TaxTMI 
TaxTMI 
2014 (11) TMI 290
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....acturing and trading of pharmaceutical products. Assessee electronically filed return of Fringe Benefit tax (FBT) for AY 06-07 on 19.12.2006 declaring Total FBT liable for tax at Rs. 1,29,94,355/-, The case was selected for scrutiny and thereafter assessment was framed u/s 115WE(3) vide order dated 14.5.2003 and the total fringe benefit value was assessed at Rs. 3,37,03,809/-. Aggrieved by the order of AO, Assessee carried the matter before Ld. CIT(A). Ld. ClT(A) vide order dated 28.10.2010 granted partial relief to the Assessee. Aggrieved by the order of Ld. ClT(A), Assessee is now in appeal before us and has raised the following grounds: "1. The order passed by the learned CIT (A) is bad in law and on facts. 2. Addition of various expenses not incurred for collective benefit of employees to value of fringe benefits u/s 115 WB (2): 2.1 On the facts and the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) (hereinafter referred to as learned CIT(A)) grossly erred in upholding contention of the Assessing Officer by not excluding the expenditure incurred wholly for business purposes, which did not result in any benefit, collective or otherwise,....
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.... 7.1 On the facts and circumstances of the case and in law, the Ld. CIT(A) grossly erred in considering telephone expenses of Rs. 217.30 lakhs as liable to FBT. 8. Addition of guesthouse expenses to value of fringe benefits u/s. 115 WB (2) Rs. 83,251/-: 8.1 On the facts and circumstances of the case and in law, the Ld. CIT(A) grossly erred in considering guest house expenses of Rs. 4.16 lakhs as liable to FBT. 9. Addition of gift expenses to value of fringe benefits u/s 115 WB (2) Rs. 9,69,044/- 9.1 On the facts and circumstances of the case and in law, the Ld. CIT(A) grossly erred in considering expenses on gift of Rs. 19.38 lakhs as liable to FBT." 5. Before us, Id AR submitted that though various grounds have been raised but all the grounds are interconnected and therefore all can be considered together. He further submitted that if ground no 2 of Assessee is decided in Assessee's favour then all other grounds become redundant. 6. During the course of assessment proceedings, AO on perusing the tax audit report noticed that total amount of expenses relatable to fringe benefit tax (FBT) debited in the books of accounts was Rs. 29,21,10,346/- of which Assessee had considered ....
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.... indirectly by the employees. I am not in agreement with the appellant that if the expenditure is wholly and exclusively incurred for business purposes and if no direct or indirect benefits accrue to the employees then it would be outside the purview of FBT. In fact provision of FBT is a liability qua employer and is in relation to expenditure laid out or expended wholly and exclusively for the purposes of the business or profession of the employer. In terms of Ques. No.35 & 36 the expenditure of personal nature and bogus expenditure are to be deducted from the various categories of expenditure for calculating the FBT. Secondly, because of the deeming fiction in section 115WB(2) if the expenditure is incurred for the stipulated purposes there is a presumption that the specified proportions out of these expenses are fringe benefits deemed to have been provided by the employer and the presumption and the proportions specified are not rebuttable. If the argument of Id, AR is accepted, the deeming provision would become otiose. It is further clear from clauses (A) to (Q) of sub Section 2 to Section 115WB. More specifically clause (B) provides that if any expenditure is incurred on hosp....
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....n the instant case all the additions effected by the AO relate to provisions of sec.115WB(2). It is seen that based on the information provided by the appellant the tax auditor has mentioned that expenditure of Rs. 29,21,10,346/- is relateble to fringe benefit tax (elaborated in table-A at page 3 of the assessment order). Thereafter by way of a note in Table-B it is mentioned that expenses of Rs. 128720019/- has no nexus or collective benefit to employees and are thus excluded in the return. The AO had called for the details of various expenses and after examination proposed certain additions. In my opinion the very assumption of nexus of collective benefit to employees in respect of certain expenses as per deeming provisions is ill founded as described in preceding paras. 7.7 Coming to specifics, the telephone expenses of Rs. 217,30 lakhs, guest house expenses of Rs. 4.16 lakhs, gift of Rs. 19.38 lakhs and sample expenses of Rs. 222.19 lakhs have been correctly considered as benefits deemed to have been provided by the AO in view of Q.No. 64, 90, 92, 97 & 98. I am not in agreement with the appellant that the amendment by Finance Act 2007 in regard to sample expenses was clarifica....
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....rification." 7. Aggrieved by the order of CIT(A), Assessee is now in appeal before us. Before us, Ld AR reiterated the submissions made before AO and Ld. CIT(A). He further submitted that before AO, it was submitted that all the expenses have been incurred for the purpose of business and were having no collective benefit to the employees. He further submitted that the contention of the Assessee was not accepted by the AO for the reason that as per the deeming provisions of s. 115WB(2), Assessee was liable to pay FBT on all the items of expenditure listed in the order. He further submitted that various tribunals like Pune Tribunal in the case of Intervalve (India) Ltd Vs Addl CIT (2012) 149 TTJ (Pune) 365, Banglore Tribunal in the case of Toyota Kirloskar Motor (P) Ltd vs Addl CIT (2012) 54 SOT 70 (Bang) (URO), DCITvs Kotak Mahindra Old Mutual Life Insurance Ltd (2012) 149 TTJ (Mum) 332 have held that the deeming fiction u/s 115WB(2) is not attracted if the expenditure does not result in any benefit to the employees. He also placed on record the copies of the aforesaid decisions. He therefore submitted that in view of the various decisions cited by him, the addition made by the AO ....