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Mcleod Russel India Ltd. Versus Assistant Commissioner of Income-Tax

2016 (5) TMI 62 - ITAT KOLKATA

FBT - Entitlement to avail of the concessional rate of tax prescribed under rule 8 of the Income-tax Rules to determine the taxable value of fringe benefits - Held that:- What has been allowed as the business expenditure (i.e. the expenditure that are subjected to fringe benefit tax) is only to the extent of 40 per cent. thereon in accordance with rule 8 of the Income-tax Rules, 1962. Hence logically the said business expenditure for the purpose of fringe benefit tax also should be considered at .....

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untant Member) And S. S. Viswanethra Ravi (Judicial Member) For the Petitioner : Ajoy Kumar Gupta For the Respondent : Mrinal Kanti Biswas ORDER M. Balaganesh (Accountant Member) 1. These appeals of the assessee arise out of the order of the learned Commissioner of Income-tax (Appeals) in Appeal No. 139/CIT(A)-IV/2010-11 dated November 15, 2012 for the assessment year 2008-09 and in Appeal No. 139/CIT(A)-IV/2011-12 dated November 16, 2012 for the assessment year 2009-10 passed against the order .....

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sentative argued on behalf of the Revenue. 3. The only issue to be decided in this case is as to whether the assessee is entitled to avail of the concessional rate of tax prescribed under rule 8 of the Income-tax Rules to determine the taxable value of fringe benefits. 4. The brief facts of this issue is that the assessee is engaged in the business of growing and manufacturing tea. The return of fringe benefits for the assessment years 2008-09 and 2009-10 was filed by the assessee declaring taxa .....

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only 40 per cent. of value of fringe benefits shall be taxable under section 115WC of the Act. However, the learned Assessing Officer did not accept the contentions of the assessee and proceeded to determine the taxable value of fringe benefits at 100 per cent. as against 40 per cent. declared in the return by the assessee. According to the learned Assessing Officer, the fringe benefit tax shall be payable irrespective of the fact whether any Income-tax is payable by the assessee under the prov .....

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x Act, 1961. When the taxable income under the provisions of the Act are to be determined at 40 per cent. of profits, the same analogy should equally be made applicable for determining the taxable value of fringe benefits. The learned authorised representative argued that the issue is covered by the decision of the jurisdictional High Court in the case of Moran Tea Co. (I.) Ltd. v. CIT reported in [2014] 51 taxmann.com 520 (Cal) vide order dated September 1, 2014. In response to this, the learne .....

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resentative that fringe benefit tax is an independent code by itself and operates separately irrespective of the fact of Income-tax liability on the assessee under the normal provisions of the Act. For the sake of convenience, the provisions of section 115WA are reproduced hereinbelow : "115WA. Charge of Fringe Benefit Tax.-(1) In addition to the income-tax charged under this Act, there shall be charged for every assessment year commencing on or after 1st day of April 2006, additional Incom .....

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y clear that fringe benefit tax is also charged as per the provisions of the Income-tax Act. Hence it is incorrect to argue that it would operate independently away from Income-tax Act read with rules thereon. It is pertinent to note that the Legislature in its wisdom had not provided for the non obstante clause in the charging section 115WA of the Act to give an independent and overriding operation. The charging section 115WA of the Act only states that an assessee-employer shall pay fringe ben .....

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e it can safely be concluded that the provisions of fringe benefit tax fall within the ambit of the Income-tax Act, 1961 read with Income-tax Rules, 1962 and hence does not operate independently. 8. Looking at the impugned issue from the above perspective, the assessee being engaged in the business of growing and manufacture of tea is entitled to offer its taxable income in accordance with rule 8 of the Income- tax Rules. Similarly the taxable value of fringe benefits also could have to be deter .....

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business of growing, manufacturing and sale of tea without having regard to the relevant provisions of the Income-tax Act, 1961 read with rule 8 of the Income-tax Rules, 1962. 2. Whether the Tribunal below committed substantial error of law in holding that there was no similarity between the provisions of section 115WA vis-a-vis section 115-O of the Act. 3. Whether the Tribunal below committed substantial error of law in upholding the inclusion of expenses in the taxable value of fringe benefit .....

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se of tax therein. The issue has been decided in the unreported judgment delivered on July 3, 2014 in ITAT No. 165 of 2013, G. A. No. 3135 of 2013. Apeejay Tea Ltd. v. CIT [2015] 370 ITR 775 (Cal) in considering an illustration given by the hon'ble Supreme Court in CIT v. Doom Dooma India Ltd. [2009] 310 ITR 392 (SC). We set out the relevant portion of the said judgment (page 783 of 370 ITR) : '10. We shall take assistance of the illustration to resolve the issue. Let us assume that the .....

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inge benefits to its employees was not solely for the purpose of business. The expenditure incurred is both for the purpose of business and for the purpose of agriculture. The submission made by Mrs. Gulgutia that the expenditure on account of fringe benefits has already been taken into account is not correct. The net profit and loss of the business has to be arrived at after deducting all the expenses as indicated in illustration A in the case of Doom Dooma (supra). Once that is done 40 per cen .....

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the result would be that the agricultural income itself would become liable to tax, which is not permissible under sub-section (1) of section 10 of the Income-tax Act. The provisions contained in Chapter XII-H of the Income-tax Act have to be read subject to section 10 of the Income-tax Act. 11. For the aforesaid reasons, we are of the opinion that the judg ment of the learned Tribunal cannot be sustained. The submissions advanced by Ms. Gutgutia naturally do not help the Revenue. The judgment .....

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