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TMI Blog2014 (7) TMI 1118X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the orders of the authorities below. We have also considered the relevant provisions, i.e., sections 115WA, 115WB and 115WE of the Income-tax Act. We observe that an employer assessee is liable to pay fringe benefit tax under section 115WA of the Income-tax Act in relation to fringe benefits provided by him to its employees, sub-section (2) of section 115WA starts with a non obstante clause and states that notwithstanding that no Income-tax is payable by an employer to its total income computed in accordance with the provisions of the Act, the tax on fringe benefits shall be payable by such an employer. Therefore, an employer is liable to pay fringe benefit tax even when no Income-tax is payable by an employer on his total income computed in accordance with the pro visions of the Income-tax Act. Therefore, the contention of the learned authorised representative for the assessee that the value of fringe benefit should be computed by applying rule 8 of the Income- tax Rules has no merit as fringe benefit tax is not payable on the income of the assessee but only fringe benefits provided by an employer to its employees. In view of the above, we agree with the learned Departmental re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "In our view, in cases where rule 8 applies, the income which is brought to tax as 'business income' is only 40 per cent. of the composite income and, consequently, proportionate depreciation is required to be taken into account because that is the depreciation 'actually allowed'. Hence, we find no merit in the civil appeals filed by the Department." The next judgment cited by Mr. Majumdar in the case of Jayshree Tea and Industries Ltd. v. Union of India reported in [2006] 285 ITR 506 (Cal) wherein a Division Bench of this court held that rule 8 was applicable to the additional Income-tax payable under section 115-O. The Division Bench clarified its opinion by the following illustration (page 513) : "If a tea company has a net income of Rs. 100, Rs. 40 would be liable to Income-tax at the prescribed rate and the assessee would be assessed accordingly. By virtue of section 115-O if the company declares Rs. 50 for distribution amongst the shareholders it would have a proportionate liability. It is true that in case of company decides to distribute a part of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the provisions of section 24 of the Act of 1922, when the pro visions of section 12B were not applicable during the course of the assessment year 1955-56. The Supreme Court held that from the charging provisions of the Act it is discernible that the words 'income' or 'profits and gain' should be understood as including losses also, so that, in one sense 'profits and gains' represent 'plus income' whereas losses represent 'minus income'. The Supreme Court observed as follows (page 124 of 99 ITR) : 'From the charging provisions of the Act, it is discernible that the words "income" or "profits and gains" should be understood as including losses also, so that, in one sense "profits and gains" rep resent "plus income" whereas losses represent "minus income". In other words, loss is negative profit. Both positive and negative profits are of a revenue character. Both must enter into computation, wherever it becomes material, in the same mode of the taxable income of the assessee. Although section 6 classifies income under six heads, the main charging provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court. The assessee was lawfully entitled to adjust the loss which arose as a result of the business activity under rule 8." Mr. Majumdar concluded by saying that the judgment and order under challenge should be reversed and the question formulated above should be answered in favour of the assessee. Ms. Gutgutia, learned advocate appearing for the Revenue, submitted that- (a) Chapter XII-H is a complete code in itself in the matter of taxation on fringe benefits. She drew our attention to sub-section (2) of section 115WA and contended that the sub-section starting with a non obstante clause makes it clear that the provisions contained in the aforesaid Chapter are applicable to fringe benefits made available to the employees by an employer. She contended that no concession has been made in the statute for applicability of rule 8. It is, therefore, not possible to hold that rule 8 would be applicable in assessing the fringe benefit tax. (b) She submitted that the expenditure incurred by the assessee in providing fringe benefits to the employees has already been taken into account for the purpose of arriving at the total taxable income. There is as such no reason why t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortant to be noted is that at the end of computation under both the illustrations, the income taxable by applying rule 8 comes to Rs. 240 in both the cases. The only difference is that in illustration B we have gone by pro rata basis." The question for consideration before their Lordships was whether deduction on account of depreciation is allowable from the business income arrived at after applying rule 8. This question was answered by their Lordships in the affirmative. From illustration A, it would appear that business profit after taking into account the expenses was computed at Rs. 600. Applying rule 8 taxable income on account of business was computed at Rs. 240, that is to say, 40 per cent. of Rs. 600. From illustration B, it would appear that 40 per cent. of the total income from sale of tea was taken into account. From illustration A it would appear that total depreciation is Rs. 100. For the purpose of computing business profit and loss of 40 per cent. of the total depreciation was taken into account. From illustration A it would appear that other expenses were computed at Rs. 300 and illustration B would show that other expenses were computed at Rs. 120, in other words, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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