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TMI Blog2021 (6) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT (A) has erred in directing the AO to value the fringe benefit in respect of free/concessional tickets to the employees at par with the provisions made in respect of Frequent flier Programme (FPP) and thereafter the amounts recovered from the employees if any should be reduced?". 2. For this and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the AO be restored." 3. We have heard rival submissions and perused the materials available on record. We find that assessee had filed its return of fringe benefits for the A.Y.2006-07 declaring total fringe benefits of Rs. 25,21,45,000/-. In this Fringe Benefit Tax (FBT) return, the value of fringe benefits on account of free/concessional tickets provided to its employees and their family members was considered at 'Nil' by the assessee. The ld. AO in the assessment framed u/s.115WE(3) of the Act for fringe benefit tax, determined the value of fringe benefits on account of free / concessional tickets given to employees and their family members at Rs. 86,42,22,000/-. The assessee agitated this assessment before the ld. CIT(A). We find that the ld. CIT(A) by placing reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3) of the Act, a special audit u/s. 142(2A) of the Act was carried out. The special auditors in their report have given a categorical finding that the company has issued 2,48,334 free/concessional tickets to its employees. The AO also observed that the auditors have taken the average value of each free/concessional tickets at Rs. 5510/-. Considering the fact that the company has issued 2,48,334 tickets the auditors computed the value of taxable fringe benefit at Rs. 136,83,20,340/-. However, the AO noticed that the assessee has taken the value of fringe benefit on account of this issue at Nil. The AO sought explanation from the assessee. The assessee strongly objected for the levy of FBT on free/concessional tickets on the ground that a ticket is issued to the employee is always subject to load i.e the employee would be allowed to board the aircraft only if there is any vacant seat available. The assessee also strongly objected to the number of tickets taken by the auditors at 2,48,334 whereas the actual No. of tickets issued were at 74,637. The assessee also objected to the method of valuation of fringe benefit. The assessee provided three methods as under: 1) Minimum F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns were only issued to the employees for vacation which may be considered as the fringe benefit to employees therefore the total number of coupons taken by the AO at 248334 is against the finding of the special auditors. 7.1 The Ld. Counsel for the assessee further pointed out that the value of fringe benefit have to be taken as per provisions of Sec. 115WC(1A) which provides that "cost at which the benefits referred to in clause (b) of sub- section (1) of Sec. 115 WB is provided by the employer to the general public as reduced by the amount, if any, paid by or recovered from its employees. It is the say of the Counsel that the tickets issued to the employees cannot be compared with the tickets issued to the general public for the following reasons: i) Tickets issued to the employees do not give any inherent right to board the flight because an employee would be allowed to board the flight only if there is availability of the load or the seat is vacant whereas ticket issued to the general public give them vested right to board the plane. ii) If the seat is not vacant or the load does not permit, the employee has to return back without taking the flight. The same cannot be sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e flights on Jet Airways or any of its partner airline. The programme gets rewarding depending on the membership status, i.e. Platinum, Gold, Silver, Blue Plus or Blue. Other benefits include upgrades to premiere, check-in at Club Premiere Desks, Tele Check-in and excess baggage allowance etc. JP Gold and Platinum Members also enjoy access to lounges of Jet Airways partner airlines, i.e. KLM, British Airways and North West Airlines. To track the miles earned by each member, a member is required to mention his JP membership numbers at the time of making a booking or at the time of checking in for a flight. Based on this information available in the system, the miles are then updated in each member's account. The cost of the unutilised mileage lying to the credit of the passengers is then provided for in the books of accounts each year. Every passenger who is admitted to the Frequent Flyer Programme is entitled to redeem the unutilised miles he has earned and the company is under an obligation to give the benefit of free travel based on the mileage he redeems out of his accumulated mileage. Based on the above criteria the total number of miles earned is ascertained and a provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the employer to the general public. To this extent, we agree with the submissions of the Counsel that the nearest available, logical and acceptable method is to value the benefit as per the cost assigned for provisions for FFP in the books of account. More so, because such provision has been accepted by the department in assessee's own case from assessment year 1999-2000 till assessment year 2005-06 and as this method is scientific and has attained finality in the due course of time since A.Y. 1999-2000 , keeping in mind that the members of the FFP scheme are from general public. We, therefore, in the interest of justice and fair play, restore this issue back to the files of the AO. The AO is directed to value the fringe benefit of free/concessional tickets as per the valuation of FFP as provided by the assessee in its books of account at Rs. 446.06 as the same has also been accepted by the department while making provisions for ' Frequent Flyer Programme ' for earning JP Mileage, and if there are costs for foreign travels the same should be eliminated from the same , thereafter , the AO is also directed to reduce the cost recovered from the employees ." 3.3. Similar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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