9911796707
TMI Blog2008 (5) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... oyees who may be residents of various countries including Australia, USA, UK, France etc. work on the MODR on a 'commuter basis'. They come to India, stay in the Rig for 28 days and go back to their own country being their place of residence for a further period of 28 days. The crew or the employees are transported from their home country to the MODR in two laps :first is from the nearest designated base city at the place of residence in the home country to a designated city in India for which the petitioner provides free air tickets of economy class and;second is from that city in India to the MODR through helicopter especially hired by the petitioner for this purpose. 4. Allegedly, on completion of 28 days, they go back from the Rig to the designated base city in their home country in the same manner. Appellant states that no conveyance/transport allowance is paid to them. Appellant entered into a contract of supplying MODR along with equipment and offshore crew on charter hire basis with Oil and Natural Gas Commission, a public sector undertaking, on or about 10.10.2003. It filed an application under Section 245Q(1) of the Income Tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge benefits shall be deemed to have been provided by the 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 expense on, or made any payment for, the following purposes, namely:- (A) entertainment; xxx xxx xxx (F) conveyance; xxx xxx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for our purpose read as under : "In terms of the provisions of sub-section (1) of Section 115WA, an employer in India is liable to FBT in respect of the value of fringe benefits" (a) Provided by him to his employees; and (b) Deemed to have been provided by him to his employees. The scope of fringe benefits provided or deemed to have been provided is defined in section 115WB. Sub-section (1) of the said section defines the scope of fringe benefits provided by the employer to his employees. Similarly, sub-section (2) of the said section defines the scope of fringe benefits deemed to have been provided by the employer to his employees. Therefore, sub-section (2) expands the scope of sub-section (1) through a deeming provision. The provision relating to the computation of the value of the fringe benefits is contained in section 115WC. It is a settled principle of law that where the computation provisions fail, the charging section cannot be effectuated. Therefore, if there is no provision for computing the value of any particular fringe benefit, such fringe benefit, even if it may fall within clause (a) of sub-section (1) of section 115WB, is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Indian company would be liable to the FBT in India if it has employees based in India. Therefore, if an Indian company carries on business outside India but does not have any employees based in India, such company would not be liable to FBT in India. Does FBT apply to foreign companies? XXX XXX XXX 103. FBT is a liability qua employer. It is an expenditure laid out or expended wholly and exclusively for the purposes of the business or profession of the employer. However, sub-clause (ic) of clause (a) of section 40 of the Income-tax Act expressly prohibits the deduction of the amount of FBT paid, for the purposes of computing the income under the head profits and gains of business or profession. This prohibition does not apply to the computation of book profit for the purposes of section 115JB. Accordingly, the FBT is an allowable deduction i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based in India and no fringe benefit tax would be payable in respect of an expenditure incurred by the employer for an employee who is not based in India and in any event if the employee is based in a foreign country would also come within the purview thereof. (7) The AAR is clearly wrong in holding that the word 'residence' would mean only residence in India. 11. Mr. G.E. Vahanavati, learned Solicitor General appearing on behalf of the respondent, on the other hand, would urge: (A) Fringe benefit tax is a new concept in terms whereof any consideration for employees provided, inter alia, for facility or amenity comes within the purview thereof; and (B) The tax is payable only when the employer incurs an expenditure delineated in sub-section (2) and such exemption is to be granted only on the tax leviable under sub-section (1). (C) The terms 'residence', 'transport', 'conveyance' etc. must be given a broad meaning which would lead to the conclusion that only when employees are provided for transport on a regular basis for attending to their work from the place of their residence to the place of work, exemption should be granted. (D) The Parliament, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n answer to question number 7 that sub-section (2) provides for an expansive definition. Does it mean that sub-section (2) is merely an extension of sub-section (1) or it is an independent provision? If sub-section (2) is merely an extension of sub-section (1), Mr. Ganesh may be right but we must notice that Section 115WA provides for imposition of tax on expenditure incurred by the employer or providing its employees certain benefits. Those benefits which are directly provided are contained in sub-section (1). Some other benefits, however, which the employer provides to the employees by incurring any expenditure or making any payment for the purpose enumerated therein in the course of his business or profession, irrespective of the fact as to whether any such activity would be carried on a regular basis or not, e.g., entertainment would, by reason of the legal fiction created, also be deemed to have been provided by the employer for the purpose of sub-section (2). Whereas sub-section (1) envisages any amount paid to the employee by way of consideration for employment, what would be the limits thereof are only enumerated in sub-Section (2). We, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s; contrarily; different from that to which it relates; in a different manner; in another way; in any other way; differently in other respects in different respects; in some other like capacity." "Otherwise" is defined by the Standard Dictionary as meaning 'in a different manner, in another way; differently in other respects'; by Webster, 'in a different manner; in other respects'. As a general rule, 'otherwise' when following an enumeration, should receive an ejusdem generis interpretation (per CLEASBY, B. Monck v. Hilton, 46 LJMC 167, The words 'or otherwise', in law, when used as a general phrase following an enumeration of particulars, are commonly interpreted in a restricted sense, as referring to such other matters as a are kindred to the classes before mentioned, (Cent. Dict.)" 17. It is now a well settled principle of law that a statute should ordinarily be given a purposive construction. {See New India Assurance Company Ltd. v. Nusli Neville Wadia and Anr. [2007 (14) SCALE 556]; Tanna and Modi v. C.I.T., Mumbai XXV and Ors. [2007 (8) SCALE 511] and Udai Singh Dagar and Ors. v. Union of India (UOI) and Ors. [2007 (7) SCALE 278]}. 18. The Parliam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees are required to be based in India, sub-section of Section 115WB would not be attracted. However, if such expenditure incurred is found to be as consideration for employment, the same would also bring within its purview the employees who have been hired from outside the country. For the purpose of obtaining the benefit of the said exemption, however, the expenditure must be incurred on the employees directly for the purposes mentioned therein, namely, they are to be provided transport from their residence to the place of work or such place of work to the place of residence. Any expenditure incurred for any other purpose, namely, other than for their transport from their residence to the place of work or from the place of work to the place of residence would not attract the exemption provision. The Assessing Authority, therefore, must, in each case, would have a right to scrutinize the claim. CBDT has the requisite jurisdiction to interpret the provisions of Income-tax Act. The interpretation of CBDT being in the realm of executive construction, should ordinarily be held to be binding, save and except where it violates any provisions of law o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reaks outside India would be subjected to tax under Section 9(1)(ii) and explanation appended thereto as inserted in 1983 w.e.f 1.4.1979. Appellant therein entered into agreements which are executed in the United Kingdom with each of the said employees who were residents of the said country. This Court, upon noticing the explanation appended to Section 9(1)(ii), as regards its retrospective operation, held: "16. The departmental understanding of the effect of the 1999 Amendment even if it were assumed not to bind the respondents under Section 119 of the Act, nevertheless affords a reasonable construction of it, and there is no reason why we should not adopt it. 17. As was affirmed by this Court in Goslino Mario a cardinal principle of the tax law is that the law to be applied is that which is in force in the relevant assessment year unless otherwise provided expressly or by necessary implication. (See also Reliance Jute and Industries Ltd. v. CIT) An Explanation to a statutory provision may fulfil the purpose of clearing up an ambiguity in the main provision or an Explanation can add to and widen the scope of the main section. If it is in its nature clarificatory then ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
