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2015 (7) TMI 1022 - ITAT DELHI

2015 (7) TMI 1022 - ITAT DELHI - TMI - Fringe benefit tax u/s 115WE - VALUE OF FRlNGE BENEFITS ON ACCOUNT OF EXPENSES RELATED TO AIRCRAFTS - Held that:- On the contention of the assessee that there is no consideration for employment, we find that the assessee had submitted before the CIT(A) that there is a possibility of the aircraft having being used for benefit of the employees. When the assessee admits of a possibility of the air craft having been used for the use of benefit of employee, to p .....

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sessee has conceded that it is not eligible for exemption u/s 115WC(2)(f), the amount declared in the return of income before claiming this exemption will become taxable. - Decided against assessee. - ITA Nos: 1009,1010/Del/2011 - Dated:- 29-7-2015 - Shri G.C. Gupta and Shri J.Sudhakar Reddy, JJ. For the Petitioner : Shri Rupesh Jain, Advocate For the Respondent :Shri Vikram Sahay, Sr. DR ORDER PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER These are appeals filed by the assessee, directed against the .....

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RELATED TO AIRCRAFTS In the original return, the value of fringe benefits was declared at ₹ 11,29,71,006/- which was subsequently" revised by filing revised return to ₹ 5,42,95,190/-. Thus, in revised return, the value of fringe benefits were reduced by an amount of ₹ 5,86,75,815/-. On examining these returns, it was noted" that the above difference is on account "of different value of fringe benefits adopted for repair, running (including fuel) and maintenance .....

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n the return. The assessee was asked to provide the reason for revising the value of fringe benefits. Vide letter dated 23.10.09, the assessee submitted as under: " "In the original return tiled, the value of ₹ 5,86,75,81S/- in respect of repair; running and maintenance expenses of aircrafts had been- wrongly included in the , ) total value of ₹ 1 1,29,71,006/- but the same should be liable for FET at NIL rate in view of section 115WC(2)(1) of the Income Tax Act, 1961 since .....

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ny is operating aircraft in charter basis for carrying passengers, in addition to usage for companies business purposes. Company utiJizes operating and maintenance services from different service providers in this business. All the expenses in connection with providing aircraft on charter hire basis to third parties is borne by the company ddirect1y or by way of reimbursement of expenses incurred by the service providers. Assessee Company gives aircraft on charter/hire basis to third parties eit .....

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24621147/- 20% 4924229 Net Expenes 293379076/- 58675815 In view of the fact that the assessee company is also engaged in the business of carriage of passengers or goods by aircraft it is liable to FBT at NIL rate, in respect of expenses incurred on repair, running and maintenance of the aircraft,. Revised return was accordingly filed" Before discussing the issue further, it. would be worthwhile to discuss the provisions of Income Tax Act with regard to computation of value of fringe benefit .....

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ter, the value of fringe benefits shall be aggregate of the following namely. , ... , . , . , , , , , . (c) 20% of the expenses referred to in clause (A) to (K) of sub-section (2) of section 11 S WB. Sub-section (2) of section 11 SWC provides relied in value of fringe benefits under certain circumstances. Clause (1)of this sub-section (2) of 11 SWC reads as under. (t) In the case of an employer engaged in the business of carriage of passengers or goods by aircraft, the value of fringe benefits f .....

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e assessee can be regarded as engaged in the business of carriage of passengers or goods by aircraft. The assessee is having two aircraft - (1) Helicopter: model BELL 206 L4. The same was purchased in the year 2004-05; (2) Aircraft: Model GULF stream IV. The same was acquired during the F.Y.2006-07 . Thus, the assessee was having helicopters since 2004-05 and it purchased another aircraft during the financial year under consideration. From the past record, it is seen that the assessee was regula .....

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icate that the income from aircraft is on account of charter hire charges received from above parties. Thus, assessee is earning income from hiring of helicopter and aircraft. 2. The assesseee claimed before the AO that it is engaged in the business of carriage of passenger or goods, by aircraft and hence as per section 115 WC (f) the value of fringe benefit tax, for the purposes referred to in clause (i) of sub section (2) of section 115WE shall be taken as NIL. The AO as well as the CIT(A) ana .....

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only from hire charges or hire on estimate basis. The assessee relied on the opinion of M/s. Vaish Associates Advocates and filed a revised return of income, claiming exemption. On facts this contention of the assessee was rejected by the Assessing Officer. 3. In appeal before the first appellate authority, the assessee reiterated the contentions raised by him before the AO. In addition he contented as follows :- Without prejudice to the above, it is respectfully submitted, that in case it is he .....

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er as resulting in a fringe benefit to an employee, which are subject to fringe benefit tax at the value to be determined in accordance with the provisions of section 115WC of the Act. It is respectfully submitted, that where an expenditure incurred does not clearly result In any benefit/fringe benefit to an employee, no portion thereof can be deemed to be subject to fringe benefit tax under section 115WB(2) read with section 115WC of the Act. A certain percentage of the expenditure incurred on .....

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on hire and is under the possession and control of the hirer, the possibility of usage of the aircraft by the employees of the owner of the aircraft is ousted and there cannot in such a situation be any case of benefit being derived by the employees from use of aircraft so as to result in levy of fringe benefit tax. Thus, during the period when aircraft is used by the hirer, no fringe benefit is derived by the employees, which can be subjected to tax in the hands of the owner/employer. It may no .....

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t be considered for purposes considered for purposes of valuing the fringe benefit, else there would be double taxation. In view of the above, in the event it is held that the provision of aircraft on hire, is not an activity of carriage of passenger, it is respectfully submitted, that the expenditure incurred by the appellant during such period cannot be considered for the purposes of valuation of fringe benefit. (emphasis ours) 4. The Ld. CIT(A) rejected the alternative contention by observing .....

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umption that part of the expenses are used for the personal benefits of employees. The exemption in respect of employer engaged in the business of carriage of passengers or goods has been provided because there it was felt that the expenses will be mainly relating to business of carriage of goods or passengers. In the appellant s case, there is no dispute that major amount. of the expenses is relating to the own use by the company which is also evident from the fact that the total expenditure on .....

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of carrying on of passenger/goods and that the expenditure on repair, renewal and depreciation etc. have been incurred in relation to the business of carrying on of passengers/goods. The order of the AO for charging the expenses to FBT is well reasoned and based upon correct appreciation of facts and law. 5. Aggrieved the assessee has filed this appeal in ITA 1009/Dl/2011 and ITA No. 1010/Del/2011 against the common order passed by the CIT(A) wherein he had upheld the order of the AO passed both .....

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e emphasised the fringe benefits means any consideration for employment u/s 115WB of the Act and that sub section (2)of section 115WB is controlled by section 115WB of the Act. For this proposition he relied on the decision of Mumbai Bench of the Tribunal in the case of DCIT vs. Kotak Mahindra Old Mutual Life Insurance Ltd.134 ITD 388 (M). 8. He also relied on the following case laws : Intervalve (India) Ltd. vs. ACIT 149 TTJ 365 9. The Ld. DR Shri Vikram Sahay opposed the contentions of the ass .....

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g how its claim is tenable made an alternative claim. He submitted that the assessee now conceded that it is not engaged in the business of carriage of passengers or goods by air craft and under these circumstances the original return stands and the stand of the assessee in all the previous years has to be considered and the order of the first appellate authority upheld. 10. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and a perusal of the papers .....

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nge benefit tax can be levied only when the expenditure incurred is for the purpose of business. Even salary paid to an employee, is consideration for employment and is expenditure incurred for the purpose of business. 11. On the contention of the assessee that there is no consideration for employment, we find that the assessee had submitted before the CIT(A) that there is a possibility of the aircraft having being used for benefit of the employees. The submissions have been extracted by us at p .....

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