INTELENET GLOBAL SERVICES P.LTD, MUMBAI V. DCIT 1(2), MUMBAI

ITA 1085/MUM/2010

• Counselvise Citation: 108519914 RSA 2010
• Duration Of Justice: 3 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 23-09-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 10-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: S K TYAGI
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI . . , ! ' #'' '$ , % ! & BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER . : 1085 / / 2010 A.YS. 2006-07 ITA NO. : 1085/MUM/2010 (ASSESSMENT YEAR: 2006-07) INTELENET GLOBAL SERVICES PVT. LTD., PLOT CST NO. 1406-A28, MINDSPACE, MALAD (W), MUMBAI -400 064 .: PAN: AAACI 7387 P VS DY CIT- 1 (2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K. TYAGI RESPONDENT BY : SHRI O.P. SINGH /DATE OF HEARING : 23-09-2013 !' / DATE OF PRONOUNCEMENT : 09-10-2013 * O R D E R #'' '$ , : PER VIVEK VARMA, JM: THE APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) 2, MUMBAI, DATED 18.11.2009, WHEREIN, THE FOLLOWING GROUNDS HAVE BEEN TAKEN: 1. THE LEARNED (LD) CIT(A) ERRED IN CONFIRMING TH E ORDER OF THE ASSESSING OFFICER (A0) UNDER SECTION 115WE(3) OF THE INCOME-T AX ACT, 1961 (THE ACT), IN NOT TREATING THE EXPENDITURE OF RS. 13,23, 122/- INCURRED ON FOOD OR BREVERAGES BY THE EMPLOYEES OF THE APPELLANT THR OUGH FOOD VOUCHERS, AS EXEMPT FROM THE FRINGE BENEFIT TAX. 2. THE LD CIT(A) ERRED IN NOT CORRECTLY APPRECIATI NG THE CONDITIONS LAID DOWN UNDER SECTION 115WB(2)(B)(II) OF THE ACT, FOR THE P URPOSE OF EXEMPTION OF THE EXPENDITURE INCURRED THROUGH PAID VOUCHERS, FOR THE PURCHASE OF FOOD OR BEVERAGES BY THE EMPLOYEES OF THE APPELLANT . 3. THE LD CIT(A) FAILED TO APPRECIATE THAT THERE W AS ABSOLUTELY NO DIFFERENCE IN THE CONDITIONS FOR EXEMPTION OF PERQU ISITE IN RESPECT OF FREE FOOD OR BEVERAGES AS LAID DOWN UNDER RULE 3(7)(III) OF THE I.T. RULES 1962 INTELENET GLOB AL SERVICES PVT. LTD. ITA NO. 1085/MUM/2010 2 AND THOSE RELATING TO EXEMPTION FROM FRINGE BENEFIT TAX UNDER SECTION 11 5WB(2)(B)(II) OF THE ACT. 4. THE LD CIT(A) FAILED TO APPRECIATE THAT UNDER B OTH THE AFORESAID PROVISIONS, THE RELEVANT CONDITION IS THAT THE EXPE NDITURE INCURRED IN RESPECT OF FOOD OR BEVERAGES SHOULD BE THROUGH PAID VOUCHERS, WHICH ARE NOT TRANSFERABLE AND USABLE ONLY AT EATING JOIN TS OR OUTLETS. 5. THE LD CIT(A) FAILED TO APPRECIATE THAT THE PRI NTING OF THE NAMES OF THE EMPLOYEES ON THE FOOD VOUCHERS WILL NOT SERVE ANY P URPOSE AND BESIDES, THE PRINTING OF THE NAMES OF THE EMPLOYEES ON FOOD VOUCHERS WILL BE A VERY COSTLY AND CUMBERSOME JOB, WHICH IS TOTALLY IM PRACTICABLE. 6. THE LD CIT(A) FAILED TO APPRECIATE THAT THE PROV ISION OF FREE FOOD OR BEVERAGES TO THE EMPLOYEES IS A WELFARE MEASURE AND THEREFORE, THE STATUTORY PROVISIONS RELATING THERETO ARE REQUIRED TO BE INTERPRETED LIBERALLY AND IN FAVOUR OF THE ASSESSEE. 2. THE SOLITARY ISSUE PERTAINS TO APPLICABILITY OF SECTION 115WE(3). 3. THE FACTS ARE THAT THE ASSESSEE FILED FBT RETURN DEC LARING VALUE AT RS. 55,50,232/-. THE AO, WHILE DEALING WITH THE ISSUE MADE AN ADDITION OF RS. 13,23,122/-, BEING EXPENDITURE INCURRED TOWAR DS PAID FOOD VOUCHERS TO ITS EMPLOYEES AS FBT. THE CIT(A) SUSTAINE D THE ADDITION MADE BY THE AO. 4. AGGRIEVED THE ASSESSEE IS NOW BEFORE THE ITAT. 5. BEFORE US, THE AR, PRODUCED BEFORE US THE SAMPLE OF FO OD VOUCHER GIVEN TO THE EMPLOYEES FOR A PARTICULAR DENOMINAT ION AND ON THE BACK OF THE VOUCHER, IT IS CATEGORICALLY MENTIONED THA T THE FOOD VOUCHER IS NON TRANSFERABLE AND HENCE, THE AR PLEADED TH AT FOOD VOUCHERS GIVEN TO THE EMPLOYEES ARE EXEMPT FROM THE CH ARGE OF FBT. AT THE TIME OF HEARING, THE AR RELIED ON THE DECISION OF CIT VS RELIANCE INDUSTRIES LTD., REPORTED IN 308 ITR 82, WHEREIN HONBLE G UJARAT HIGH COURT WAS ON THE ISSUE OF TDS, VIS-A-VIZ MEAL COUPONS DIST RIBUTED BY THE COMPANY TO ITS EMPLOYEES. THE HONBLE GUJARAT HIGH C OURT IN THAT CASE HELD THAT THE ASSESSEE CANNOT ENVISAGE AS TO WHICH EMPLOY EE WOULD MISUSE THE COUPON AND THE ASSESSEE CANNOT BE C ALLED UPON TO PRESUME THAT A PARTICULAR PERCENTAGE OF EMPLOYEES SH ALL MISUSE THE FACILITY SO AS TO WARRANT DEDUCTION OF TAX AT SOURCE . 6. THE AR PLEADED THAT SAME ANALOGY HAS TO BE ADOPTED IN SO FAR AS FBT APPLICABILITY ON THE INSTANT ISSUE. INTELENET GLOB AL SERVICES PVT. LTD. ITA NO. 1085/MUM/2010 3 7. THE DR PLACED RELIANCE ON THE DECISIONS OF THE REVENUE AUTHORITIES. 8. AFTER HEARING THE SUBMISSIONS OF THE CONTESTING PARTIES AND TAKING INTO CONSIDERATION THE SAMPLE FOOD COUPON, ON WHICH, THE TERM OF NON TRANSFERABILITY IS INSCRIBED. THE FACT, THE DR HAS NOT BEEN ABLE TO DISTINGUISH FROM THE ISSUE PLACED BEFORE THE HONBLE GU JARAT HIGH COURT IN THE CASE OF RELIANCE INDUSTRIES LTD. (SUPRA), EXCE PT FROM THE FACT, THAT IT PERTAINED TO TDS PROVISIONS, NO OTHER INPUTS HAD BEEN PROVIDED BY THE DR. HOWEVER, THE CRUX OF THE ISSUE THAT THE EMPLOYER ISSUES NON TRANSFERABLE FOOD VOUCHERS REMAINS UNDISPUTED, WHICH, ACCORDING TO US, IS THE BASIC ISSUE BEFORE US. THIS IS ALSO UNDISPUTED THAT THE ASSESSEE ISSUES NON TRANSFERABLE FOOD COUPONS TO ITS EMPLOYEES, TO BE USED BY THE EMPLOYEES ONLY. IF, THE FACILIT Y, IS MISUTILIZED BY ITS EMPLOYEES (SOME TIMES), CANNOT BY ITSELF ATT RACT THE PROVISIONS OF FBT ON THE ASSESSEE, BECAUSE, AS THE HONB LE GUJARAT HIGH COURT HAS OBSERVED, ASSESSEE, CANNOT BE CALLED UPON TO PRESUME THAT A PARTICULAR PERCENTAGE OF EMPLOYEES SHALL MISUSE THE FACILITY , THIS ANALOGY, WOULD SQUARELY APPLY ON THE INSTANT ISSUE. 9, WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND DIR ECT THE AO TO DELETE THE ADDITION MADE AT RS. 13,23,122/-. 10. THE APPEAL IS, THEREFORE, ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH OCTOBER, 2013. SD/- SD/- ( . . ) ( #'' '$ ) ! ! (P.M. JAGTAP) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 9 TH OCTOBER, 2013 INTELENET GLOB AL SERVICES PVT. LTD. ITA NO. 1085/MUM/2010 4 / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) & & ' ( ) - 2 MUMBAI / THE CIT (A)-2, MUMBAI. 4) & & ' 1, MUMBAI / THE CIT1, MUMBAI, 5) )*+ , & , & , , -. / THE D.R. I BENCH, MUMBAI. 6) +/ 0 COPY TO GUARD FILE. &12 / BY ORDER / / TRUE COPY / / [ 3 / 4 5 & , , -. DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *784 . . * CHAVAN, SR. PS