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TMI Blog2014 (5) TMI 933X X X X Extracts X X X X X X X X Extracts X X X X ..... lue by the assessee due to the reasons best known to them – the matter is required to be remitted back to the AO for fresh adjudication as to the proper determination of the value of fringe benefit - Decided in favour of Assessee. - ITA No. 3646/DEL/2011 - - - Dated:- 17-4-2014 - Shri S. V. Mehrotra And Shri Chandramohan Garg,JJ. For the Appellant : Shri Ajay Vohra, Upvan Gupta For the Respondent : Shri Satpal Singh, DR ORDER Per Chandramohan Garg, Judicial Member This appeal has been preferred by the assessee against the order of the Commissioner of Income Tax(A)-XIII, New Delhi dated 28.4.2011 in Appeal No. 1243/09-10 for AY 2006-07. 2. On the issue of fringe benefit tax, the assessee has raised following grounds:- 1. That the Commissioner of Income-tax (Appeals) erred on facts and in law in upholding the action of the assessing officer in completing assessment computing the value of fringe benefits at Rs.2,03,18,452/- as against returned value of fringe benefit of Rs.91,42,036/-. 2. That the Commissioner of Income-tax (Appeals) erred on facts and in law in upholding the action of the assessing officer in treating the expenditure amounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pholding the action of the Assessing Officer for treating the expenditure incurred on running and maintenance of motor cars being car fuel, engine oil and lubricants, rent and taxes, insurance on motor cars, service charges i.e. the driver s salary as liable to be calculated as value of fringe benefit under the provisions of the Act. On behalf of the assessee, it was also contended that the action of the Commissioner of Income Tax(A) in confirming additions made by the Assessing Officer are not based on correct appreciation of the facts of the case and position of law because provisions of FBT are not applicable to normal business expenditure which does not result in any benefit to employee. 6. Ld. counsel of the assessee has also pointed out Budget Speech of the Finance Minister while introducing Finance Bill 2005, Memorandum explaining the provisions to the Finance Bill, 2005 and reliance is also placed in its record on the following citations and decisions:- Circular No.8 of2005 dated 29.08.2005 T T Motors Ltd. vs. CIT: 341 ITR 332 (Del.) Godrej properties Ltd. v. Addl. CIT: 135 ITJ 426 (Mum.) (ITAT) DCIT VS. Kotak Mahindra Old Mutual Life Insurance Ltd: 134 ITD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of computation of FBT even in cases where the assessee is using the motor cars for running them on hire. Further, the assessee has not included the expenses for traveling and telephone for calculation of FBT although no reason has been given. The expenses of traveling, conveyance and telephone are to be included for the purpose of calculating the value of fringe benefit. The following expenses have not been included by the assessee:- S.No. Description Amount (Rs.) 1 Car fuel, oil and lubricants 5,82,71,463 2 Rate taxes on motor cars 53,57,351 3 Travel - Air/Rail ticket 4,26,583 4 Telephone expenses 95,99,023 5 Insurance on motor cars 76,51,103 6 Repair maintenance of cars 3,06,30,198 7 Service charges i.e. drivers salary 6,92,85,555 8 Business promotion 15,80,177 3. In view of the facts discussed above, the assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same cannot be: considered as expenditure resulting in fringe benefit to the employees. b. The entire amount of deprecation and expenditure on maintenance of motor cars incurred by the renting company is recovered as part of the rental from the customers, on which FBT is payable by the customer, Requiring the renting company also to pay FBT on such expenses/ cost would mean that the motor cars given on rent by the renting company are being simultaneously used by the customers and employees which is factually erroneous and would result in double taxation of the same amount. c. ITH has a fleet of 491 cars which are used in the business of renting . In addition, the assessee company has 27 motor cars for use by the employees for official as well as personal purposes. Fringe Benefit Tax is liable to be paid in respect of expenses on repairs, maintenance and deprecation on such motor cars used by the employees. To estimate 5% of 491 cars used in the business of renting, as giving been used by the employees, would mean that nearly 24 cars are withdrawn from the business and are put to use by the employees. The aforesaid presumption is contrary to the facts. d. Since the expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 5% of the expenditure as against 20%. Thus the Act itself specifically provides that where the assessee is engaged in the business of hiring of motor cars, the element of fringe benefit is definitely included. However in view of the nature of business of hiring of motor cars, the value of fringe benefit has been substantially reduced and is to be taken @ 5% instead of 20%. Thus the Act itself clearly incorporates the requirement of fringe benefit valuation on motor cars used for hiring. 12. Ld. counsel of the assessee has placed reliance on various decisions of Hon ble High Court and Coordinate bench of Tribunal including decision of Hon ble Jurisdictional High Court of Delhi in the case of T T Motors Ltd. vs C.I.T. (supra) wherein it has been held that the accessories provided free of cost to the customers who purchase car from car dealer is not an item of hospitality or sales promotion and therefore the same is not liable to fringe benefit tax. Ld. counsel of the assessee has also drawn our attention towards CBDT Circular No. 8 of 2005 dated 29.8.2005 to support his submissions and contentions. Ld. DR pointed out that the present case is not a case of car dealer and is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s income partly in cash and partly in kind, thereby violating horizontal equity. Further, fringe benefits are generally provided to senior executives in the organization. Therefore, under-taxation of fringe benefits also violates vertical equity. It also discriminates between companies which can provide fringe benefits and those which cannot, thereby adversely affecting market structure. The object of legislation to bring fringe benefit tax was that when all benefits cannot be individually attributed to employees particularly in the cases where the benefit is collectively enjoyed; of the present widespread practice of providing perquisites, wherein many perquisites are disguised as reimbursements or other miscellaneous expenses so as to enable the employees to escape/reduce their tax liability and when there is difficulty in the valuation of the benefits provided by the employer to its employees. 15. In the case in hand, the assessee company itself offered that the employees of the company are using 27 cars for administering the business of the assessee i.e. for official and personal use of employee and the assessee offered expenses in relation to such 27 cars for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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