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TMI Blog2012 (11) TMI 1307X X X X Extracts X X X X X X X X Extracts X X X X ..... Benefit is ₹ 1,39,74,63,401 (value of Fringe Benefit - ₹ 33,62,26,739) as against original expenditure liable for Fringe Benefit of ₹ 1,66,35,72,462 (value of Fringe Benefit - ₹ 38,98,14,061) as per original Return of Income filed on 30th October, 2006 by stating that the appellant did not file revised return within the stipulated time prescribed under section 115WD(4) of the Income Tax Act. 1961. The Leaned CIT. (A) ought to have accepted the aforesaid claim made by the Appellant during the course of assessment proceedings. 2. Taxability of value of expenditure on non-employees - ₹ 23,23,38.793/ The Learned C.I.T. (A) erred by not excluding the amount of ₹ 23,23,38,793/-which is the value of expenditure on non-employees while computing the value of fringe benefits by stating that the Appellant did not file revised return within the stipulated time prescribed under section 115WD(4) of the Income Tax Act, 1961. The Learned C.I.T.(A) ought to have accepted the contention of the appellant that in computing the value of chargeable Fringe benefits, expenditure should be restricted to expenses incurred on employees only and expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arise. Reimbursement of Medical Expenses of ₹ 1,19,76,943 /- not liable for Fringe Benefit The Learned CIT. (A) erred in not accepting the contention that Reimbursement of medical expenses of ₹ 1,19,76,943/- are not liable for Fringe Benefit Tax. The Learned C.I.T. (A) ought to have accepted the fact that these expenses are specifically exempted by Section 17(2) of the Income Tax Act and hence not liable to be considered as Fringe Benefits provided to employees Your Appellant reserves the right to add to, alter or amend any of the above grounds of appeal, if felt necessary. 2.ITA No. 3999/ Mum/2010 value of FB at ₹ 38,98,14,061/-. The case was selected for scrutiny and was finalised and the assessment as per Section 115 WE(3) of the Income Tax Act, 1961 (Act) was passed on 26-12-2008. During the course of assessment proceedings, AO found that the assessee had filed a revised value of FB amounting to ₹ 38,28,84,936/-. It was argued by the assessee that expenses which were not incurred on employees could not be construed to give benefits to employees, that the expenses incurred on non-employees should not be included for computing F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed revised return on 31-05-2009 declaring FB ₹ 24,78,51,831/-.During the course of assessment proceedings, appellant company filed a comparative chart in respect of the original and the revised FBT valuations. As per the AO, the assessee vide its letter dt. 16-12-2009 filed the details of the revised value of the FB excluding FB in respect of (i) expenditure incurred not connected to employees and (ii) medical exhibition of employees. It was submitted by the assessee that value of expenditure incurred on non-employees amounting to ₹ 1,33,51,309/- had to be reduced while computing the FB. AO held that as per the provisions of Sub-section 1 of the Section 115WB, the request made by the assessee could not be accepted. He also held that expenses incurred on proceedings other than the employees would be liable for FBT. He referred to question No.7 of the Circular No. 8/2005 issued by the Central Board of Direct Taxes (CBDT) on 29-08-2005.Finally, he held that there was no scope for the reduction of taxable value of FB declared in the return of income. Accordingly, taxable value of FB amounting to ₹ 26.12 Crores declared by the assessee in the original FB return was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m if revised return was not filed, that assessee did not file revised return though it had required information. 5. We heard the rival submissions and perused the material before us. First, we would like to decide the issue of applicability of FBT with regard to non-employees. AO as well as the assessee have admitted that expenditure amounting to ₹ 23.23 Crores was not incurred on employees of the assessee-company. Whether the said expenditure is covered by Sec.115 or not was a point of dispute during the initial period of FBT provisions. But, now it is settled law that expenditure incurred for non-employees is not liable for FBT. We find that coordinate Benches of Mumbai Tribunal in the cases of Kotak Mahindra Old Mutual Life Insurance Ltd. and Tata Asset Management Ltd. (supra) have decided the issue in favour of the assessee. Similarly, Bangalore Benches of Tribunal have also taken the same view. We would like to reproduce the relevant portion of the judgment delivered by the Bangalore Bench in the case of Toyata Kirloskar Motor Pvt. Ltd.(supra) : the Finance Minister s speech while introducing the provisions of FBT and the Memorandum explaining the provisions of F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... problems or for some reasons, it is not feasible to tax the benefits in the hands of the employee, it is proposed to levy a separate tax known as FBT on the employer on the value of such benefits provided or deemed to have been provided to the employees. Thus, the intention of creation of a deeming fiction under section 115WB(2) is to include an expenditure resulting in collective enjoyment of fringe benefits by the employees and it is difficult or not feasible to attribute such benefit personally to employees. The legislature itself has clarified that where the benefits are fully attributable to employees, the same continues to be taxable in the hands of the employees. On a plain reading of sub-section 1 and 2 of section 115WB, it would be evident that sub-section 1 covers those fringe benefits which can be fully attributed to employees and sub-section 2 covers those fringe benefits the personal attribution of which it is difficult to make. Thus, the deeming fiction u/s 115WB (2) is limited to those expenditures which result in collective enjoyment of benefits by the employees and where personal attribution of benefit poses difficulty. It is only under these circumstances tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there was calculation mistake in valuing FB should be decided on merits. As stated earlier, we restore the matter to the FAA to decide the issue as whether there was duplication of expenses that resulted in taxing the same amount twice? If the answer is yes then the matters deserves to be decided afresh. As pet the established principles of taxation-jurisprudence only due taxes , not taxes, have to be collected from the subjects by the Sovereign. If duplication of expenses has resulted in double taxation then assessee is entitled to relief specially when the provisions of FB were not so clear. FAA is requested to adjudicate the issue after affording a reasonable opportunity of hearing to the assessee. Ground No. 3 is partly decided in favour of the assessee. Appeal filed by the assessee for the AY 2006-07 stands partly allowed. 6. Ground No.1 for the AY 2007-08 is about taxability of value of expenditure on non-employees amounting to ₹ 13.74 lakhs.AR and the DR made the same submissions that were advanced when the appeal for AY 2006-07 was argued. While deciding the appeal for the earlier AY, we have already decided the issue in favour of the assessee. Following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxed in the hands of the employer. (Emphasis ours) 8. From the above, it is clear that where perquisites/benefits which are fully attributable to the employee and are taxed in their hands, would be continued to be taxed under the existing provisions of section 17(2) of the Act. Only in case where the benefits are usually enjoyed collectively by the employees and cannot be attributed to an individual employee, they shall be taxed in the hands of the employer. 9. In sub-section (3) of section 115WB it is made clear that section 115WB(1)(a), does not include, such perquisite in respect of which tax is paid or payable by the employees. 10. In the case on hand, tax is payable on medical advance and in certain cases tax has been paid. Only where bills have been produced by the employee to the employer it was a case of reimbursement and to the extent of the benefit given in 17(2) proviso (v) the employee need not pay tax. This is not a case where the attribution of personal benefits directly to an employee poses of problem or a case where it is not feasible to tax the benefit in question in the hands of the employee. It is only a case where a benefit above a certain spec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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