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TMI Blog2013 (2) TMI 747X X X X Extracts X X X X X X X X Extracts X X X X ..... s material can be considered as ordinary business expenses - no details/ bifurcation of expenses has been given - Matter Remanded back Held that:- Agents Training consisting of food and beverages etc. are covered under clause (C)&(D) of section 115WB(2) - FBT is applicable - Decided in favor of Revenue - I.T.A. No. 8817/Mum/2010, I.T.A. No. 8939/Mum/2010 - - - Dated:- 15-2-2013 - Rajendra Singh (Accountant Member) And Sanjay Garg (Judicial Member) For the Petitioner : Arati Visanji For the Respondent : P. K. Shukla ORDER Sanjay Garg (Judicial Member) 1. These two appeals, one filed by the assessee (ITA No. 8817/Mum/2010) and the other filed by the revenue (ITA No. 8939/Mum/2010) are directed against the order of learned CIT(A) dated 29.9.2010 partly allowing the appeal of the assessee against the assessment order dated 31.12.2008 for A.Y. 2006-07 relating to fringe benefit tax. 2. Brief facts of the case are that the assessee, a life insurance company, filed its return for fringe benefit for A.Y. 2006-07 declaring total value of fringe benefit at ₹ 18,59,40,850/-. The Assessing Officervide order dated 31.12.2008 passed u/s. 115WE(3) of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gents training ₹ 1,56,80,000/- Total ₹ 8,42,00,000/- Revenue is also in appeal against the deletion of expenses by the learned CIT(A) under the following Head: a) incentive and conference amounting to ₹ 4,77,86,000/- 3. We have heard the learned representatives of the parties and also gone through the material on record. 4. Learned AR has relied upon the CBDT Circular No. 8 of 2005 dated 29.8.2005 claiming the said expenses to be exempt. She has further submitted that the expenditures as claimed in her grounds of appeal are ordinary business expenses in the shape of advertisement including printing of product brochure, forms, training and incentive and providing of sales literature etc. to the agents. She has further submitted that the agents are not employees of the insurance company and hence any expenses incurred in relation to incentives, training and marketing material to agents do not fall within the purview of the provisions of section 115WB of the Income Tax Act. No benefit has been derived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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 whether or not such activity is carried on with the object of deriving income, profits or gains) incurred any expense on, or made any payment for, the following purposes, namely:- (A) entertainment; (B) provision of hospitality of every kind by the employer to any person, whether by way of provision of food or beverages or in any other manner whatsoever and whether or not such provision is made by reason of any express or implied contract or custom or usage of trade but does not include- (i) any expenditure on, or payment for, food or beverages provided by the employer to his employees in office or factory; (ii) any expenditure on or payment through paid vouchers which are not transferable and usable only at eating joints or outlets; [(iii) any expenditure on or payment through non-transferable prepaid electronic meal card usable only at eating joints or outlets and which fulfils such other conditions as may be prescribed] (C) conference (other than fee for participation by the employees in any co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nning (including fuel), maintenance of motor cars and the amount of depreciation thereon; (I) repair, running (including fuel) and maintenance of aircrafts and the amount of depreciation thereon; (J) use of telephone (including mobile phone) other than expenditure on leased telephone lines; (K) [***] (L) festival celebrations; (M) use of health club and similar facilities; (N) use of any other club facilities; (O) gifts; and (P) scholarships; [(Q) tour and travel (including foreign travel).] 8. Sub-section (2) of section 115WB of the Act elucidates the fringe benefits which shall be deemed to have been provided by the employer to his employees. It is provided that if an employer in the course of his business or profession incurs any expenditure for the purposes set out therein, it shall bedeemed that fringe benefit has been provided by the employer to the employees. We may observe that u/s. 115WB(1)the expenses incurred by the employer, in consideration for employment, for the benefits, services etc. as mentioned under clause (A) to (D) of his employee including former employee or employees are liable to be subjected to fringe ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subjected to fringe benefit tax excluding expenditure as mentioned under exclusion clauses (i) to (vi). So a perusal of the entire section 115WB(2) reveals that wherever the Parliament has intention to include the expenditure from which any benefit is derived out to the employees, the word employees has been specifically used. Whereas, the expenditure as mentioned under other heads, as discussed above, the word employee has been intentionally omitted, rather the word any person has been used. Even certain expenses as mentioned therein which are generally incurred by the employer in the ordinary course of business and cannot be in any manner said to be incurred by the employer for the welfare or benefit of the employee, the nature of those expenses being such, even without any remote benefit to the employees, have been subjected to fringe benefit tax through express provisions of the statute. The language of the section is clear unambiguous and straight and there is no place for insertion or subtraction or substitution of any word into it. A careful reading of the entire section reveals without any doubt that sub-section (2) is an independent section and is not controlle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the same. Neither any presumption nor any inference can be drawn in that respect; rather language of the section reveals that the expenditure mentioned there in is relating to payment to third persons except where the word employee has been specifically used. The principles of legal interpretation do not allow any different type of interpretation of this provision. The Statute is to be read as a whole so as to give meaning to the entire statute instead of making a part of it redundant, otiose or meaningless Hon'ble Supreme Court in Saraswati Sugar Mills Vs. Haryana State Board 1992 AIR 224, has held that every Act of the Parliament must be read according to the strict natural construction of its words. 11. It may be further observed that a careful reading of Section 115 WB(1) reveals that the words any privilege, service, facility or amenity, directly or indirectly are wide enough to cover the expenditure incurred by the employer for the employees for entertainment, hospitality in any manner whether by way of food or beverages or in any other manner whatsoever, conveyance, use of hotel, boarding and lodging facilities, repair and maintenance of motor cars and air craft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceive strict interpretation (Manish Maheshwari Vs. Assistant Commissioner of Income Tax and Another 2007 (3) SCLAE 627). Hon'ble Supreme Court in State of M.P. Vs. Rakesh Kohli Anr., Civil Appeal No. 684 of 2004 decided in 11.5.2012, while summing up the law related to the interpretation and validity of taxing statute has observed as under :- In Commissioner of Income Tax, Madras Vs. RSV Sr. Arunachalam Chettiar (12), a three Judge Bench of this Court, inter alia observed in paragraph 13 (at page 1220-21) of the Report, equity is out of place in tax law; a particular income is either exigible to tax under the taxing statute or it is not. The court highlighted that the court could not concern itself with the intention of the Legislature when the language expressing such intention was plain and unambiguous. 20. In P. Laxmi Devi (Smt.)7, a two-Judge Bench of this Court was concerned with a judgment of the Andhra Pradesh High Court. The High Court had declared Section 47-A of the 1899 Act as amended by A.P. Act 8 of 1998 that required a party to deposit 50% deficit stamp duty as a condition precedent for a reference to a Collector under Section 47-A unconstit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitrary or unreasonable or irrational but some constitutional infirmity has to be found. (iii) The court is not concerned with the wisdom or unwisdom, the justice or injustice of the law as the Parliament and State Legislatures are supposed to be alive to the needs of the people whom they represent and they are the best judge of the community by whose suffrage they come into existence. (iv) Hardship is not relevant in pronouncing on the constitutional validity of a fiscal statute or economic law. (v) In the field of taxation, the Legislature enjoys greater latitude for classification. 14. The matter relating to fringe benefit tax came into consideration and discussion before Hon'ble Supreme Court in R B Falcon (A) Pty Ltd. Vs. CIT, Civil Appeal No. 3326 of 2008.Since the point in dispute before us was not under consideration before Supreme Court hence, Hon'ble Supreme Court did not make any specific observation regarding point in dispute we are dealing with. However, the law laid down in the above authority by the Hon ble Supreme Court relating to the operation of section 115WB(1), section 115WB(2) vis- -vis section 115WB(3) is very relevant and can be squar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put to sub-sections (1) and (3), the purpose of grant of exemption shall be defeated. If the latter part of sub- section (3) cannot be given any meaning, it will result in an anomaly or absurdity. It is also now a well settled principle of law that the court shall avoid such constructions which would render a part of the statutory provision otiose or meaningless. [See Visitor and Ors. v. K.S. Misra [(2007) 8 SCC 593]; Commissioner of Sales Tax, Delhi and Ors. v. Shri Krishna Engg. Company and Ors. [(2005) 2 SCC 692]. 19. We, therefore, are of the opinion that AAR was right in its opinion that the matters enumerated in sub-section (2) of Section 115WB are not covered by subsection (3) thereof, and the amenity in the nature of free or subsidized transport is covered by sub-section (1). 15. The Hon'ble Supreme Court is clear in terms while holding that section 115 WB(1)and 115WB(2) operate in different fileds. Hon'ble Supreme Court has also held that the courts should avoid such constructions which would render a part of statutory provisions otiose or meaningless. Though, the hon'ble Supreme Court was concerned with the point that whether matter enumerated in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be held to be binding, save and except where it violates any provisions of law or is contrary to any judgment rendered by the courts. The reason for giving effect to such executive construction is not only same as contemporaneous which would come within the purview of the maxim temporania caste pesto, even in certain situation a representation made by an authority like Minister presenting the Bill before the Parliament may also be found bound thereby . 19. Hon'ble Supreme Court relying upon various case laws as discussed in paragraph 22 to 27of the said judgement has upheld the validity and applicability of the circular No. 8/2005 (i.e. circular in question). Though the matter in question before Hon'ble Supreme Court was relating to some other provisions of the circular, but Hon'ble Supreme Court in the last paragraph of the judgement has upheld not only the validity of the said circular but also held that the interpretation of the CBDT of the provisions of the Income Tax Act should ordinarily be held to be binding, save and except where it violates provisions of law or is contrary to any judgement rendered by the courts. Incidentally CBDT circular No. 8/2005 is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7(6) SCC 586in para No.66 and 67 of the judgment has observed as under :- 66. It is well settled that a mere direction of the Supreme Court without laying down any principle of law is not a precedent. It is only where the Supreme Court lays down a principle of law that it will amount to a precedent. 67. In Municipal Committee, Amritsar Vs. Hazara Singh, AIR 1975 SC 1087, the Supreme Court observed that only a statement of law in a decision is binding. In State of PunjabVs. Baldev Singh,1999 (6) SCC 172, this Court observed that everything in a decision is not a precedent. In Delhi Administration Vs. Manoharlal,AIR 2002 SC 3088, the Supreme Court observed that a mere direction without laying down any principle of law is not a precedent. In Divisional Controller, KSRTC vs. Mahadeva Shetty, 2003 (7) SCC 197, this Court observed as follows: .. The decision ordinarily is a decision on the case before the Court, while the principle underlying the decision would be binding as a precedent in a case which comes up for decision subsequently. The scope and authority of a precedent should never be expanded unnecessarily beyond the needs of a given situation. The only thing bin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based commission but the employer company also gives lot of benefits in the shape of amenities, perquisites and services to its agents. Apart from that, the training, conference components, travel expenses and certain hospitality expenses are also borne by the company for the agents. No doubt as observed in common law, the agents are not the employees of the company but it can be safely said that they have the colour of the employees. Status of the agents is somewhere in between the status of employees and third person. If the agents cannot be said to be employees of the company, at the same time they cannot be said to be the third parties. The indirect incentives, benefits and perquisites which are collectively enjoyed by the agents provided by the employer company are neither taxed individually at the hands of the agents nor at the hands of the employer company. To bring into the purview and subject these type of expenditure incurred by the employer company on certain persons like agents, provisions of section 115WB(2) have been enacted. In the case in hand also, most of the expenses have been incurred by the assessee on conference, perquisite and training of the agents, these ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vo assessment giving opportunity to the assessee to file the bifurcation/split up of expenses claimed under sales promotion. The Assessing Officer after giving proper opportunity of hearing to the assessee and after verification of the details will assess and subject the expenses incurred by the assessee to fringe benefit tax excluding the expenses incurred on print product brochure, form, product booklets etc. which in our view are ordinary business expenses. (B) Incentive and Conference ₹ 4,77,86,000/- :- The revenue has come into appeal against the deletion of the said expenses. Learned CIT(A) has deleted the said expenses considering the submissions of the assessee that the same are in the nature of performance based incentives to agents. However, no bifurcation/split up of the expenses has been given by the assessee. It is observed that the commission or incentives, which are taxable at the hands of the individual beneficiary, cannot be subjected to fringe benefit tax. However, incentives and perquisites paid collectively to the agents will specifically attract the provisions of section 115WB(2). Under clause (C) of section 115WB(2), expenses incurred on conference ..... X X X X Extracts X X X X X X X X Extracts X X X X
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