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TMI Blog2014 (7) TMI 804X X X X Extracts X X X X X X X X Extracts X X X X ..... payment cannot be considered as covered by the provisions of 115WB(1)(c) – thus, the contribution made to the fund under this benefit scheme cannot be considered as the amount to be considered under the provisions of section 115WB(1)(c) for the purpose of FBT – Decided in favour of Assessee. - ITA. No. 601/Hyd//2012, ITA. No. 781/Hyd//2012 - - - Dated:- 16-7-2014 - Shri B. Ramakotaiah And Shri Saktijit Dey,JJ. For the Petitioner : Mr. S. Ananthan For the Respondent : Mr. P. Somasekhar Reddy ORDER Per B. Ramakotaiah, A.M. These cross-appeals are by Assessee and Revenue against the Order of CIT(A)-II, Hyderabad dated 15.03.2012 on the issue of value of FBT brought to tax by the A.O. under the provisions of section 115WB(1)(c) of Income Tax Act, 1961. 2. Briefly stated, assessee is a schedule bank governed by the provisions of Banking Regulation Act, 1949. It filed its return of income for A.Y. 2006-07 on 29.11.2006 admitting Fringe Benefit Tax (In short FBT ) value of ₹ 14,36,39,345/-. A.O. completed the assessment determining the FBT value at ₹ 89,61,88,345/-, by making an addition of ₹ 75,25,49,000/- which was claimed as an expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Schedule Part-A under the Head Recognised P.F. defines the word contribution which means any sum credited by or on behalf of any employee out of his salary or by the employer out of his own monies , to the individual account of an employee, but does not include any sum credited as interest . Referring to Part-B, it was submitted that the definition provided in Part-A applies to the various terms used in Part-B ie. for approved superannuation fund. Relying on the above, it was submitted that there was no contribution made by the employer to the individual account of the employee. Ld. Counsel relied on the memorandum explaining the Finance Bill 2006 to contend that the Government intention was to exclude the amounts from fringe benefits under section 115WB. He also referred to Finance Minister Budget speech while introducing the Finance Bill, 2006. He then referred to Gazette of India Publication dated September 29, 1995 with reference to constitution of the fund which is known as Andhra Bank Employees Pension Fund and the Rules made therein. By virtue of the actuarial assessment of Investible amount of the fund made on every 31st day of March, it was the responsibility of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any information to the A.O. and therefore, consequential orders have not been issued. Therefore, both the parties are on appeal. 8. We have considered the rival contentions and perused the facts placed on record as well as the scheme of superannuation guidelines and issues therein. PROVISIONS OF SECTION 115WB (1) (c) : 9. There is no dispute with reference to provision of fringe benefits under section 115WB governing the issue which is as under : 115WB (1) For the purpose of this Chapter fringe benefits means any consideration for employment provided by way of (a) (b) (c) Any contribution by the employer to an approved superannuation fund for employees . 9.1. As amended by Finance Act, 2006 115WC.(1) For the purpose of this Chapter, the value of fringe benefits shall be the aggregate of the following namely : -- (a) -- ---- -- (b) The amount of contribution referred to in clause (c) of sub-section(1) of section 115WB which exceeds one lakh rupees in respect of each employee; Extract of Section 17(2) as amended by Finance (No.2) Act, 2009. Salary , perquisite and profits in lieu of salary defined. 17. For the purposes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed to restore the taxation of the fringe benefits as perquisites in the hands of the employees. Therefore, it is also proposed to amend clause (2) of section 17, - (a) By substituting sub-clause (vi) so as to provide that perquisite shall include the value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, or former employer, free of cost or at concessional rate to the assessee. For this purpose, the value of any specified security or sweat equity shares, as the case may be, on the date on which the option is exercised by the assessee as reduced by the amount actually paid by, or recovered from, the assessee in respect of such security or shares. The fair market value will mean the value determined in accordance with the method as may be prescribed by the Board. (b) By inserting sub-clause (vii) to provide that perquisite shall also include the amount of any contribution to an approved superannuation fund by the employer in respect of the assessee, to the extent it exceeds one lakh rupees. (c) By inserting sub-clause (vii) to provide that perquisite shall also include the value of any other fringe benefit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g been framed by the Banks' Boards under section 19(1) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980. The Pension Fund Scheme therefore has a statutory character. After obtaining the necessary no objection from the Income Tax authorities, banks which are parties (Assessee bank is one of the parties) to the settlement dated 29.01.1993 had set up Pension Funds and the contribution made into such funds are as laid down in the Scheme and constitutes among other things : (i) the contribution by the bank at the rate of 10% per month on the pay of the employee, which contribution was hitherto being made to the PF account. (ii) The accumulated contributions of the bank to the Provident Fund and interest accrued thereon up to the date of such transfer in respect of the employee ; (iii) Additional annual contribution to the Fund as required to secure payment of pensionary benefits to the members of the Fund, based on actuarial investigation of the Fund as at 31st March of every financial year. 10.2. Assessee bank therefore, submits that Pension Fund in the banks are not over and above contributions to gratuity and provident fund. Assessee als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost more than expected) and investment risk fall, in substance, on the enterprise. If actuarial or investment experiences are worse than expected, the employer's obligation may increase. In view of the above, it is apparent that the contribution paid by the assessee bank is mainly made up of two components, firstly to meet the cost of the accruing benefits during the year and secondly, an adjustment for any deficit or surplus in the scheme at the time for the past year(s). Accordingly, in view of the above arguments and given the nature of the 'Defined Benefit Scheme', it is not possible to derive the contribution on a per employees basis which may be used for income tax purposes. 12. In the case of Royal Bank of Scotland Inre, 45 Taxman.com 283, the Authority for Advanced Rulings has analysed the defined benefit scheme and held that in the defined benefit scheme employer s contribution to the superannuation fund assures only future benefit to employees and they did not get any vested right at the time of making contribution to the fund. In the context of analyzing the tax deducted at source provisions, it was held that such contribution need not be treated as char ..... X X X X Extracts X X X X X X X X Extracts X X X X
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