training expenses would be the fringe benefits and subjected to tax in the hands of the assessee, the AO is required to at least examine the nature of dealers training expenditure. Since he did not examine this aspect, we have no hesitation to hold that the assessment order is erroneous and prejudicial to the interests of revenue in this regard. Conference expenses AO has not examined this aspect also either in the assessment order or by raising a specific query in this regard; whereas as per Q.No.55 & 56 of the Instruction No.8/2005, it has been clarified by the Board that the expenditure in the nature of fee for participation by the employees in any conference is not liable to FBT, but if the participation fee includes any expenditure of the nature referred to in clauses (A), (B) and (D) to (P) of sub-section (2) of section 115WB, such expenditure will be liable to FBT. The expenditure incurred for the purposes of agents or dealers or development advisors is liable to FBT. When the Board has clarified that certain conference expenses are subject to FBT, the AO ought to have examined the nature of conference expenses. But, he did not raise any query in this regard, what to say about the discussion in the assessment order. For similar reasons as discussed in the foregoing paragraphs, we are of the view that the assessment order is also erroneous and prejudicial to the interests of revenue for non-consideration of the issue of conference expenses by the AO. Sales promotion expenses and business promotion expenses We find that a specific query was raised by the AO in this regard and the assessee has filed a detailed reply in response thereto. Not only in the course of assessment proceedings, the AO has also examined this issue in the assessment order in para Nos. 2 to 3, after making a detailed discussion with respect to the relevant provision and the nature of this expenditure. Out of a total claim of ₹ 2,66,50,000, a sum of ₹ 1,58,9,000 was charged to FBT. On a careful perusal of the assessment order, we find that the AO has examined this issue and assessed to FBT an amount of ₹ 1,58,95,000 out of total claim of ₹ 2,66,50,000. Though the CIT may not agree with the conclusions and the findings of AO, but in any case, the AO has applied his mind to the issue and the CIT cannot thrust upon his opinion upon the AO. Therefore, in this regard, we are of the view that since the AO has applied his mind and examined the issue, the CIT has no jurisdiction to revise the order u/s. 263 of the Act Appeal decided partly in favour of assessee.
Issues Involved:
1. Jurisdiction of the Commissioner of Income Tax (CIT) under Section 263. 2. Assessment of medical reimbursements for Fringe Benefit Tax (FBT). 3. Assessment of dealer training expenses for FBT. 4. Assessment of conference expenses for FBT. 5. Assessment of business promotion expenses for FBT. 6. Assessment of sales promotion expenses for FBT. Detailed Analysis: 1. Jurisdiction of the Commissioner of Income Tax (CIT) under Section 263: The assessee challenged the CIT’s order under Section 263, arguing that the conditions for exercising jurisdiction were not satisfied, rendering the order invalid. The CIT believed the assessment order under Section 115WE(3) was erroneous and prejudicial to the revenue’s interests. The Tribunal upheld the CIT's jurisdiction, noting that the Assessing Officer (AO) failed to apply his mind to certain aspects, making the original assessment order erroneous and prejudicial to the revenue. 2. Assessment of Medical Reimbursements for FBT: The CIT noted that medical reimbursements amounting to ?8,97,920 were not added back to the return of Fringe Benefits. The Tribunal confirmed that the AO did not examine whether these reimbursements exceeded ?15,000 and were incurred in unapproved hospitals, which would make them liable for FBT. The Tribunal agreed with the CIT that the AO’s failure to consider this rendered the assessment order erroneous and prejudicial to the revenue. 3. Assessment of Dealer Training Expenses for FBT: The CIT observed that dealer training expenses of ?6,45,32,648 were not offered to FBT. The Tribunal referred to CBDT’s Instruction No.8/2005 and relevant case law, confirming that such expenses should be considered fringe benefits. The Tribunal found that the AO did not examine this aspect, making the assessment order erroneous and prejudicial to the revenue. 4. Assessment of Conference Expenses for FBT: The CIT pointed out discrepancies in the conference expenses reported and those offered for FBT. The Tribunal upheld the CIT’s view, noting that the AO did not raise specific queries or examine the nature of conference expenses. According to CBDT’s Instruction No.8/2005, certain conference expenses are liable to FBT. The Tribunal concluded that the AO’s failure to consider this issue made the assessment order erroneous and prejudicial to the revenue. 5. Assessment of Business Promotion Expenses for FBT: The CIT concluded that business promotion expenses of ?66,33,731 were not offered for FBT. The Tribunal found that the AO had raised specific queries and examined the issue in detail during the assessment proceedings. Since the AO applied his mind and made a reasoned decision, the Tribunal held that the CIT could not revise the order under Section 263 based on a difference of opinion. 6. Assessment of Sales Promotion Expenses for FBT: The CIT noted that sales promotion expenses of ?1,76,97,334 were not offered to FBT. The Tribunal found that the AO had specifically queried and examined this issue, with a detailed discussion in the assessment order. The AO assessed ?1,58,95,000 out of the total claim of ?2,66,50,000 for FBT. The Tribunal concluded that since the AO had applied his mind, the CIT had no jurisdiction to revise the order under Section 263 on this issue. Conclusion: The Tribunal confirmed the CIT’s order regarding the reimbursement of medical expenses, dealer training expenditure, and conference expenses, finding the original assessment order erroneous and prejudicial to the revenue. However, it set aside the CIT’s order concerning business promotion and sales promotion expenses, as the AO had already applied his mind to these issues. The appeal was thus partly allowed.
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