2020 (10) TMI 91 - HC - Income Tax

Deemed expenditure chargeable to fringe benefit tax u/s 115WB(2)(H) - Principal component of the EMI payment for cars purchased on lease finance basis - Whether the Tribunal was correct in allowing relief to assessee, when the expenses are not by any stretch of imagination, in the nature of inhouse training expenses whereby the relaxation provided in Question No.51 of FAQ in Circular No.8/2005 dated 29.08.2005 of CBDT would not be available to the assessee? - HELD THAT - As from conjoint reading of provisions of Section 115WB(2)(C) and Circular No.8/2005 dated 29.08.2005, it is evident that expenditure incurred in imparting in-house training to employees is excluded from the ambit of fringe benefit tax. Other incidental expenses such as boarding, lodging, traveling and conveyance expenses would be liable to fringe benefit tax. Assessee had produced the documents before the authorities to show that it has incurred expenses for imparting training to its employees. Tribunal has rightly held that there was no fringe benefit in in-house training expenditure. Tribunal, on the basis of material available on record, has also recorded a finding that repayment of loan obtained for purchase of acquisition of assets cannot be brought within the purview of fringe benefit tax and it is only actual running and maintenance expenditure of the cars taken on finance lease which is liable for fringe benefit tax. The aforesaid finding of fact does not suffer from any perversity. So far as in-house expenses incurred by the assessee for training of the employees cannot be subjected to fringe benefit tax as the finding on the aforesaid issue was held in favour of the assessee for the Assessment Year 2008-09 by the Commissioner of Income Tax (Appeals) which was accepted by the revenue. - Decided against revenue.

Summary

Issues:
1. Interpretation of provisions of the Income Tax Act regarding fringe benefit tax on EMI payments for cars purchased on lease finance basis.
2. Determination of fringe benefit tax liability on in-house training expenses incurred by the assessee.

Analysis:

Issue 1:
The appeal under Section 260A of the Income Tax Act, 1961 involved the interpretation of provisions related to fringe benefit tax (FBT) on Equated Monthly Installments (EMI) for cars purchased on lease finance basis for the Assessment Year 2009-10. The Assessing Officer treated the EMI payments as expenditure on running or maintaining a motor car, subjecting it to FBT. The Commissioner of Income Tax (Appeals) partly allowed the appeal, and the Tribunal dismissed the revenue's appeal, holding that the EMI payments were not chargeable to FBT under Section 115WB(2)(H). The Tribunal's decision was based on the finding that the loan repayment for asset acquisition cannot be considered for FBT, only actual running and maintenance expenses of cars on finance lease are liable for FBT. The Tribunal's decision was upheld, emphasizing that the EMI payments were not within the purview of FBT, as supported by Circular No.8/2005.

Issue 2:
The second substantial question of law revolved around determining the FBT liability on in-house training expenses incurred by the assessee. The Tribunal found that expenses for imparting in-house training to employees were excluded from FBT, as per Circular No.8/2005. The Tribunal held that while expenses for in-house training were exempt from FBT, other incidental expenses like boarding, lodging, traveling, and conveyance were liable to FBT. The Tribunal's decision was supported by the production of documents showing expenses for employee training. The Supreme Court's decision in 'RADHASOAMI SATSANG' was cited to emphasize that findings on in-house training expenses in favor of the assessee for the previous Assessment Year were accepted by the revenue, preventing a change in position for subsequent years.

In conclusion, the High Court ruled in favor of the assessee, dismissing the appeal by the revenue due to the correct interpretation of provisions regarding FBT on EMI payments and in-house training expenses. The Tribunal's decisions were upheld, emphasizing that the EMI payments and in-house training expenses were not liable for FBT, as supported by relevant provisions and Circulars.