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TMI Blog2016 (9) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... and salary to its employees and certain other expenditure aggregating to Rs. 8,08,415/- incurred by the assessee on business promotions, conveyance, staff welfare, telephone and travelling expenses, which constitute fringe benefits provided to the employees as per section 115WA(2) of the Act were exigible to fringe benefit tax ('FBT')@ 20% thereof. The Assessing Officer issued notice under section. 115WH of the Act to the assessee in this regard, after recording reasons for reopening the assessment. In response thereto, the assessee requested that the original return filed on 25/11/2006 be treated as filed in response to the notice under section. 115WH of the Act. The Assessing Officer proceeded to complete the re-assessment under section 115WG of the Act vide order dated 29/1/2013 and levied FBT @ 20% of the fringe benefits amounting to Rs. 8,08,415/-. 2.1.2 For Assessment Year 2007-08, the assessee filed its return of fringe benefits on 6/10/2007 declaring the value of fringe benefits at 'Nil'. The return was processed under section 115WE of the Act on 11/09/2009. Subsequently, the Assessing Officer initiated reassessment proceedings, on observing that the assessee had paid wage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payable by such an employer. Therefore, an employer is liable to pay Fringe Benefit Tax even when no income-tax is payable by an employer on his total income computed in accordance with the provisions of the Income Tax Act. Therefore, the contention of the Id. Authorized Representative for the assessee that value of Fringe Benefit should be computed by applying Rule 8 of Income Tax Rule has no merit as Fringe Benefit Tax is not payable on the income of an assessee but only Fringe Benefits provided by an employer to its employees. In view of the above, we agree with the Id. Departmental Representative that the contention of the Id. Authorized Representative for the assessee has no merit and accordingly, we uphold the order f the Id. CIT(A) by rejecting grounds of appeal taken by the assessee. Respectfully following the Tribunal's decision we reverse the order of err (A) and this issue of revenue's appeal is allowed." 3. Aggrieved by the orders under section 115WG of the Act dated 29/1/2013 for both assessment years 2006-07 and 2007-08, the assessee carried the matter in appeal before the Ld CIT(Appeals)-4, Mumbai. The Ld. CIT(A) vide separate orders dated 12/2/2013, dism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T-(A) for confirming AO's action of imposing Fringe Benefit Tax of Rs. 3,11,722/- including interest of Rs. 1,26,173/ u/s. 115WJ(5) of the Income Tax Act, 1961, are wrong, insufficient and contrary to facts and evidence on record. 6. Appellant craves leave to add, amend, alter, modify or omit any of the aforesaid Grounds of Appeal as occasion may arise of demand. 5. Grounds 1 to 3 and 6: 5.1 At the outset, the Ld. Representative for the assessee submitted that the assessee is not pressing or urging the grounds raised at Sl.No.1 to 3 and 6 in these appeals. Since, grounds Nos.1 to 3 and 6 are not being pressed by the assessee in its appeals for assessment years' 2006-07 and 2007-08, these grounds are rendered infructuous and are accordingly dismissed. 6. Grounds 5 & 5:- 6.1 In these grounds (supra), the assessee assails the order of the Ld. CIT(A) in upholding the Assessing Officer's action in imposing FBT in the case on hand as being erroneous. The Ld. Representative for the assessee was heard in support of the grounds raised. Urging that the proposition that since the assessee's income comprised of only agricultural income that was exempt from Income Tax under section. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 115WA starts with an non obstante clause and states that notwithstanding that no income- tax is p,1yable by an employer to its total income computed in accordance with the provisions of the Act, the tax on Fringe Benefits shall be payable by such an employer. Therefore, an employer is liable to pay Fringe Benefit Tax even when no income-tax is payable by an employer on his total income computed in accordance with the provisions of the Income Tax Act. Therefore, the contention of the Id. Authorized Representative for the assessee that value of Fringe Benefit should be computed by applying Rule 8 of Income Tax Rule has no merit as Fringe Benefit Tax is not payable on the income of an assessee but only Fringe Benefits provided by an employer to its employees. In view of the above, we agree with the Id. Departmental Representative that the contention of the Id. Authorized Representative for the assessee has no merit and accordingly, we uphold the order f the Id. CIT(A) by rejecting grounds of appeal taken by the assessee. Respectfully following the Tribunal's decision we reverse the order of err (A) and this issue of revenue's appeal is allowed." 6.3.3. From a perusal of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding it to be unsustainable. At paras 8 to 11 of this order, their Lordships held as under:- 8. We have considered the rival submissions advanced by me learned advocates. For the purpose of resolving the disputes, we would like to refer to the illustration appearing from the judgment of the apex court in the case of CIT v. Doom DOO1na India Ltd. (supra). The illustration in para- graphs 12 and 13 of the judgment reads as follows (page 397) : "Be that as it may, we can give the following illustration(s) which will give an example of how the "written down value" needs to be computed : ILLUSTRATION -A (Rs.) Income from sale of tea 1000 Less : Expenses: Depreciation (100) Others (300) Business profit 600 Income subject to charge under the Income-tax Act by application of rule 8(40% of 600) 240 ILLUSTRATION -B (Rs.) Income from sale of tea (40% OF 1000) 400 Less : Expenses: Depreciation (40) Others (40% OF 300) (120) Business profit subject to charge of Income Tax(40% of 600) 240 Analysing the above two charts, we find that at the end of computation the income' chargeable to tax by applying rule 8 comes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court in the aforesaid judgment. It cannot be disputed that the amount of expenditure incurred by the assessee in extending fringe 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 The submission made by Mrs. Gutgutia 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 cent. of the net profit and loss has to be, worked out which shall be chargeable to tax. Once this is done the expenditure on account of fringe benefits would automa- tically stand reduced to 40 per cent. as would appear from illustration B in the case of Doom D007na (supra). The Revenue is interested in contending as would appear from the impugned orders that the expenditure on account of fringe benefit cannot be reduced to 40 per cent. for the purpose of computing fringe benefit tax. If that is done, the result would be that the agricultural income itself would be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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