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2014 (7) TMI 1118 - HC - Income TaxApplicability of rule 8 of the Income-tax Rules, 1962 in arriving at a valuation of the fringe benefits under Chapter XII-H - ITAT rejected the contention of the assessee on applicability of rule 8 - Held that:- Taking assistance of the illustration given in Commr. of Income Tax, Dibrugarh Versus Doom Dooma India Ltd. & Assam Co. Ltd. [2009 (2) TMI 9 - SUPREME COURT] to resolve the issue the other expenses in illustration A amounting to ₹ 300 include ₹ 100 spent by the employer on account of fringe benefits made available to its employees. In that case, 40 per cent. of the aforesaid sum of ₹ 100 would also be includible in illustration B. Therefore, the question posed before us has really been answered by the illustration given by the apex court in the aforesaid judgment. It cannot be disputed that the amount of expenditure incurred by the assessee in extending fringe benefits to its employees was not solely for the purpose of business. The expenditure incurred is both for the purpose of business and for the purpose of agriculture. The submission made by Mrs. Gutgutia that the expenditure on account of fringe benefits has already been taken into account is not correct. The net profit and loss of the business has to be arrived at after deducting all the expenses as indicated in illustration A in the case of Doom Dooma (supra). Once that is done 40 per cent. of the net profit and loss has to be worked out which shall be chargeable to tax. Once this is done the expenditure on account of fringe benefits would automatically stand reduced to 40 per cent. as would appear from illustration B in the case of Doom Dooma (supra). The Revenue is interested in contending as would appear from the impugned orders that the expenditure on account of fringe benefit cannot be reduced to 40 per cent. for the purpose of computing fringe benefit tax. If that is done, the result would be that the agricultural income itself would become liable to tax, which is not permissible under sub-section (1) of section 10 of the Income-tax Act. The provisions contained in Chapter XII-H of the Income-tax Act have to be read subject to section 10 of the Income-tax Act. For the aforesaid reasons, we are of the opinion that the judgment of the learned Tribunal cannot be sustained. - Decided in favour of assessee.
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