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TMI Blog2006 (12) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... on MODR for 28 days (called on days) which is then alternated by a 28 days field break (called off days) when he stays at the place of his residence. The members of the crew are residents of various countries like Australia, USA, U.K. etc. They are transported from their home country to the MODR in two laps - the 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 applicant provides free air tickets of economy class and the second is from that city in India to MODR through helicopter especially hired by the applicant for this purpose. On completion of 28 days they are transported back from MODR to the designated base city in their home country in the same manner. They are not paid any conveyance/transportation allowance. The Fringe Benefit Tax (for short 'FBT') was introduced by the Finance Act, 2005. To clarify the provisions relating to FBT, the CBDT issued circular No. 8 of 2005 on August 29, 2005. The applicant claims that the answer to question No. 104 in the said circular shows that it is not liable to FBT and that subsequently Section 115WB(3) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicant, submits that three categories of employees are working under the applicant (i) employees based on land who attend to the administration, etc. (ii) Indian employees working on the rig and (iii) foreign nationals (employees) who are transported to the rig from outside India; and this application relates to the third category of employees. Having regard to the nature of duties to be performed by the offshore employees on the rig, namely, staying during on days (for 28 days) on the rig and staying off days (for 28 days) at the place of their residence, they are being transported by the applicant from their home country to a designated airport in India by airplane and from there to the rig by helicopter; such transportation of offshore employees does not fall within the charge of FBT under section 115WA of the Act. According to him the position is made clear by the CBDT circular No. 8 of 2005 which clearly excludes such transportation of employees from the ambit of the charge of FBT; further, the same position is also made clear by section 115WB(3). The plea of the Commissioner, contends the learned counsel, that as the residence of the offshore employee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h fringe benefits. (2) Notwithstanding that no income-tax is payable by an employer on his total income computed in accordance with the provisions of this Act, the tax on fringe benefits shall be payable by such employer. Section 115WB defines 'fringe benefits' which is in the following term: Fringe benefits. 115WB.(1) For the purposes of this Chapter, "fringe benefits" means any consideration for employment provided by way of any privilege, service, facility or amenity, directly or indirectly, provided by an employer, whether by way of reimbursement or otherwise, to his employees (including former employee or employees); any free or concessional ticket provided by the employer for private journeys of his employees or their family members; and any contribution by the employer to an approved superannuation fund for employees. (2) The 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 foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred any expenditure on or made any payment for any of the purposes enumerated in clauses (A) to (Q) of sub-section (2) of 115WB the fringe benefits shall be deemed to have been provided by the employer to his employees. We are concerned here with clause (F) "conveyance" and clause (Q) "tour and travel (including foreign travel)" of sub-section (2) which, among others, are specified as deemed fringe benefits. The said clauses read as follows: (A) to (E) : xx xx xxx xx (F) : Conveyance (G) to (P) xxx xx xx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , service, facility or amenity, provided directly or indirectly, by an employer to his employees by way of reimbursement or otherwise does not take in its ambit 'conveyance' and 'tour and travel (including foreign travel)' otherwise the said expressions* could not have been the elements of the deeming provision in sub-section(2). In so far as FBT on the fringe benefits of free and concessional tickets by the employer to his employees or their family members is concerned, it is confined to private journeys only. In the instant case providing free air tickets for the round trip, the first sector (from the home State of employees to the designated city in India and the return journey) cannot be termed as private journeys. They are undertaken for the purpose of the employment. It would be pertinent to refer to sub-section (3) of section 115WB which excludes for the purpose of sub-section (1) 'perquisites' (on which tax is paid or is payable by the employees) and any benefit or amenity in the nature of free or subsidized transport or any such allowance provided by the employer to his employees for journeys by the employees from their residence to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 115WB of the Act and the answer thereto read as follows:- "104. Whether expenditure incurred by the employer for the purposes of providing free or subsidized transport for journeys to employees from their residence to the place of work or such place of work to the place of residence would attract FBT? Ans. The free or subsidized transport provided to employees for journeys from their residence to the place of work or such place of work to the place of residence is in lieu of conveyance/transportation allowance, which is not liable to FBT. Accordingly, the expenditure incurred by the employer for the purposes of providing free or subsidized transport for journeys to employees from their residence to the place of work or such place of work to the place of residence will not be liable to FBT". From a cursory reading of the above question and the answer, it appears that the free or subsidized transport provided to employees for journeys from their residence to the place of the work or such place of work to the place of residence if in lieu of conveyance/transportation allowance, is not liable to FBT and therefore the expenditure incurred by the employer thereof wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means of transport ……. Transport$ . Carry (people or goods) from one place to another by means of vehicle, aircraft or ship…….. 7. In the Model Convention on Income and Capital issued by OECD term 'residence' is explained in the context of the tie-breaker rule. It is stated "the residence is that place where the individuals own or possess a home; this home must be permanent, that is to say, the individual must have arranged and retained it for his permanent use as opposed to staying at a particular place under such conditions that it is evident that the stay is intended to be of short duration". It is stated that the concept of residence implies arranging a dwelling place available to him at all times continuously and not occasionally for the purpose of stay which, owing to the reasons for, it is necessarily for short duration like for pleasure, business travel, education travel, attending course etc. Mr. Bhutani also invited attention to the observation of the Hon'ble Supreme Court in Smt. Jeewanti Pandey vs. Kishan Chandra Pandey2, There the Hon'ble Court in considering the concept of residence for the purpose of section 19(ii) of the Hindu Marriage Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el' (including foreign travel)' in clause (Q) of sub-section (2) of 115WB will have to be understood in contra distinction to clause (b) of sub-section (1) of section 115WB. Whereas clause (b) of sub-section (1) brings free or concessional tickets provided by the employer for private journeys of his employees or their family members within the meaning of fringe benefits, clauses (F) and (Q) of sub-section (2) cover 'conveyance' and 'tour and travel' (including foreign travel), other than on private journeys, within the meaning of fringe benefits deemed to have been provided by the employer to his employees. We have noted above that for the first lap of the journey of the offshore employees from their home countries to the designated city in India, the applicant is providing free (round-trip) tickets; it would, therefore, fall under clause (Q) of sub-section (2). For the journeys from the chopper base in India to the rig for which the applicant is providing helicopters, it would amount to the employer providing conveyance. Inasmuch as the transportation of the employees from their residence in their home countries to the rig falls within the above mentioned c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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