TMI Blog2016 (9) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... y, are as under:- 2.1 The assessee is a company engaged in farming and agriculture. 2.1.1 For assessment year 2006-07, the assessee furnished its return of fringe benefits on 25/11/2006 declaring the value of fringe benefits at Nil . The assessment was completed under section 115WE(3) of the Income Tax Act, 1961 ( in short the Act ) vide order dated 11/12/2008, wherein the total value of fringe benefits was determined at Nil . Subsequently, the Assessing Officer initiated re-assessment proceedings, on observing that the assessee had paid wages and salary to its employees and certain other expenditure aggregating to ₹ 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 noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and orders of the authorities below. We have also considered the relevant provisions, ie. Section 115WA, 115WB 115 WE of the Income Tax Act. We observe that an employer assessee is liable to pay Fringe Benefit Tax under section 115WA of the Income Tax Act, in relation to Fringe Benefits provided by him to its employees. Sub-section (2) of section 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Notice u/s. 115WH r/w. section 115WG of the Act is wrong, insufficient and contrary to facts and evidence on record. 3. In the facts and circumstances of the case, the Notice issued u/s. 115WH r/w. section 115WG of the Act is void ab initio as the same is issued without obtaining satisfaction from Chief Commissioner or the Commissioner. 4. In the facts and circumstances of the case, and in law, the learned CIT- (A) erred in confirming AO's action of imposing Fringe Benefit Tax of ₹ 3,11,722/- including interest of ₹ 1,26,173/- u/s. 115WJ(5) of the Income Tax Act, 1961. 5. Reasons given by the learned CIT-(A) for confirming AO's action of imposing Fringe Benefit Tax of ₹ 3,11,722/- including interest of ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income that does not form part of total income. In support of this proposition, the authorities below relied on the decision of the ITAT, Kolkatta Bench in the case of Mcleod Russel India Ltd.(supra), wherein it was held as under :- We have carefully considered the submissions of the Id. Representatives of the parties and orders of the authorities below. We have also considered the relevant provisions, ie. Section 115WA, 115WB 115 WE of the Income Tax Act. We observe that an employer assessee is liable to pay Fringe Benefit Tax under section 115WA of the Income Tax Act, in relation to Fringe Benefits provided by him to its employees. Sub-section (2) of section 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me- tax Rules has no merit as fringe benefit tax is not payable on the income of the assessee but only fringe benefits provided by an employer to its employees. In view of the above, we agree with the learned Departmental representative that the contention of the learned authorised representative for the assessee has no merit and, accordingly, we uphold the order of the learned Commissioner of Income-tax (Appeals) by rejecting the grounds of appeal taken by the assessee. 6.3.4 On appeal by the assessee, the Hon'ble High Court of Calcutta, in the case of Apeejay Tea Ltd. supra), reversed the above decision of the ITAT Kolkatta Bench in Apeejay Tea Ltd. (supra), holding 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . From illustration A, it would appear that business profit after taking into account the expenses was computed at ₹ 600. Applying rule 8 taxable income on account of business was computed at ₹ 240, that is to say, 40 per cent of ₹ 600. From illustration B, it would appear that 40 per cent. of the total income from sale of tea was Taken into account. From illustration A it would appear that total deprecation ₹ 100. For the purpose of computing business profit and loss of 40 per cent of the total depreciation was taken into account. From illustration A it would appear that other expenses were computed at ₹ 300 and illustration B would show that other expenses were computed at ₹ 120, in other words, 40 per cent of ₹ 300 had been taken into account. 10. We shall take assistance of the illustration to resolve the issue. Let us 10 assume that the other expenses in illustration A amounting to ₹ 300 include ₹ 100 spent by the employer on account of fringe benefits made available to its employees. In that case, 40 per cent. of the aforesaid sum of ₹ 100 would also be inc1udible in illustration B. Therefore, the question pose ..... X X X X Extracts X X X X X X X X Extracts X X X X
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