SERCO BPO P.LTD, MUMBAI V. DCIT 1(2), MUMBAI

CO 112/MUM/2014

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9728 (ITAT-MUMBAI)
• Duration Of Justice: 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 04-06-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2006-2007
• Appeal Filed On: 19-05-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S K TYAGI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AN D DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 1794/MUM/2013 ASSESSMENT YEAR: 2006-07 DCIT 1(2) MUMBAI VS. M/S. INTELENET GLOBAL SERVICES PVT LTD. INTELENET TOWER, MINDSPACE, MALAD (W), MUMBAI -400 090 (APPELLANT) (RESPONDENT) C.O. NO. 112/MUM/2014 (ARISING OUT OF ITA NO. 1794/MUM/2013) ASSESSMENT YEAR: 2006-07 M/S. SERCO BPO PVT. LTD. SERCO HOUSE, PLOT CST NO. 1406-A/28 MINDSPACE, MALAD (W) MUMBAI-400 090 VS. DCIT 1(2) MUMBAI (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. :- AAACO 6297 N ASSESSEE BY : SHRI S.K. TYAGI REVENUE BY : SHRI SANJEEV JAIN DATE OF HEARING : 04.06.2014 DATE OF PRONOUNCEMENT : 04.06.2014 O R D E R PER DR. S.T.M. PAVALAN: THESE APPEAL AND THE CROSS OBJECTION FILED RESPECTI VELY BY THE REVENUE AND THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD.CIT(A)-2, MUMBAI DATED 06.12.2012 FOR THE ASSESSMENT YEAR 2006-07. 2. IN THE APPEAL FILED BY THE REVENUE, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN STATING THAT THE CONVEYANCE EXPE NSES MET OUT BY THE ASSESSEE FOR ITS EMPLOYEES FROM PLACE OF WORK TO PL ACE OF RESIDENCE AND VICE VERSA WILL NOT BE LIABLE TO FBT RELYING ON THE BOAR D CIRCULAR NO. 8 OF 2005, DATED 29.08.2005 ISSUED BY THE CBDT (227 ITR (ST) 2 0) QUESTION NO. 104? ITA NO. 1794/MUM/2013 C.O. NO. 112/MUM/2014 (ARISING OUT OF ITA NO. 1794/MUM/2013) M/S. SERCO BPO PVT. LTD. ASSESSMENT YEAR: 2006-07 2 2. WHETHER ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE RS.45,13,848/- FROM THE TOTAL VALUE OF FRINGE BENEFIT COMPUTED IN THE R E-ASSESSMENT. 3. BRIEFLY STATED, THE ASSESSEE, A COMPANY HAD ELEC TRONICALLY FILED ITS FBT RETURN U/S 115WD(1) ON 22.11.2006 DECLARING VALUE OF FRING E BENEFITS U/S 115WC READ WITH SECTION 115WB AT RS.55,50,232/-. THE ORIGINAL ASSES SMENT WAS COMPLETED U/S 115WE(3) DETERMINING THE TOTAL VALUE AT RS.58,14,85 6/-. THEREAFTER, THE ASSESSMENT WAS REOPENED AND THE AO COMPLETED THE REOPENED FBT ASSESSMENT AND ADDED THE FOLLOWING AMOUNTS WITH THE TOTAL VALUE OF FRINGE BE NEFITS IN THE RETURN: (I) ON ACCOUNT OF SUBSIDIZED TRANSPORT OF RS.2,42,87,175/- AND (II) ON ACCOUNT OF CONVEYANCE EXPENSES OF RS.45,13,848/-. ON APPEAL, T HE LD. CIT(A) DELETED THE ADDITION OF RS.2,42,87,175/- ON THE REASON THAT CIR CULAR NO. 14 OF 2006 DATED 28.12.2006 SPECIFICALLY EXEMPT THE EXPENDITURE OF E MPLOYEES INCURRED ON THE TO AND FRO JOURNEYS FROM RESIDENCE TO OFFICE THEIR EMPLOYE ES FROM THE PROVISION OF FBT. THE LD.CIT(A) DELETED THE FURTHER ADDITION OF RS.45,13, 848/- AS THE ASSESSEE IS ENTITLED TO INCLUDE ONLY 5% AS AGAINST THE AO MAKING IT TO 2 0% SINCE THE ASSESSEE ALSO ENGAGED IN PROVIDING BPO SERVICES. AGGRIEVED BY THE IMPUGNED DECISION, THE REVENUE HAS RAISED THESE GROUNDS IN THE APPEAL BEFO RE US. 4. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD, ON THE ISSUE OF ADDITION ON ACCOUNT OF SUBSIDIZED TRANSPORT OF R S.2,42,87,175/, IT IS PERTINENT TO MENTION THAT PARA 29.5 OF CIRCULAR NO. 14 OF 2006 D ATED 28.12.2006 ISSUED BY WAY OF EXPLANATORY NOTE ON THE PROVISION OF FINANCE ACT 20 06 READS AS FOLLOWS:- TO SPECIFICALLY EXEMPT EXPENDITURE OF EMPLOYERS, IN CURRED ON THE TO AND FRO JOURNEYS FROM RESIDENCE TO OFFICE OF THEIR EMPLOYEE S, FROM THE PROVISIONS OF THIS TAX, SUB-SECTION 3 OF SECTION 115WB HAS BEEN A MENDED TO PROVIDE THAT ANY BENEFIT OR AMENITY IN THE NATURE OF FREE OR SUB SIDIZED TRANSPORT OR ANY SUCH ALLOWANCE PROVIDED BY THE EMPLOYER TO HIS EMPL OYEES FOR JOURNEYS BY THE EMPLOYEES FROM THEIR RESIDENCE TO THE PLACE OF WORK OR SUCH PLACE OF WORK TO THE PLACE OF RESIDENCE SHALL NOT FORM PART OF THE FRINGE BENEFITS. HOWEVER, ACCORDING TO THE AO, THE SAID BENEFIT IS E XEMPT FROM FBT FROM ASSESSMENT YEAR 2007-08 ON WARDS. THE SAID VIEW OF THE AO HAS NOT BEEN ACCEPTED BY THE LD. CIT(A) AS AMENDED OF SECTION 115WD(3) HAS BEEN BROU GHT VIDE FINANCE ACT 2006 AND THUS THE CONTENTION OF THE AO THAT THE AFORESAI D BENEFIT IS EXEMPT FROM FBT FROM A.Y. 2007-08 ON WARDS ONLY IS TOTALLY ERRONEOU S AND UNTENABLE. AFTER ITA NO. 1794/MUM/2013 C.O. NO. 112/MUM/2014 (ARISING OUT OF ITA NO. 1794/MUM/2013) M/S. SERCO BPO PVT. LTD. ASSESSMENT YEAR: 2006-07 3 CONSIDERING THE REASONING OF THE LD. CIT(A) FOR DEL ETING THE IMPUGNED ADDITION OF RS.2,42,87,175/ MADE BY THE AO, WE DO NOT FIND ANY JUSTIFIABLE REASON TO INTERFERE WITH THE SAID DECISION AND THUS THE SAME IS UPHELD. 5. AS REGARDS THE SECOND ISSUE WHETHER THE ASSESSEE IS ENTITLED TO INCLUDE ONLY 5% OF THE CONVEYANCE EXPENSES FOR FBT PURPOSES, IT IS PERTINENT TO MENTION THAT THE LD.CIT(A) HAS NOTED THAT OUT OF THE GROSS INCOME OF RS.271,56,55,082/-, THE ASSESSEE HAS EARNED RS.269,19,26,534/- FROM BPO SER VICES. THIS PARTICULAR FACT ESTABLISHES THAT THE ASSESSEE HAS TO BE CONSIDERED AS A COMPANY ENGAGED IN PRODUCTION OF COMPUTER SOFTWARE AND THEREFORE, ONLY 5% OF THE CONVEYANCE EXPENSES SHOULD BE TAKEN FOR FBT PURPOSES. THEREFOR E, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) UPHOLDING THE CLAIM OF THE ASSESSEE AND THUS THE SAME IS UPHELD. 6. IN THE CROSS OBJECTION FILED BY THE ASSESSEE, TH E ASSESSEE HAS CHALLENGED THE REOPENING OF THE ORIGINAL FBT ASSESSMENT ORDERS PAS SED U/S 115WE (3) AND CONSEQUENTLY PASSING THE REASSESSMENT ORDER U/S 115 WE (3) READ WITH SECTION 115WG OF THE ACT. IN THIS CONNECTION, SINCE THE ADD ITIONS MADE BY THE AO HAS BEEN DELETED BY THE LD. CIT(A) AND THE SAID DELETIONS HA VE BEEN UPHELD VIDE OUR ADJUDICATION AFOREMENTIONED, THERE IS NO REQUIREMEN T OF ADJUDICATING THE CROSS OBJECTION FILED BY THE ASSESSEE AGAINST THE REOPENI NG PROCEEDINGS. 7. IN THE RESULT, THE APPEAL AND THE CROSS OBJECTIO N FILED BY THE REVENUE AND THE ASSESSEE RESPECTIVELY ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF JUNE, 2014. SD/- SD/- (D. KARUNAKARA RAO) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 04.06.2014. *SRIVASTAVA ITA NO. 1794/MUM/2013 C.O. NO. 112/MUM/2014 (ARISING OUT OF ITA NO. 1794/MUM/2013) M/S. SERCO BPO PVT. LTD. ASSESSMENT YEAR: 2006-07 4 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR I BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.