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A.N. Pharmacia Laboratories Pvt. Ltd. Versus DCIT, Circle-11, Kolkata

2018 (2) TMI 436 - ITAT KOLKATA

Computation of fringe benefit tax - Assessee pleaded that when a particular item of expenditure has been disallowed by the Ld. AO as not incurred wholly and exclusively for the purpose of business u/s 37 of the Act, then the same should not be subjected to levy of fringe benefit tax - Held that:- We find that the Ld. AO has fairly pleaded only for exclusion of the amount disallowed in the sum of ₹ 7,91,147/- from the computation of fringe benefit tax which, in our considered opinion, is ju .....

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d from the computation of FBT as worked out in the aforesaid table. Hence, we direct the ld. AO to re-compute the FBT computation as directed above. Accordingly, grounds raised by the assessee are allowed for statistical purposes. - I.T.A No. 1510/Kol/2015 - Dated:- 7-2-2018 - Shri N.V.Vasudevan, JM And Shri M. Balaganesh, AM For The Appellant : Shri A. Biswal, FCA For The Revenue : Shri R.P. Nag, Addl. CIT Sr. DR ORDER Per M.Balaganesh, AM 1. This appeal by the Assessee arises out of the order .....

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gly and arbitrarily confirmed the addition of ₹ 7,91,147 [being 113 (one third) of the total expenditure of ₹ 23,73,442/-] as 'not being incurred for business . 2. For that the Learned Commissioner of Income Tax (Appeals) further erred in not considering the fact that the value of Fringe Benefit Tax [FBT] of ₹ 7,03,886/- [comprising 20% of ₹ 16,09,447/- and 50% of ₹ 7,63,995/-] was disclosed in the return under the head Sales Promotion and Gift and offered for t .....

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e disallowed amount as for FBT only allowable expenses are to be taken into consideration . 4. For that the Learned Commissioner of Income Tax (Appeals) was wrong in not taking out the 1/3rd disallowance of ₹ 7,63,995/- for computation of Fringe Benefit Tax and thereby denied the relief of ₹ 234,628/- in the computation of FBT. 5. The appellant craves leave to add to and/or alter, amend, modify or rescind the grounds hereinabove before or at the time of hearing of the appeal. 3. The .....

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377; 7,63,995/- in its profit and loss account on account of sales promotion expenses and gift and presentation articles to doctors respectively. The assessee was asked to furnish the details of the same together with justification for claiming the same as business expenditure. The assessee could not file the details properly before the ld. AO. The assessee instead filed ledger extracts to show that certain gift articles were purchased by it to serve its purpose towards so-called sales promotion .....

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dingly, concluded that these items cannot be said to have been given as an incentive for sale. Accordingly the Ld. AO concluded that the assessee has not been able to prove as to whether the said expenditure were incurred wholly and exclusively for the purpose of business of the assessee. The Ld. AO accordingly sought to disallow 1/3rd of the total expenditure of ₹ 23,73,442/- amounting to ₹ 7,91,147/- in the assessment. Before the Ld. CIT(A), the assessee stated that the entire sale .....

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erved that the ld. AO disallowed the expenditure holding that the expenditure was not laid out wholly and exclusively for the purpose of business and that it was not disallowed on the ground that the expenditure was representing fringe benefits. Accordingly, he dismissed the primary and alternative argument of the assessee and upheld the action of the ld. AO. Aggrieved, the assessee is in appeal before us. 4. The Ld. AR fairly pleaded that when a particular item of expenditure has been disallowe .....

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assessment year 2007-08 in the case of the assessee. 5. In response to this, the Ld. DR vehemently relied on the order of the Ld. CIT(A). 6. We have heard the rival submissions. We find that the Ld. AO has fairly pleaded only for exclusion of the amount disallowed in the sum of ₹ 7,91,147/- from the computation of fringe benefit tax which, in our considered opinion, is just and fair. We find that CBDT Circular No. 8/2005 dated 29.08.2005 had in response to Frequently Asked Questionnaire (F .....

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ular seeks to provide a harmonious, purposive and contextual interpretation of the provisions of the Finance Act, 2005 relating to the FBT so as to further the objective of this levy. Whether expenses disallowed under section 37 of the Income Tax Act on the plea that the expenses are personal in nature, would also be liable to FBT? 35. Section 37 of the Income Tax Act provides that any expenditure laid out or expended wholly and exclusively for the purposes of the business or profession shall be .....

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h disallowance would not be liable to FBT. For example, let us assume a firm, being an employer, has incurred an expenditure of ₹ 100 towards tour and travel, of which ₹ 40, is personal in nature. Therefore, the amount of ₹ 40, being personal in nature, will be disallowed under section 37 of the Income Tax Act, and FBT will be levied on 20% of the amount of ₹ 60 (Rs. 100 - ₹ 40). Whether expenditure identified as bogus expenditure in income tax assessment will be li .....

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