TMI Blog2015 (5) TMI 506X X X X Extracts X X X X X X X X Extracts X X X X ..... mbursements to its individual employees not exceeding ₹ 15,000/-. Section 17(2) 1st proviso (v) grants exemption to such benefits in the hands of individual employees from being taxed upto the very monetary limit. Section 115WB(3) also excludes operation of sub section 1 in case of such a benefit. We quote case law of Bosch Limited V/s. Dy.CIT, [2011 (10) TMI 383 - ITAT BANGALORE] Godrej Properties Ltd. Vs. ACIT (2012) [2010 (12) TMI 605 - ITAT, Mumbai] and hold that the lower authorities findings under challenge have to be reversed. The Revenue does not point out any distinction on facts. Therefore, the assessee’s arguments challenging inclusion of the impugned individual medical reimbursements in fringe benefits also succeed. - Decided in favour of assessee. - ITA No.179/Ahd/2011 - - - Dated:- 17-4-2015 - Shri G. D. Agarwal Amd Shri S.S. Godara JJ. For the Appellant : Shri Subhash Bains, CITD.R. For the Respondent : Shri Mukesh M. Patel, A.R. ORDER Per: S. S. Godara, JUDICIAL MEMBER This assessee s appeal for A.Y.2006 -07 is directed against the order of learned CIT(A)-VI, Ahdmedabad dated 14.12.2010 in case no.CIT(A)-VI/ACIT.Cir.1/351/08-09 in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to non employees and does not relate in any manner to the employees of an assessee is clearly beyond the scope and levy of FBT. Moreover, any perquisite already granted exemption under a specific provision of the I.T. Act could not also be made liable to the levy of FBT. 2.1 The assessee s company had filed its Fringe benefits return on 26.12.2006 declaring fringe benefits value of ₹ 4,13,28,904/-. The Assessing Officer took up scrutiny . He noticed the aforesaid six heads of expenditure. The assessee had not included the same in its array of fringe benefits. Per assessee, there existed no employeremployee relationship qua first five items. The last one, i.e. a sum of ₹ 3,36,74,477/- representing individual medical reimbursement was claimed to be exempted u/s.17(2) of the Act in the hands of concerned employees. It quoted the hon ble Finance Minister speech while tabling the Finance Bill, 2005 on 28.02.2005, memorandum to the Finance Bill, 2005 containing explanatory notes in support. The Assessing Officer in assessment year dated 26.12.2008 took into consideration the Board Circular No.8/05 dated 29.08.2005; more particularly questions no.58 to 63 and 69 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of expenses not incurred for the purpose of employees benefit, therefore, I do not find any legal support for the appellant s contention. In view of this, the addition to the value of Fringe benefits made by the Assessing Officer is confirmed. Therefore, the assessee in appeal. 3. We have heard both sides and perused the case file. The assessee submits that qua items A to E, there does not exist any employer-employee relationship between itself and its payees so as to attract the fringe benefit provisions. The Revenue strongly supports the CIT(A) s order. It contends that a case is pending before the hon ble jurisdictional High Court filed by the Gujarat Chambers of Commerce. The assessee states that the hon ble High Court had imposed certain conditions for depositing amount in question in an escrow account and the same has already been complied with. The necessary compliance is evident from page 2 of the paper book in clause 5. The Revenue fails to counter the same. Therefore, its technical objection fails. 3.1 Now, we come to the assessee s legal argument on nonapplicability of Fringe benefits Tax provision on sales promotion expenses in absence of employer an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyer, shall not be considered as expenditure on sales promotion including publicity; 7. From the above, it is evident that section 115WB(2) is a deeming provision which provides that the fringe benefits shall be deemed to have been provided by the employer to his employee if the employer has incurred the expenses provided in various clauses of the above sub-section. Clause (D) of the above subsection covers sales promotion including publicity. The proviso to the above clause excludes various types of expenditure on advertisement from the purview of clause (D). The assessee has argued that neither there is an employer employee relationship nor the expenditure is in the nature of sales promotion and publicity. In contrast, the learned Commissioner of Incometax- Departmental representative has stated that if the expenditure as provided in any of the clauses of section 115WB(2) is incurred by the assessee, the fringe benefits tax would be chargeable, whether or not there is an employer- employee relationship. In this regard, we find that the Central Board of Direct Taxes has issued Circular No. 8, dated August 29, 2005 which is published in [2005] 277 ITR (St.) 20. In paragraph 2 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the tax base and maintaining equity between employers. 8. At page 25 paragraph 11, frequently asked questions are given. Question No. 2 thereof and reply is as under : 2. Whether employer-employee relationship is a prerequisite for the levy of fringe benefits tax ? Answer: Yes. 9. Thus, in the Circular issued by the Central Board of Direct Taxes explaining the newly introduced provisions of fringe benefits tax, the Central Board of Direct Taxes itself has clarified that employer-employee relationship is a prerequisite for levy of fringe benefits tax. The hon ble apex court has considered the above Circular in the case of R B Falcon (A) (P.) Ltd. (supra) and held as under (headnote): The interpretation of the Central Board of Direct Taxes in its circulars being in the realm of executive construction, should primarily be held to be binding, save and except where it violates any provisions of law or is contrary to any judgment rendered by the courts. The reason for giving effect to such executive construction is not only the same as contemporaneous which would come within the purview of the maxim temporania caste pesto, even in a certain situation a representat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out any distinction on facts. We also notice that another co-ordinate bench in case of M/s. Adani Retail Ltd. vs. DCIT in ITA No.3269/Ahd/2009 decided on 25.10.2013 holds that fringe benefit provisions do not apply to sales promotions expenses as the same do not bestow any benefit to the assessee s employees. Therefore, the assessee s grounds relating to payment A-C succeed. 5. Now we come to the assessee s expenses on gifts to business associates of ₹ 8,66,884 and club member fees of ₹ 36,225/-. On our asking the assessee fails to prove that its employees have not at all enjoyed either of the two facilities. Thus, we assume that some of its employees must have availed these benefits. Thus, we accept the assessee s arguments only in part and delete the impugned additions to the extent of 50% of the sums involve. The assessee partly succeeds in relation to D-E heads of expenditure. 6. This leaves us with the last issue of reimbursement of medical expenses upto ₹ 15,000/- to the assessee s individual employees involving alleged fringe benefits of ₹ 67,34,895/-. The assessee has incurred these amounts for payment of medical reimbursements to its individua ..... X X X X Extracts X X X X X X X X Extracts X X X X
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