2013 (10) TMI 1373 - AT - Income Tax

Levy of Fringe Benefit Tax - Held that - We find that the Assessing Officer has estimated Fringe Benefit amount at 20% of the expenditure He has not brought any material on record to show that the above expenditure gave any benefit to the employees of the assessee company. In absence of any such nexus being proved by the Assessing Officer in our considered opinion levy of Fringe Benefit Tax on the expenditure is not warranted.

Summary

Issues:
Appeal against the order of CIT(A)-VI, Ahmedabad confirming the levy of Fringe Benefit Tax on various expenditures.

Analysis:
1. The only issue in this appeal was the confirmation of the order levying Fringe Benefit Tax on expenses like sales promotion, conveyance, tours, repairs, and telephone by the assessing officer.

2. The assessee declared a value of Fringe Benefit in the return, but the assessing officer added an additional amount as per the provisions of the Act, resulting in a total of Rs. 1,11,61,364 added to the expenses.

3. The assessee argued that expenses not directly benefiting employees should not be subject to Fringe Benefit Tax, but the CIT(A) upheld the levy, stating that the provisions were clear and did not require a direct benefit to employees for taxation.

4. The Tribunal considered decisions from other cases where it was held that expenses not benefiting employees directly were not liable for Fringe Benefit Tax, and after examining the details of the expenses, concluded that the assessing officer had not proven any benefit to the employees from the expenditures.

5. Relying on the precedents and lack of evidence showing employee benefit, the Tribunal deleted the levy of Fringe Benefit Tax amounting to Rs. 1,11,61,364, allowing the appeal of the assessee.

6. The Tribunal's decision was based on the lack of evidence establishing a nexus between the expenses and employee benefits, aligning with previous judgments that expenses not directly benefiting employees should not be subjected to Fringe Benefit Tax.

7. The Tribunal's ruling emphasized the importance of proving a direct benefit to employees for expenses to be considered for Fringe Benefit Tax, highlighting the need for a clear link between the expenditure and employee advantage to warrant taxation.