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TMI Blog2011 (12) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... L) account filed along with reflected a debit of Rs. 3286.09 lakhs in respect of contribution to the Employees' Superannuation Fund. However, the value of the corresponding fringe benefit that the assessee had, thus, provided to its employees, was adopted at Rs. 728.08 lakhs. This was explained by the assessee to be (so) for the reason that the same (fringe benefit) is limited to the 'actual' contribution by the assessee during the year, with the balance Rs. 2558.01 lakhs having been actually paid or contributed during the following financial year, supporting the same with a copy of the Saving Bank Account of the Fund wherein the said amount stood credited on 03.4.2006. In the view of the Revenue, the fringe benefit tax (FBT) was payable for the year in which the expenditure is incurred, even as clarified by the CBDT vide its Circular No. 8/2005 dated 29.8.2005 (copy on record). The relevant expenditure having been incurred in full during the financial year (F.Y.) 2005-06, the entire contribution of Rs. 3286.09 lakhs is liable for assessment to FBT for A.Y. 2006-07 and, accordingly, the contribution payable as at the year-end (31.3.2006), i.e., Rs. 2558.01 lakhs, was brought t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rawn by him from s. 115WC, which seeks to provide for the valuation of the fringe benefit. Clause (b) of sub-section (1) thereof refers to the actual amount of contribution, and, thus, clarifies the matter beyond any doubt, i.e., that it is only the actual contribution which is contemplated by the Act as amounting to the provision of fringe benefit by way of contribution to the superannuation fund of the employees. The questions referred to by the ld. CIT(A) in his order are in respect of 'deemed fringe benefit', and which, as clarified by the Act itself (s. 115WB(2)), would be the incurring of an expenditure on or making of payment for the defined purposes. As such, the inference drawn by him is not in consonance with the clear provisions as well as the scheme of the Act. On being questioned by the Bench as to whether the assessee had incurred any contractual liability as an employer in respect of contribution to the employee's superannuation fund, he replied in the negative, stating that all that the assessee had done was to provide for the liability in his accounts on the basis of an actuarial valuation. On a further question, as to if the cheque for the contribution had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rate of thirty per cent on the value of such fringe benefits." Fringe Benefits. 115WB(1) For the purposes of this Chapter, 'fringe benefits' means any consideration for employment provided by way of - ( a ) any privilege, service, facility or amenity, directly or indirectly, provided by an employer, whether by way of reimbursement or otherwise, to his employees(including former employee or employees); ( b ) any free or concessional ticket provided by the employer for private journeys of his employees or their family members; ( c ) any contribution by the employer to an approved suprannuation fund for employees; and ( d ) (2) The fringe benefits shall be deemed to have been provided by the employer to his employees, if the employer has, in the course of his business or profession (including any activity .) incurred any expense on, or made any payment for, the following purposes, namely:- (A) entertainment; (B) provision of hospitability of every kind by the employer to any person, whether by way of provision of food or beverages or in any other manner .. Value of fringe benefits. 115 WC(1) For the purposes of this Chapter, the value of fringe benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision of fringe benefit to an employee and the payment of the corresponding liability by the assessee-employer to the payee, are two entirely different things or aspects of the matter. In fact, this has even nothing to do with the provision of the said liability in his accounts by the employer, which in a given case may not obtain, and without in any manner impacting either the allowability as deduction of the corresponding expenditure (in the computation of the assessee-employer's income under the Act), or its inclusion as a fringe benefit provided by the employer. A provision in accounts only exhibits the factum of accrual of the liability. In our view, there is only one, and not two bases for attracting the charge to tax on account of fringe benefit u/s. 115WA, i.e., one as specified u/s. 115WB(1), and the other for those deemed to be provided u/s. 115WB(2), and that is the provision of a fringe benefit as provided or deemed to have been provided, as being contended by the assessee. And the date of the actual discharge of the corresponding liability (toward payment or expenditure) by the employer is an altogether different matter. The deeming u/s. 115WB(2) is only toward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the exclusive benefit of his employees under an irrevocable trust". Further, but for s. 43B(b), the contribution payable by the assessee as an employer to the fund for the benefit of his employees would be allowed as a deduction. This is even as the word 'paid' is defined u/s. 43(2) as including 'incurred'. The Legislature, per these sections, which also concern contribution to funds set up for the benefit of the employees, employed the words 'sum received', 'annual accretion', 'sum paid', 'sum payable', to denote the sums under reference, as also as to whether it would cover only actual payments and/or those payable as well. In other words, the legislative intent, as expressed by the clear language of the Act, does not warrant restricting the provision of fringe benefit only to cases where the contribution has been actually paid or realized, i.e., in exclusion to cases where the contribution has actually inured. The ld. AR, in our opinion, is incorrect in stating that no contractual liability qua contribution to the superannuation fund (of the employees) stands undertaken or assumed by the assessee as at the end of the relevant year. The same is in fact contradicted by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tribution, nothing less, nothing more. That is, it abstains from prescribing any independent valuation method, but confines it to the arrangement, as existing, whereby the contributions are being paid or are liable for payment. In the present case, as stated, the 'arrangement' provides for payment of the contribution arrived at on the basis of the actuarial valuation. Further, there is no difference between the amount of actual contribution and that provided for in the books of accounts. In fact, whatever may be the basis of arriving at the amount of contracted liability (i.e., actuarial or otherwise), no difference would obtain where the employer pays the amount he is supposed to pay, i.e., for which obligation has been assumed and liability incurred, providing the same in its books. The words 'actual amount of the contribution referred to ..' in section 115WC(1)(b), refer to the actual amount of contribution referred to in sec. 115WB(1)(c), i.e., which the assessee is obliged to pay. The inference sought to be drawn from the provisions of s. 115WC is, thus, to our mind, misconstrued. As apparent, the same concerns only the valuation aspect, prescribing the adoption of the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that of the Revenue, reinforcing the view that it is only the amount of contribution which the assessee-employer is liable to pay in terms of the underlying contractual obligation qua employment, where incurred during the relevant year, which constitutes the consideration for employment, and on which it would be liable to be charged to FBT. Reference to section 115WD, which casts an obligation to return the fringe benefit either paid or provided for by the assessee-employer, also supports this view inasmuch as it cannot oblige the assessee to return a 'fringe benefit' which does not qualify as one, or for which there is no liability to FBT. The same, though definitely not a charging provision, is yet required to be read harmoniously. 4.7 Finally, we may consider one more aspect of the matter. That is, whether the provision of fringe benefit in respect of a contribution to the employee's superannuation fund u/s. 115WB(1)(c), would necessarily require that the same had become due for payment during the relevant year or would it be sufficient if the liability in its respect had accrued as at the year-end. To make things clearer, assuming (say) that the contribution falls due for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (to an approved superannuation fund for his employees), it is the amount that the employer is actually required to contribute in relation to the relevant year which can be said to the consideration for employment for the said year. The due date/s of contribution may not necessarily match with the financial year, and or even if they do, the contribution may not have been actually paid during the relevant year itself. 5. In view of the foregoing, we are unable to be in agreement with the assessee's case and, accordingly, uphold the Revenue's action in bringing the amount of undischarged liability towards contribution (Rs. 2558.01 lakhs), discharged on April 3, 2006, to tax for the relevant year, i.e., A.Y. 2006-07. So however, as admittedly the amount stands discharged during the following year, for which the same has been offered to tax by the assessee-company, the same cannot be subject to tax again for that year, and if so, the assessment for that year would stand to be suitably amended by the AO, without the assessee being required to move an application u/s. 154 in its respect. For this we draw support from the decision in the case of CIT v. Ajay Forgings (P.) Ltd., [2 ..... 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