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TMI Blog2020 (1) TMI 1155X X X X Extracts X X X X X X X X Extracts X X X X ..... rcular No. 8/2005 of CBDT which indicated that the objective of taxing perquisite of fringe benefit is both on the ground of equity and economic efficiency. Thereafter, this Court held that the basis of fringe benefit tax is the benefit or perquisite which emanates out of an employer-employee relationship which is a pre-requisite for levy of fringe benefit tax Tribunal recorded as a finding of fact that in the course of its business, assessee distributes free samples to the doctors and others the expenditure for which the assessee claims is not covered within the meaning of sales promotion for the purpose of fringe benefit tax. Tribunal also noted that no case was made out by the Income Tax authorities that the expenditure incurred by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and in the circumstances of the case and in law, Tribunal was right in ignoring the fact that the Tribunal has explained considering the case of E-Skayef Ltd., 245 ITR 116, of the Supreme Court that free medical samples distributed to doctors is in the nature of sales promotion and similarly, any expenditure on free samples of other products distributed to trade or consumers would be liable to FBT? 4. Matter relates to income tax on fringe benefits which was introduced in the Act by way of the Finance Act, 2005 w.e.f. 1.4.2006. Chapter XXII-H of the Act provides for income tax on fringe benefits. Fringe benefit tax has been defined under Section 115W(b) as tax chargeable under Section 115WA. 5. Section 115WA is the charging sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was concluded by the Assessing Officer accepting the return of fringe benefit value as disclosed by the assessee. 9. Thereafter, the case was reopened under Section 115WG of the Act. The assessment was reopened on the ground that distribution of free samples was in the nature of fringe benefit and therefore, the expenditure incurred by the assessee on the same was includible for the purpose of fringe benefit tax. Though the assessee contended that the nature of expenditure was not covered within the meaning of sales promotion for the purpose of fringe benefit tax, the Assessing Officer did not accept such contention of the assessee. Accordingly, the Assessing Officer added a sum of ₹ 4,01,40,143.00 to the value of fringe benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyer to the employees in the course of such relationship. 14. In Tata Consultancy Services Ltd (supra), this Court referred to Circular No. 8/2005 of CBDT which indicated that the objective of taxing perquisite of fringe benefit is both on the ground of equity and economic efficiency. Thereafter, this Court held that the basis of fringe benefit tax is the benefit or perquisite which emanates out of an employer-employee relationship which is a pre-requisite for levy of fringe benefit tax. 15. Having noticed this Court s order in Tata Consultancy Services Ltd (supra), we may now advert to the order passed by the Tribunal dated 25.1.2017, relevant portion of which is extracted here-under:- 7. We have carefully considered the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that such amount was not includible for the purposes of FBT. The said stand of CIT(A) was upheld by the Tribunal, which has been affirmed by the Hon ble High Court. In the said case, it was noticed that expenditure by way of subscription had been incurred in terms of contractual agreement between Tata Consultancy Services Ltd. and Tata Sons and that there was no employer-employee relationship between the two. The Hon ble High Court observed that the basis of FBT is the benefit or perquisite which emanates out of employer-employee relationship. As a consequence, it is safe to deduce that in order to justify the levy of FBT, establishing of employer-employee relationship is a prerequisite. In the present case, no case has been made out b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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