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2018 (2) TMI 436

ss 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 just and fair. We find that CBDT Circular No. 8/2005 dated 29.08.2005 had in response to Frequently Asked Questionnaire (FAQ) has clarified the same. - We find that the similar exclusion from FBT has been done properly by the Ld. AO in the assessment proceedings of assessment year 2007-08. From the facts narrated we find that this sum of disallowance of expenditure had been subjected to FBT. - We are inclined to accept the alternative .....

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nder the head Sales Promotion and Gift and offered for tax accordingly. 3. For that on the fact and in the circumstances the Learned Commissioner of Income Tax (Appeals) while confirming the addition of ₹ 7,91,147/- failed to consider that i) the appellant had already paid tax under FBT on the value computed on the total expenditure under Sales Promotion and Gift so much so that there was double taxation on the quantum of disallowance of ₹ 7,91,147/- and ii) in Assessment year 2007-08, the Learned Assessing Officer had taken out of FBT the 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 dis .....

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beneficiaries or ultimate beneficiaries nor it could explain as to how the gift articles were used for the purpose of business. The Ld. AO observed that these expenses relate to various expensive items for personal or domestic use and they were ranging from few hundreds to few thousands rupees, and accordingly, 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 .....

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assessment order framed on the very same lines for the 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 (FAQ) has clarified the same. For the sake of convenience, the same is reproduced hereunder: Finance Act, 2005- Explanatory Notes on the Provisions relating to Fringe Benefit Tax Circular No. 8/20 .....

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nal 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 liable to FBT? 36. Sub-section (2) of section 115WB provides that fringe benefits shall be deemed to have been provided by the employer to his employees if the employer incurs any expense on or makes any payment for the purposes referred to in clauses (A) to (P) of the said sub-section. If an expenditure is found to be bogus on the plea that it has not been actually incurred, the same is not allowed as a deduction under section 37 of the Inco .....

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