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TMI Blog2008 (5) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... alth of Australia. It is engaged in the business of providing Mobile Offshore Drilling Rig (MODR) along with crew on a day rate charter hire basis to drill offshore wells. The MODR operates offshore (upto 200 nautical miles off the coast of India). Allegedly, having regard to the harsh working environment and purported to be in line with global practices typical to such industry, the employees who may be residents of various countries including Australia, USA, UK, France etc. work on the MODR on a 'commuter basis'. They come to India, stay in the Rig for 28 days and go back to their own country being their place of residence for a further period of 28 days. The crew or the employees are transported from their home country to the MODR in two laps :first is from the nearest designated base city at the place of residence in the home country to a designated city in India for which the petitioner provides free air tickets of economy class and;second is from that city in India to the MODR through helicopter especially hired by the petitioner for this purpose. 4. Allegedly, on completion of 28 days, they go back from the Rig to the designated base city in their home country in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fringe benefits 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; xxx xxx xxx (F) conveyance; xxx xxx xxx (Q) tour and travel (including foreign travel).; (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". 7. Before the AAR, a circular issued by the Central Board of Direct Tax (CBDT) bearing No.8 of 2005, was relied upon by both the parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefits is contained in section 115WC. It is a settled principle of law that where the computation provisions fail, the charging section cannot be effectuated. Therefore, if there is no provision for computing the value of any particular fringe benefit, such fringe benefit, even if it may fall within clause (a) of sub-section (1) of section 115WB, is not liable to FBT. XXX XXX XXX 19. FBT is payable in the year in which the expenditure is incurred irrespective of whether the expenditure is capitalized or not. However, the same expenditure will not be liable to FBT again in the year in which it is amortized and charged to profit. Is FBT payable by an Indian Company having employees based both in and outside India on its total (global) expenditure incurred by it for the purposes referred to in clauses (A) to (P) of sub-section (2) of section 115B? 20. FBT is payable on the value of fringe benefits provided or deemed to have been provided to employees based in India and determined on a presumptive basis in accordance with the provisions of Section 115WC of the Income-tax Act. The value of such fringe benefits is d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace of work or such place of work to the place of residence would attract FBT?" 9. AAR by reason of its judgment and order dated 13.12.2006 holding that the company is liable to pay fringe benefit tax for providing transportation and movement of offshore employees for their residence and home countries outside India to the place of rig and back, opined that (1) The exemption provision contained in sub-section (3) of Section 115WB is restricted to sub-section (1) whereas the exemption falls under the deeming provision contained in sub-section (2); (2) Residence within the meaning of the said provision would mean residence in India and as the employees concerned are residents of the countries outside India, sub-section (3) of Section 115WB is not applicable. 10. Mr. S. Ganesh, learned counsel appearing on behalf of the appellant, would submit; (1) The AAR committed an error of law insofar as it failed to consider that sub-section (3) covers both the contingencies envisaged under sub-sections (1) and (2); (2) The distinction between sub-sections (1) and (2) is highly artificial inasmuch as the exemption is provided for in clauses (F) and (Q) of sub-section (2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med to have been provided by an employer to employees during the previous year is at the rate of 30 per cent on the value of such fringe benefits. The object for imposition of the said tax, as is evident from the said circular dated 29.8.2005, was to bring about an equity. The intention of the Parliament was to tax the employer who, on the one hand, deducts the expenditure for the benefit of the employees including entertainment, etc. and on the other when the employees getting the perks are to be taxed, those who get direct or indirect benefits from the expenditures incurred by the employer, no tax is leviable. As stated in the objective, it is for bringing about a horizontal equity and not a vertical equity. 13. Sub-section (1) of Section 115WB contains the interpretation section. It is in two parts. It provides for a direct meaning, as also an expanded meaning. Expanded meaning of the said provision is contained in sub-section (2). Whereas sub-section (1) takes within its sweep any consideration for employment, inter alia, by way of privilege service, facility or amenity directly or indirectly, sub-section (2) thereof expands the said definition stating as to when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyee for the purposes mentioned in sub-section (3) are to be found only in clauses (F) and (Q) of sub-section (2) and if that be so, the statute must be held to envisage grant of exemption in respect of matters which do not form the subject matter thereof. We have noticed the factual matrix of the instant case. The employees concerned are experts in their field. They are necessarily residents of other country. They are brought to the Rig by providing air tickets for their coming from their place of residence to the Rig. The employer incurs the said expenditure as of necessity. It, therefore, clearly falls within the purview of the words 'consideration for employment'. If fringe benefits are provided for consideration for employment, which is given or provided to the employee by way of an amenity, reimbursement or otherwise; clearly clause (a) of sub-section (1) shall be attracted. A statute, as is well known, must be read in its entirety. What would be the subject matter of tax is contained in sub-sections (1) and (2). Sub-section (3), therefore, provides for an exemption. There cannot be any doubt or dispute that the latter part of the contents of sub-section (3) m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sub-section (3) thereof, and the amenity in the nature of free or subsidized transport is covered by sub-section (1). 20. It brings us to the next question, namely, whether the employee concerned should be a resident of India. The statute does not say so. Fringe benefit tax being a tax on expenditure; the only concern of the revenue wherefor should be as to whether such expenditure has been made. Appellant has a permanent establishment in India. It pays income-tax in India. It carries on business in India. It has for the purpose of carrying out its business activities engaged persons from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon is put by the executive upon its coming into force, the same carries a great weight. 24. In this regard, we may refer to the decision of the House of Lords in the matter of R.V. National Asylum Support Service [(2002) 1 W.L.R.2956] and its interpretation of the decision in Pepper v. Hart [(1993) A.C. 593]. on the question of 'executive estoppel'. In the former decision, Lord Steyn stated:-"If exceptionally there is found in the Explanatory Notes a clear assurance by the executive to Parliament about the meaning of a clause, or the circumstances in which a power will or will not be used, that assurance may in principle be admitted against the executive in proceedings in which the executive places a contrary contention before a court." 25. A similar interpretation was rendered by Lord Hope of Craighead in Wilson v. First County Trust Ltd., [2004] 1 A.C. 816, wherein it was stated:- "As I understand it [Pepper v. Hart], it recognized a limited exception to the general rule that resort to 'Hansard' was inadmissible. Its purpose is to prevent the Executive seeking to place a meaning on words used in legislation which is different from that which ministers attributed to whos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... natural meaning. It would, therefore, be difficult to accept the contention of the learned Solicitor General that the employees must be based in India. 28. However, it appears that the contention that such expenditure should be paid on a regular basis or what would be the effect of the words 'employees journey' did not fall for consideration of AAR. What, therefore, is relevant would be the nature of expenses. The question as to whether the nature of a travelling expenditure incurred by the appellant would attract the benefits sought to be granted by the statute did not and could not fall for consideration of the AAR. Its opinion was sought for only on one issue. It necessarily had to confine itself to that one and no other. No material in this behalf was brought on record by the parties. Whether the payments were made to them on a regular basis or whether the expenditures incurred which strictly come within the purview of Section 115WB or not must, therefore, be answered having regard to the materials placed on records. If any question arises as to whether the agreement entered into by and between the appellant and the employees concerned would attract, in given cases, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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