TMI Blog2006 (9) TMI 549X X X X Extracts X X X X X X X X Extracts X X X X ..... c. 2. A board of trustees headed by a chairman is the governing body of the applicant. Its head office is located in New York, USA. It has a regional office and a country office in India among four regional offices and 14 country offices located elsewhere in various parts of the globe. The funds of the applicant come from Government, individuals and internal sources. The applicant carries on charitable, scientific and educational activities for population. The activities of the applicant in India fall within the approved objects for the purpose of granting exemption under the USA law. It enjoys tax exemption from federal income-tax under section 501(c)(3) of the Internal Revenue Code of the USA (for short the USA law ). The expenses incurred in India by the applicant which include fringe benefits provided to the employees, falling under the heads travel, workshop/conference, entertainment/hospitality, etc., are met by remittances from the head office in New York. In regard to fringe benefit tax (FBT) levied under section 115WA of the Act, it is submitted that it is chargeable when the employer is chargeable to income-tax under the Act and not otherwise ; this follows if sub-sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome under section 10(23C) or under section 12AA of the Act, the applicant is not claiming to have been notified or approved for the purpose of exemption under the said provisions. Further, from the annual report, it is noted that the provisions of sections 13(7) and 115BBC of the Act, anonymous donations are chargeable to income-tax even if they enjoy exemption under section 10(23C) or 11 of the Act. The applicant maintains a PE in the form of regional office in India and receives funds from internal sources whether from investments or from publication or other business activities, which is chargeable. The Commissioner has referred to Circular No. 8 of 2005 dated August 29, 2005 (see [2005] 277 ITR (St.) 20 ) clarifying the provisions relating to FBT. 6. In the rejoinder filed by the applicant, it is admitted that the status of the applicant for purposes of the Act is that of association of persons . Article 1(2) of the Double Taxation Avoidance Agreement, submits the applicant, is a peculiar feature of the Double Taxation Avoidance Agreement to which the USA is a party. Only in the absence of such a clause could India levy tax on that part of income arising in India though t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umming up he submits that as in the case of the applicant the computation machinery cannot be pressed into service, sub-section (2) of section 115WA of the Act would not be attracted and therefore the charge under sub-section (1) of section 115WA would fail. 8. Mr. T. N. Chopra, learned counsel appearing for the Commissioner, has contended that the FBT as defined in section 115WA of the Act, is payable by the applicant who is an employer within the meaning of that section. Only an employer who is eligible for exemption under section 10(23C) of the Act or who is registered under section 12AA of the Act, is entitled to claim exemption from the FBT and admittedly the applicant does not claim to fall under that category so it is liable to pay FBT. It is submitted that as long as an employer has employees in India and provides benefits or incurs on them expenses of the nature specified in section 115WB of the Act, he would be liable to pay the FBT in India. The proper interpretation of sub- section (2) of section 115WA of the Act is that the liability to pay the FBT under sub-section (1) of section 115WA of the Act exists even if no income-tax is payable by the employer in India. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basic rules in interpreting a statute. Quoting the dicta of Tindal in Warburton v. Loveland [1832] 2 D. Cl. 480 at page 489 Maxwell on the Interpretation of Statutes (Twelfth Edition, page 1) the learned author notes, if language is clear and explicit, the court must give effect to it, for in that case the words of the statute speak the intention of the Legislature . 12. A modification of the literal rule is referred to as the golden rule of interpretation which in the words of Parke B in Becke v. Smith [1836] 2 M. W. 191 at page 195 reads as : It is a very useful rule, in the construction of a statute, to adhere to the ordinary meaning of the words used, and to the grammatical construction, unless that is at variance with the intention of the Legislature, to be collected from the statute itself, or leads to any manifest absurdity or repugnance, in which case the language may be varied or modified, so as to avoid such inconvenience, but no further. 13. Quoting the observation of Lindley L.J. in The Duke of Buccleuch, In re [1889] 15 P. D. 86, 96 (CA), the rule is stated in Craies on Statute Law Seventh Edition thus : You are not so to construe the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additional income-tax (in this Act referred to as fringe benefit tax) ; (ii) the tax is in respect of fringe benefits provided or deemed to have been provided by an employer to his employees during the previous year ; (iii) the tax is leviable on the value of such fringe benefits at 30 per cent. ; and (iv) this is in addition to the income-tax charged under the Act. There is no dispute with regard to this sub-section. The expression fringe benefits is defined in section 115WB of the Act and the value of fringe benefits which is the basis of levy of tax is to be arrived at as provided in section 115WC of the Act. We are not concerned with the rest of the provisions of the Chapter here. Now, reverting to sub- section (2) of section 115WA of the Act, it commences with a non obstante clause and states that notwithstanding that no income-tax is payable by an employer on his total income computed in accordance with the provisions of the Act, the tax on fringe benefits shall be payable by such employer. This provision is clarificatory in nature. Inasmuch as sub-section (1) of section 115WA of the Act mandates that FBT shall be charged for every assessment year in addition to the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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