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Toyota Kirloskar Motor P. Ltd. Versus The Commissioner of Income Tax, LTU, Bangalore

2016 (6) TMI 843 - ITAT BANGALORE

Revision u/s 263 - default FBT computation - as per CIT(A) no query was raised with respect to an amount for medical reimbursement expenses by AO - Held that:- In light of the clarification issued by the CBDT on 29.8.2005, the AO was required to examine the details of medical reimbursement to employees, whether the expenditure is incurred for the medical treatment in unapproved hospital and it exceeds ₹ 15,000 or not. If it does not exceed ₹ 15,000, the entire reimbursement of expend .....

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ery from the assessee in this regard. Therefore, the AO has not at all applied his mind to the expenditure incurred on dealers training and non-application of mind to a particular issue which results into loss to the revenue makes the assessment order to be erroneous and prejudicial to the interests of revenue. We are of the view that where as per the provisions of the Act and clarification issued by the CBDT through Instruction No.8/2005, the dealers training expenses would be the fringe benefi .....

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5, it has been clarified by the Board that the expenditure in the nature of fee for participation by the employees in any conference is not liable to FBT, but if the participation fee includes any expenditure of the nature referred to in clauses (A), (B) and (D) to (P) of sub-section (2) of section 115WB, such expenditure will be liable to FBT. The expenditure incurred for the purposes of agents or dealers or development advisors is liable to FBT. When the Board has clarified that certain confer .....

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enses We find that a specific query was raised by the AO in this regard and the assessee has filed a detailed reply in response thereto. Not only in the course of assessment proceedings, the AO has also examined this issue in the assessment order in para Nos. 2 to 3, after making a detailed discussion with respect to the relevant provision and the nature of this expenditure. Out of a total claim of ₹ 2,66,50,000, a sum of ₹ 1,58,9,000 was charged to FBT. On a careful perusal of the a .....

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r u/s. 263 of the Act - Appeal decided partly in favour of assessee. - ITA No. 1182/Bang/2013 - Dated:- 17-6-2016 - Shri Sunil Kumar Yadav, Judicial Member And Shri Inturi Rama Rao, Accountant Member For the Appellant : Shri Padamchand Khincha, CA For the Respondent : Shri Sanjay Kumar, CIT-III ( DR ) ORDER Per Sunil Kumar Yadav, Judicial Member This appeal is preferred by the assessee against the order dated 12.03.2013 of the Commissioner of Income Tax passed u/s. 263 of the Income-tax Act, .....

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ot having been satisfied, the order passed under section 263 is bad in law and liable to be quashed. 2.1 The learned Commissioner of Income tax. LTU Bangalore has erred in passing the order under section 263 without satisfying as to how the order Passed under section 143(3) is erroneous in so far it is prejudicial to the interest of the revenue. The order so passed is bad in law and liable to be quashed. 3.1 Without prejudice, the learned Commissioner of Income tax, LTU, Bangalore has erred in p .....

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nce expenses, business promotion expenses and sales promotion expenses are liable for FBT. 4.2 The learned Commissioner of Income tax, LTU Bangalore has erred in making various impugned conclusions which are incorrect, contrary to facts, bad in law and liable to be quashed. 5.1 In view of the above and other grounds to be adduced at the time of hearing, the order passed under section 263 be quashed or in the alternative, medical reimbursements, dealer expenses, conference expenses, business prom .....

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rcular 8/2006, this expenditure is not exempt from FBT. 3. Conference expenses shown in the return of income is ₹ 230,64,748/- whereas the expenses offered for FBT is ₹ 80,30,131/-. As per P/L account the conference expenses is RS.3,31,21,677/-. Hence the balance amount needs to be brought to tax. 4. Business Promotion Expenses of ₹ 66,33,731/- has not been offered for FBT. 5. Expenses of ₹ 1,76,97,334/- shown under the head Sales Promotion has not been offered to FBT. 4. .....

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se notice and the assessee has filed the reply explaining the details as sought by the AO. He has filed the reconciliation statements to explain the discrepancies pointed out by the AO during the course of assessment proceedings. In support thereof, he has invited our attention to the documents appearing at page Nos. 42 to 75 of the compilation of the assessee. 5. The ld. counsel for the assessee further submitted that once the AO has applied his mind and examined all the issues pointed out by t .....

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t of Karnataka in the case of Sun Micro Systems India Pvt. Ltd. in ITA No.203 of 2009; CIT v. Saravana Developers in ITA No.68/2014 c/w 67/2014. 6. Per contra, the ld. DR has emphatically contended that CIT has exercised his jurisdiction u/s. 263 of the Act with respect to the 5 points on which the AO has not applied his mind. He further placed reliance upon the order of the CIT passed u/s. 263 with the submission that the CIT has made a reference to Instruction No.8/2005 while holding that cert .....

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AO has not applied his mind to certain reimbursements, which according to Instruction No.8/2005 are fringe benefits, the CIT has rightly exercised his jurisdiction u/s. 263 of the Act as the assessment order in which certain reimbursements are fringe benefits as per Instruction No.8/2005 and were not subjected to tax, resulting the assessment order erroneous and prejudicial to the interests of revenue. He further placed reliance upon the judgments of the Hon ble High Court of Karnataka in the ca .....

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ent of the Hon ble Supreme Court in the case of R & B Falcon (A) Pty Ltd. v. CIT, 301 ITR 309 (SC). 7. Having given a thoughtful consideration to the rival submissions and from a careful perusal of the orders of the authorities below and documents placed on record, we find that the CIT has revised the assessment order having invoked the jurisdiction u/s. 263 of the Act on certain points illustrated in para No.3 hereinabove. We have carefully examined the assessment order as well as the queri .....

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l reimbursement expenses, an amount of ₹ 6,45,32,048 for dealer training expenses and the conference expenses shown at ₹ 230,64,748. With respect to business promotion expenses and sales promotion expenses, it can be said that a specific query was raised by the AO through his letter dated 19.4.2010. We have also carefully examined the assessment order and find that in the assessment order also, the AO has made great deliberations on sales promotion expenses, conveyance, tour & tr .....

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hesitation to conclude that the issue with regard to reimbursement of medical expenses, dealer training expenditure and conference expenses are the fringe benefits and are required to be subjected to tax. On this issue, the CIT has observed in his order that the Instruction No.8/2005 clarifies the confusion and answered the questions raised by the public with respect to certain items of reimbursement of the expenditures. With regard to medical reimbursement, it was clarified by the Board through .....

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T. However, if any sum is payable by employer for expenditure actually incurred by employee for medical treatment in an unapproved hospital and it does not exceed ₹ 15,000 during the year, such sum does not fall under the head salary as defined in clause (1) of section 17 of the Income-tax Act and not liable to income-tax in the hands of the employee. Since such sum is not taxable in the hands of employee, the same is liable to FBT. 9. In light of the above clarification issued by the CBDT .....

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cial to the interests of revenue and we therefore do not find any infirmity in the order of the CIT in exercising his jurisdiction u/s. 263 of the Act. 10. So far as dealer training expenditure of ₹ 6,45,32,648 is concerned, we find that through question No.10 of Instruction No.8/2005, the Board has clarified that section 115WB defines fringe benefits and sub-section (1) refers to the specific fringe benefits provided by the employer to the employees, whereas sub-section (2) provides that .....

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) by holding that the language of section 115WB is clear, unambiguous and straight and there is no place for insertion or subtraction or substitution of any word into it. A careful reading of the entire section reveals without any doubt that sub-section (2) is an independent section and is not controlled by sub-section (1) and both sub-section (1) and sub-section (2) operate in a different field. Any inference that sub-section (2) is controlled by subsection (1) and any expenditure which is not .....

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f business or profession, is deemed to have been provided by the employer to the employees. With this deeming provision, the scope of fringe benefit tax has been expanded covering those expenses which have been mentioned in sub-section (2), even though the employee-employer relationship may or may not be present or even though any benefit is derived out or not to the employees. In the case of R & B Falcon (A) Pty Ltd. v. CIT, 301 ITR 309 (SC), the Hon ble Apex Court has categorically held th .....

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ss to the revenue makes the assessment order to be erroneous and prejudicial to the interests of revenue. 12. While adjudicating the scope of section 263 of the Act, the Hon'ble jurisdictional High Court in the case of CIT v. Infosys Technologies Ltd. [2012] 17 taxmann.com 203 (Kar.), Their Lordships have held that the submission of the assessee could not be accepted that the materials had been placed before the assessing authority and therefore there should be a conclusion that the authorit .....

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and there is no need for the assessing authority to spell out reasons when the order is accepting the claim of the assessee, to accept a submission of this nature would be to give a free hand to the assessing authority just to pass order without reasoning and to spell out reasons only in a situation where the finding is to be against the assessee or any claim put forth by the assessee is denied. Their Lordships further held that there cannot be any dichotomy of this nature as every conclusion an .....

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a tax relief to the assessee, the order definitely constitutes an order not merely erroneous but also prejudicial to the interest of the revenue and, therefore the Commissioner was justified in exercising the jurisdiction under section 263 of the Act. 13. In light of the judgment of the Hon'ble jurisdictional High Court, we are of the view that where as per the provisions of the Act and clarification issued by the CBDT through Instruction No.8/2005, the dealers training expenses would be th .....

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d; whereas as per Q.No.55 & 56 of the Instruction No.8/2005, it has been clarified by the Board that the expenditure in the nature of fee for participation by the employees in any conference is not liable to FBT, but if the participation fee includes any expenditure of the nature referred to in clauses (A), (B) and (D) to (P) of sub-section (2) of section 115WB, such expenditure will be liable to FBT. It was also clarified in response to a question i.e., whether FBT will apply to the expendi .....

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