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TMI Blog2011 (12) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... efit) is limited to the 'actual' contribution by the assessee during the year, with the balance Rs. 2558.01 lakhs having been actually paid or contributed during the following financial year, supporting the same with a copy of the Saving Bank Account of the Fund wherein the said amount stood credited on 03.4.2006. In the view of the Revenue, the fringe benefit tax (FBT) was payable for the year in which the expenditure is incurred, even as clarified by the CBDT vide its Circular No. 8/2005 dated 29.8.2005 (copy on record). The relevant expenditure having been incurred in full during the financial year (F.Y.) 2005-06, the entire contribution of Rs. 3286.09 lakhs is liable for assessment to FBT for A.Y. 2006-07 and, accordingly, the contribution payable as at the year-end (31.3.2006), i.e., Rs. 2558.01 lakhs, was brought to tax by the Assessing Officer (A.O.). The ld. CIT(A), after noting the assessee's arguments, who relied on the provisions of ss. 115WA(1), 115WB(1) and 115WC(1), confirmed the said addition, relying on paras 7, 8 and 11 of the said Circular, reproducing the answers to Question Nos. 18 & 19 as contained in para 11 of the Circular in his order. In his view, the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the superannuation fund of the employees. The questions referred to by the ld. CIT(A) in his order are in respect of 'deemed fringe benefit', and which, as clarified by the Act itself (s. 115WB(2)), would be the incurring of an expenditure on or making of payment for the defined purposes. As such, the inference drawn by him is not in consonance with the clear provisions as well as the scheme of the Act. On being questioned by the Bench as to whether the assessee had incurred any contractual liability as an employer in respect of contribution to the employee's superannuation fund, he replied in the negative, stating that all that the assessee had done was to provide for the liability in his accounts on the basis of an actuarial valuation. On a further question, as to if the cheque for the contribution had been issued by the assessee-employer on or before 31.3.2006, he clarified that the same was only on 03.4.2006, i.e., the date on which the funds stood transferred to the bank account of the Fund. 3.2 The ld. DR, on the other hand, was equally vehement in arguing the Revenue's case. The liability stands duly incurred, and neither is there any difference in valuation, as is borne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or employees); (b) any free or concessional ticket provided by the employer for private journeys of his employees or their family members; (c) any contribution by the employer to an approved suprannuation fund for employees; and (d) ......... (2) The fringe benefits shall be deemed to have been provided by the employer to his employees, if the employer has, in the course of his business or profession (including any activity....) incurred any expense on, or made any payment for, the following purposes, namely:- (A) entertainment; (B) provision of hospitability of every kind by the employer to any person, whether by way of provision of food or beverages or in any other manner .. Value of fringe benefits. 115 WC(1) For the purposes of this Chapter, the value of fringe benefits shall be the aggregate of the following, namely:- (a) ........................ (b) actual amount of the contribution referred to in clause (c) of sub-section (1) of section 115WB;" (ba) .........." 4.3 Under both the clauses, i.e., sub-sections (1) & (2) of sec. 115WB, the recipient or the payee, i.e., a person who receives the payment, or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner impacting either the allowability as deduction of the corresponding expenditure (in the computation of the assessee-employer's income under the Act), or its inclusion as a fringe benefit provided by the employer. A provision in accounts only exhibits the factum of accrual of the liability. In our view, there is only one, and not two bases for attracting the charge to tax on account of fringe benefit u/s. 115WA, i.e., one as specified u/s. 115WB(1), and the other for those deemed to be provided u/s. 115WB(2), and that is the provision of a fringe benefit as provided or deemed to have been provided, as being contended by the assessee. And the date of the actual discharge of the corresponding liability (toward payment or expenditure) by the employer is an altogether different matter. The deeming u/s. 115WB(2) is only toward the statutory presumption qua certain payments as constituting a fringe benefit, i.e., by law. In view of the statutory presumption, it is not open to contend that the payment (to a third party) does not involve an extension or provision of benefit to the employees or of it as not being so as not flowing from the terms of the employment. As such, once the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per these sections, which also concern contribution to funds set up for the benefit of the employees, employed the words 'sum received', 'annual accretion', 'sum paid', 'sum payable', to denote the sums under reference, as also as to whether it would cover only actual payments and/or those payable as well. In other words, the legislative intent, as expressed by the clear language of the Act, does not warrant restricting the provision of fringe benefit only to cases where the contribution has been actually paid or realized, i.e., in exclusion to cases where the contribution has actually inured. The ld. AR, in our opinion, is incorrect in stating that no contractual liability qua contribution to the superannuation fund (of the employees) stands undertaken or assumed by the assessee as at the end of the relevant year. The same is in fact contradicted by the provision for the same in its accounts, and which is only on the basis of assumption of liability in its respect. On what basis, one may ask, if not so, is it providing for the said liability in its accounts, claiming the same in its return and, further, making payment there-against. The assessee is by virtue of the contract of em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the actuarial valuation. Further, there is no difference between the amount of actual contribution and that provided for in the books of accounts. In fact, whatever may be the basis of arriving at the amount of contracted liability (i.e., actuarial or otherwise), no difference would obtain where the employer pays the amount he is supposed to pay, i.e., for which obligation has been assumed and liability incurred, providing the same in its books. The words 'actual amount of the contribution referred to.....' in section 115WC(1)(b), refer to the actual amount of contribution referred to in sec. 115WB(1)(c), i.e., which the assessee is obliged to pay. The inference sought to be drawn from the provisions of s. 115WC is, thus, to our mind, misconstrued. As apparent, the same concerns only the valuation aspect, prescribing the adoption of the actual amount of contribution toward consideration, so that no case of any difference or variation may arise. Again, it would noted that the word 'actual' in the provision qualifies the word 'amount' and not 'contribution', and which only accords with the purpose of the provision, i.e., providing a basis for valuation. In fact where provided for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 115WD, which casts an obligation to return the fringe benefit either paid or provided for by the assessee-employer, also supports this view inasmuch as it cannot oblige the assessee to return a 'fringe benefit' which does not qualify as one, or for which there is no liability to FBT. The same, though definitely not a charging provision, is yet required to be read harmoniously. 4.7 Finally, we may consider one more aspect of the matter. That is, whether the provision of fringe benefit in respect of a contribution to the employee's superannuation fund u/s. 115WB(1)(c), would necessarily require that the same had become due for payment during the relevant year or would it be sufficient if the liability in its respect had accrued as at the year-end. To make things clearer, assuming (say) that the contribution falls due for payment on the first day of April, so that the liability though accrued had not fallen due for payment as on the last day of March. Could, in such a case, it be said that even though the right to pay and, correspondingly, to receive, having not crystallized as at the end of the relevant year, there is no provision of fringe benefit by way of contribution the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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