2018 (6) TMI 1037 - AT - Income Tax

Disallowance of advertisement expenditure considering as fringe benefit - chargeability to tax as fringe benefit - Held that - Assessee has given a detailed break-up which shows that expenditure are not chargeable to tax of fringe benefit - most of the expenditure are advertisements, banners, newspapers, printed materials etc. on which FBT is not chargeable - ssessee has himself stated that conference charges have already been considered in return of FBT including dealers conference expenses - also scholarship was also offered for taxation - Fringe Benefit Tax is not leviable on channel placement charges paid to cable operators by T.V. Channel Companies - thus we hold that addition upheld by the learned CIT (Appeals) deserves to be deleted - Decided in favor of assessee. Disallowance of 20% of expenditure considering as fringe benefit towards provision of transport facilities to employees for commuting between the office and residence - Held that - Copy of the agreement with M/s. Varun Voyages are claimed by the Revenue authorities that it does not only include the transportation of the staff, but to other members also - assessee has not furnished the complete information with respect to the payment - assessee has not shown how ₹ 40 lakhs paid to M/s. Varun Voyages are utilized - no evidences such as log book or any other material are produced to show that whole amount has been spent on transportation expenses of staff only. The assessee failed concurrently at lower authorities to submit that detail - thus in absence of any details forth-coming from assessee, we do not have any option but to make a fair estimate - hence we hold that 50% of the expenditure of ₹ 40 lakhs may be considered as tours and travel expenditure and 20% thereof may be retained as the fringe benefit in the hands of the assessee - thus appeal of assessee is partly allowed.

Summary

Issues:
1. Addition of expenditure on conveyance to the value of fringe benefits under section 115WC of the Income Tax Act, 1961.
2. Addition of expenditure on advertisement, publicity, and sales promotion to the value of fringe benefits under section 115WB of the Act.
3. Reduction of addition of advertisement expenditure by the Revenue.
4. Challenge to the addition of expenditure on transport facilities for employees as fringe benefits.

Issue 1: Addition of Expenditure on Conveyance:
The assessee challenged the addition of ?22,53,344 as 20% of the expenditure incurred on conveyance, arguing it was exempt under section 115WB(3) for providing transport facilities to employees. The CIT (Appeals) upheld the addition due to factual inconsistencies and a wider agreement with the vendor. The ITAT found that the expenditure included free transportation for employees but lacked evidence on specific usage. Thus, a fair estimate was made, reducing the fringe benefit value to ?4 lakhs, granting relief to the assessee.

Issue 2: Addition of Expenditure on Advertisement:
The Revenue added ?9,21,88,625 to the fringe benefits value due to discrepancies in disclosed advertisement expenses. The CIT (Appeals) disallowed a portion based on lack of complete bill evidence. The ITAT examined detailed expenditure breakdowns and held that most expenses were not taxable fringe benefits. Relying on precedent regarding channel placement charges, the ITAT deleted the addition, as the sample invoices showed non-taxable expenses.

Issue 3: Reduction of Addition of Advertisement Expenditure by the Revenue:
The Revenue challenged the reduction of advertisement expenditure addition from ?9,21,88,625 to ?4,60,64,313. The ITAT, after reviewing detailed expenditure breakdowns and sample invoices, found that the expenses were not subject to fringe benefit tax. Therefore, the ITAT dismissed the Revenue's appeal and partly allowed the assessee's appeal.

Issue 4: Challenge to Addition of Transport Facilities Expenditure:
The assessee contested the addition of ?22,53,344 as fringe benefits for transport facilities provided to employees. The ITAT noted discrepancies in disclosed vs. debited amounts and lack of complete information on expenditure usage. A fair estimate was made, reducing the fringe benefit value to ?4 lakhs based on available evidence. The ITAT partly allowed the appeal, granting relief to the assessee.

In conclusion, the ITAT's judgment addressed various challenges related to the addition of expenditure to the value of fringe benefits under the Income Tax Act, providing detailed analyses and rulings on each issue raised by the parties involved.