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TMI Blog2012 (6) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... een made for business promotion to another group company - the charge to FBT is dependent on enjoyment of benefit collectively by the employees as clarified by CBDT’s circular No.8 dated 29.08.2005 which is totally missing in the present case of brand equity payment and hence cannot be subjected to FBT – against revenue. - ITA No. 2735/Mum/2011, ITA No.2736/Mum/2011 - - - Dated:- 25-4-2012 - P M Jagtap, N V Vasudevan, JJ. For Appellant: Shri P C Maurya For Respondent: Shri Niraj Sheth ORDER Per: N V Vasudevan: These are appeals by the revenue against the common order dated 20/1/2011 of CIT(A)-6, Mumbai relating to A.Y 2006-07 and 2007-08. 2. First we shall take up for consideration ITA No.2735/M/11 for A.Y 2006-07. Ground No.1 4 raised by the revenue is general in nature and calls for no adjudication. 3. Ground No.2 raised by the revenue reads as follows: On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in holding that, prepaid expenses of Rs. 9,27,342/- cannot be charged under FBT without appreciating that prepaid expenses is to be included in the value of taxable fringe benefits as provided u/s. 115WB(2) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctric spectaculars, kiosks, hoardings, bill boards, display of products or by way of such other medium of advertisement ; (vi) being the expenditure by way of payment to any advertising agency for the purposes of clauses (i) to (v) above, (vii) being the expenditure on distribution of samples either free of cost or at concessional rate; and (viii) being the expenditure by way of payment to any person of repute for promoting the sale of goods or services of the business of the employer, shall not be considered as expenditure on sales promotion including publicity ; (3) For the purposes of sub-section (1), the privilege, service, facility or amenity does not include perquisites in respect of which tax is paid or payable by the employee or any benefit or amenity in the nature of free or subsidised transport or any such allowance provided by the employer to his employees for journeys by the employees from their residence to the place of work or such place of work to the place of residence. While making assessment of expenditure which is subject to fringe benefit tax the AO added a sum of Rs. 9,27,342/- being contribution towards superannuation funds under section 115WB(1)(c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses to be incurred in the future. The Assessee further submitted that the total amount of contribution to superannuation fund made during the year and liable to fringe benefit tax was Rs.32,76,478/- as follows: Particulars Amount Amount Total amount of superannuation contribution made in AY - 2005-06 31,81,613 Less: Superannuation contribution debited to P L A/c. of F.Y 2004-05 (A.Y 2005-06) 830,052 Balance pre-paid contribution to be debited to Profit loss A/c. F.Y. 2005-06 (A.Y 2006-07) 23,51,561 Total amount of superannuation contribution made in A.Y 2006-07 42,40,926 Less: Pre-paid contribution to be debited to P L a/c. of F.Y 2006-07 (A.Y 2007-08) 32,78,903 Less: Excess Contribution paid earlier received back Superannuation contribution for A.Y 2006-07 37,106 924,917 Total superannuation contribution for A.Y 2006-07 32,76,478 As seen from the above, the total amount of contribution to superannuation fund debit to Profit Loss A/c was Rs.32,76,478/- for A.Y. 2006-07 as appeared in the revised FBT a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to superannuation fund. Even the CBDT in Circular No.8/2005 dated 29/8/2005 issued in connection with FBT provisions had made it clear that FBT would be payable in the year in which the expenditure is incurred and FBT would not be payable on payment of advance towards expenses to be incurred in the future. In view of the above factual position regarding expenditure related to the previous year and pre-paid contribution and the legal position as explained in the Circular, we are of the view that the order of the CIT(A) on the issue does not call for any interference. Consequently ground No.2 raised by the revenue is dismissed. 9. Ground No.3 raised by the revenue reads as follows: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that expenses of Rs.16,14,384/- which are on account of sales promotion cannot be charged under FBT without appreciating that the sales promotion expenses is to be included in the value of taxable fringe benefits as provided u/s. 115WB(2) of the I.T. Act. 10. The assessee had paid Rs.16,40,384/- to Tata Sons Limited for usage of name of TATA . According to the Assessee, the expenditure was in the natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyee they are taxed in the hands of the employee; that position will continue. In addition, I now propose that where the benefits are usually enjoyed collectively by the employees and cannot be attributed to individual employees, they shall be taxed in the hands of the employer. However , transport services for workers and staff and canteen services in an office or factory will be outside the tax net. The tax is not a new tax, although I am obliged to call it by a new name, namely, Fringe Benefits Tax. The rate will be 30 per cent on an appropriately defined base . In the present case, it is noted that the basic ingredient of enjoying benefit collectively by the employees is totally missing in the present case of brand equity payment and hence cart not subjected to FBT on this ground. Further, it is noted that the CBDT s circular No.8 dated 29.08.2005 also clarifies in reply to question no.2 as to whether employer-employee relationship was a pre-requisite for the levy of FBT by replying in the affirmative. In the present case, it is noted that the payment has been made I for business promotion to another group company, without there being any benefit accruing to any of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y missing in the present case of brand equity payment and hence cannot be subjected to FBT. Even the CBDT s circular No.8 dated 29.08.2005 clarifies in reply to question no.2 as to whether employer-employee relationship was a pre-requisite for the levy of FBT by replying in the affirmative. In the present case, as rightly held by the CIT(A), the payment has been made for business promotion to another group company, without there being any benefit accruing to any of the employees of the assessee. Thus the very basis for levy of FBT, namely the collective enjoyment of some benefit by the employees is missing. Therefore Fringe Benefit Tax would not be leviable unless benefit accrues collectively to the employees of the Assessee. We therefore find no merit in Ground No.3 raised by the Revenue. Consequently Ground No.3 raised by the revenue is dismissed. 13. In the result, the appeal by the revenue is dismissed. ITA No.2736/M/2011,A.Y. 2007-08: 14. Ground No.1 3 are general in nature and calls for no adjudication. 15. Ground No.2 raised by the revenue reads as follows: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that exp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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