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2015 (5) TMI 518 - BOMBAY HIGH COURT

2015 (5) TMI 518 - BOMBAY HIGH COURT - [2015] 374 ITR 112 (Bom) - Imposition of fringe benefit tax - Tata Brand equity contribution - Tribunal deleted tax imposed - Held that:- Budget Speech of the Minister of Finance while presenting the Budget for the year 2005-2006, the explanatory notes and the circulars have been rightly understood by the Tribunal to mean that the basis of tax is the benefits or perquisites which emanate out of an employer-employee relationship. That is a prerequisite and f .....

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erverse. Mr. Andhyarujina is, therefore, right in relying on the materials which have been handed in to us and which find place equally in the Tribunal's order. Those have been referred to and in the relevant factual backdrop so also on perusal of the agreement in its entirety, that the Tribunal concluded that there is no merit in the Revenue's appeal. - Decided in favour of assessee. - Income Tax Appeal No. 1132 of 2013 - Dated:- 24-3-2015 - S C Dharmadhikari & A K Menon,JJ. For the Petitio .....

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at the question of law which the Revenue has formulated at page 5 of the paper-book is a substantial question of law. He would submit that the Tribunal has failed to notice that the payment made by the assessee of ₹ 27,57,12,999/- as Tata Brand equity contribution can be considered as a fringe benefit. The assessee-company had itself considered this contribution as sales promotion expenses. If the company to which the payment was made organizes the promotional activities and assists the gr .....

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ions. In any event, the employer-employee relationship can be culled out if the facts and circumstances placed before the Tribunal had been noted in proper perspective. Therefore, he submits that the appeal be entertained and admitted. 4. On the other hand, Mr. Andhyarujina, the learned senior counsel appearing on behalf of the assessee submits that the Tata Brand Equity And Business Promotion Agreement dated 19th April, 2004, has been perused by the Tribunal. A reading thereof would indicate as .....

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s the understanding of the Tribunal based on a reading of the provisions. In such circumstances, that cannot be termed as erroneous or vitiated by any error of law apparent on the face of the record enabling this Court to entertain the appeal. Therefore, it should be dismissed. 5. What the Revenue highlights before us is a fact that the assessee-company is engaged in the business of rendering technical consultancy services marketing of software and hardware products and also export of software. .....

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the value of fringe benefit tax as the claim of the assessee could not be entertained without filing of the revised return. His order dated 8th December, 2009, came to be challenged by the assessee-company before the Commissioner of Income Tax (Appeals). The CIT (Appeals) allowed this appeal on 24th February, 2011. The Tribunal found, upon a reading of the order of the Commissioner, that the fringe benefit tax was brought in for the purposes of taxing certain benefits which are derived and duri .....

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income tax referred to as the fringe benefit tax in respect of fringe benefits provided or deemed to have been provided by the employer to his employee during the previous year at the rate of thirty per cent on the value of such fringe benefits has to be charged. By sub-section (2) of section 115WE it is clarified that notwithstanding no income tax is payable by an employer on his total income computed in accordance with the provisions of this Act, the tax on fringe benefits shall be payable by .....

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he employer to his employees, if the employer has, in the course of his business or profession (including any activity whether or not such activity is carried on with the object of deriving income profits or gains) incurred any expenses on or made any payment for the purposes and which have been set out in clauses (A) to (Q) of sub-section (2) of section 115WB. Thus, for the purpose of further clarity, by sub-section (3), it has been stated that for the purposes of sub-section (1), the privilege .....

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ovisions that the Legislature always had in mind a relationship of employer-employee and by virtue of which, these benefits are admissible to the employees. They could be under several heads and a nomenclature attached to it would not be decisive provided the nature thereof is falling within the above quoted provisions. In the present case, the Tribunal made reference extensively to the provision and to the understanding of the same by the Revenue itself. While it is true that it is the duty of .....

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led as Tata Brand Equity And Business Promotion Agreement dated 19th April, 2004. That is between Tata Sons Limited and the assessee before us. That indicates as to how a new competitive environment created by liberalisation and globalisation of trade and industry has brought about a radical transformation of the business scene and it has become imperative for individual Tata companies wherever and to the extent possible to pool their resources and make a cooperative effort to promote a united c .....

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oposes the scheme and its signatory thereto viz. the assessee would have to abide by a code of conduct which is required to be followed in all its dealings. As long as there is an association with the TATA name and that association is desired to be continued, then, the enhancement and preservation of that brand by the signatory is contemplated. That is why the term "subscriber" appears therein and the assessee before us subscribes to this scheme and use and associate itself with the TA .....

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7. It is in that context and in the backdrop of such an agreement that the Tribunal referred to the Revenue's circular. The circular which has been carrying forward the object and purpose of introducing and levying such tax denotes that the taxation of perquisites or fringe benefits provided by an employer to his employees, in addition to the perks or wages paid is subject to varying treatment in different countries. These benefits are either taxed in the hands of the employees themselves or .....

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. Moreover, in cases where the employer directly reimburses the employee for expenses incurred, it becomes difficult to effectively capture the true extent of the perquisite provided because of the problem of cash flow in the hands of the employer. That is how the tax was conceived of, introduced and then, what we find is that the C.B.D.T. Circular No.8 of 2005, copy of which has been placed on records, indicates that the objective of taxing perquisites or fringe benefits is justified both on gr .....

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