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TMI Blog2015 (7) TMI 1022X X X X Extracts X X X X X X X X Extracts X X X X ..... s exemption will become taxable. - Decided against assessee. - ITA Nos: 1009,1010/Del/2011 - - - Dated:- 29-7-2015 - Shri G.C. Gupta and Shri J.Sudhakar Reddy, JJ. For the Petitioner : Shri Rupesh Jain, Advocate For the Respondent :Shri Vikram Sahay, Sr. DR ORDER PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER These are appeals filed by the assessee, directed against the order passed by the CIT(A) XVII, New Delhi dated 19.11.2010 for the assessment year 2007-08, wherein he confirmed the levy of fringe benefit tax u/s 115WE of the Income Tax Act 1961 vide order dated 24.12.2009 and has also confirmed the rejection of the application filed by the assessee u/s 154 of the Act. The facts of the case and the relevant sections are brought out by the AO from page 2 to 4 of the order which is extracted for ready reference:- VALUE OF FRlNGE BENEFITS ON ACCOUNT OF EXPENSES RELATED TO AIRCRAFTS In the original return, the value of fringe benefits was declared at ₹ 11,29,71,006/- which was subsequently revised by filing revised return to ₹ 5,42,95,190/-. Thus, in revised return, the value of fringe benefits were reduced by an amount of ₹ 5, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lows: PARTICULARS TOTAL RATE FBT VALU INCLUDE Expenses debited to profit and loss account in respect of repair, running . and maintenance of aircraft 157641917/- 20% 31528383 Depreciation on Aircraft 160358306/-- 20% 32071661 TOTAL EXPENSES 318000223/- 63600044 Income from Hiring of Aircraft 24621147/- 20% 4924229 Net Expenes 293379076/- 58675815 In view of the fact that the assessee company is also engaged in the business of carriage of passengers or goods by aircraft it is liable to FBT at NIL rate, in respect of expenses incurred on repair, running and maintenance of the aircraft,. Revised return was accordingly filed Before discussing the issue further, it. would be worthwhile to discuss the provisions of Income Tax Act with regard to computati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on account of hiring of the aircrafts to two parties namely Kubase Solutions and Indo-Pacific Aviation Ltd. The invoices issued for such income were also examined. These invoices indicate that the income from aircraft is on account of charter hire charges received from above parties. Thus, assessee is earning income from hiring of helicopter and aircraft. 2. The assesseee claimed before the AO that it is engaged in the business of carriage of passenger or goods, by aircraft and hence as per section 115 WC (f) the value of fringe benefit tax, for the purposes referred to in clause (i) of sub section (2) of section 115WE shall be taken as NIL. The AO as well as the CIT(A) analysed the facts of the case and held that the assessee was using the air craft for the internal business of the company and this constituted merely 92.85% of the usage and that the air craft was given on hire only for 7.15%. Similarly in the case of usage of helicopter, it was found that the assessee was using a helicopter mainly for the purpose of the asessee s internal business. There is also a finding of fact that the assesee has no direct contact with passengers and the income generated was only from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit is derived by the employees, which can be subjected to tax in the hands of the owner/employer. It may not be out of place to mention that the assessing officer in the order passed under section 154 of the Act has not reduced the sum of ₹ 2,46,26, 147/- received by the appellant on account of charter hire from the expenditure incurred by the appellant on running, repair, etc., of the aircraft, for the purposes of computing the value of fringe benefits liable to tax, treating it as income from business of hiring. As a corollary the expenditure incurred in relation to such business income cannot be considered for purposes considered for purposes of valuing the fringe benefit, else there would be double taxation . In view of the above, in the event it is held that the provision of aircraft on hire, is not an activity of carriage of passenger, it is respectfully submitted, that the expenditure incurred by the appellant during such period cannot be considered for the purposes of valuation of fringe benefit. (emphasis ours) 4. The Ld. CIT(A) rejected the alternative contention by observing that the assessee had itself admitted liability of FBT in the original r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to its employees during the previous year. He emphasised the fringe benefits means any consideration for employment u/s 115WB of the Act and that sub section (2)of section 115WB is controlled by section 115WB of the Act. For this proposition he relied on the decision of Mumbai Bench of the Tribunal in the case of DCIT vs. Kotak Mahindra Old Mutual Life Insurance Ltd.134 ITD 388 (M). 8. He also relied on the following case laws : Intervalve (India) Ltd. vs. ACIT 149 TTJ 365 9. The Ld. DR Shri Vikram Sahay opposed the contentions of the assessee and submitted that sub section (2) of section 115WB deems that fringe benefits have been provided by the employer to its employees and under sub section (1) the amount of expenditure incurred was rightly brought to tax by the AO and confirmed by the Ld. CIT(A). He pointed out that the assessee filed a revised return of income only on the basis that it is entitled to relief u/s 115WC (2)(f) of the Act and when the same is rejected, the assessee without furnishing any details or demonstrating how its claim is tenable made an alternative claim. He submitted that the assessee now conceded that it is not engaged in the business of carr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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