M/s Mindtree Limited, Bangalore V. ACIT, Bangalore

ITA 1087/BANG/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68358 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 05-12-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 29-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H L SOWMYA ACHARDR
• Keywords: Business expenditure

Judgement Text

ITA NO.1087 OF 2012 MINDTREE LTD BANGALORE PAGE 1 OF 15 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE CBENCH, BANGALORE BEFORE SHRI N. BARTHVAJASANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K. JUDICIAL MEMBER ITA NO. 1087/BANG/2012 (ASSESSMENT YEAR: 2009-10) M/S. MINDTREE LTD, GLOBAL VILLAGE, RVCE POST MYSORE ROAD BANGALORE 560059 PAN: AABCM 8839 K VS. ASSTT. COMMISSIONER OF INCOME TAX (LTU) BANGALORE (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI TATA KRISHNA, ADVOCATE DEPARTMENT BY: SMT.H.L.SOWMYA ACHAR,DR DATE OF HEARING: 05/12/2013 DATE OF PRONOUNCEMENT: 05/12/2013 O R D E R PER GEORGE GEORGE K. J.M. 1. THIS APPEAL OF THE ASSESSEE COMPANY IS DIRECTED AGAINST THE ORDER OF THE CIT (A)-LTU, BANGALORE, DA TED 21.6.2012. THE RELEVANT ASSESSMENT YEAR IS 2009-10. 2. THE CONCISE GROUNDS RAISED BY THE ASSESSE E, IN ITS MEMORANDUM OF APPEAL, ARE AS UNDER: (1) THAT THE CIT (A)-LTU WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS.1,29,473/- BEING 20% OF RS.6.47 LAKHS INCURRED TOWARDS EVENT MANAGEMENT WHILE COMPUTING THE VALUE OF TAXABLE FRINGE BENEFITS [FB]; (2) THAT THE CIT (A) WAS ALSO NOT JUSTIFIED IN UPHOLDING THE ADDITIONS OF ITA NO.1087 OF 2012 MINDTREE LTD BANGALORE PAGE 2 OF 15 (I) RS.6,87,089/- BEING 20% OF RS.34,35,443/- PAID TO ORG. INDIRECT; (II) RS. 41,772/- BEING 20% OF RS.2,08,860/- PAID TO EXTERNAL FACULTIES; & (III)RS.38,38,958/- BEING 20% OF RS.1,91,94,739/- PAID TO ORG. DIRECT INCURRED TOWARDS STAFF TRAINING . 3. BRIEFLY STATED, THE FACTS OF THE ISSUES ARE AS UNDER: THE ASSESSEE IS A COMPANY ENGAGED I N THE BUSINESS OF SOFTWARE DEVELOPMENT AND ALLIED ACTIVITIES. DURING THE YEAR UNDER DISPUTE, THE ASSESSEE HAD FILED ITS RETURN OF FRING E BENEFITS ON 30.9.2009, DECLARING TAXABLE FB OF RS.8,85,08,943/- WHICH WAS REVISED ON 23.3.2010. DURING THE COURSE OF PROCEEDI NGS, THE ASSESSEE HAD FURNISHED THE RECONCILIATION OF FB WIT H THE FINANCIAL STATEMENTS. THE AO HAD CONCLUDED THE ASSESSMENT U/ S 115 WE(3) BY MAKING ADDITIONS ON THE FOLLOWING EXPENSES : (I) RS.1,29,473/- BEING 20% OF RS.6.47 LAKHS INCURR ED TOWARDS EVENT MANAGEMENT; (II) RS.6,87,089/- BEING 20% OF RS.34.35 LAKHS PAID TO ORG. INDIRECT TOWARDS STAFF TRAINING; (III) RS.41,772/- BEING 20% OF RS.2.08 LAKHS PAID T O EXTERNAL FACULTIES TOWARDS STAFF TRAINING; AND (IV) RS.38,38,958/- BEING 20% OF RS.1.91 CRORES PAI D TO ORG. DIRECT TOWARDS STAFF TRAINING. 3.1. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUES WI TH THE CIT (A)-LTU. AFTER DUE CONSIDERATION OF THE ASSESS EES CONTENTIONS, THE CIT (A)-LTU HAD RECORDED HER FINDI NGS, UNDER EACH ITEM-WISE, AS UNDER: (I) RS.1,29,473/- : ITA NO.1087 OF 2012 MINDTREE LTD BANGALORE PAGE 3 OF 15 4.2. (E) I AM OF THE CONSIDERED OPINION THAT THE N ATURE OF EXPENSES LISTED IN TABLE I ABOVE WHEREIN THE APPELLANT HAS FURNISHED THE BREAK-UP OF EVENT MANAGEMENT EXPENDITURE MAKES IT ABUNDANTLY CLEAR THAT SUCH EXPENSES ARE IN THE NATURE OF ENTERTAINMENT LIABLE TO BE TREATED AS A DEEMED BENEFIT U/S 115WB(2)(A) RATHER THAN AS EXPENDITURE INCURRED TOWARDS CONFERENCE LIABLE TO BE TAXED U/ S 115WB(2)(C). IT IS QUITE EVIDENT FROM A PLAIN READ ING OF THE FINANCE MINISTERS SPEECH DT 28.2.2005 AND FROM THE MEMORANDUM TO THE FINANCE BILL, 2005 THAT WHERE THE BENEFITS ARE USUALLY ENJOYED COLLECTIVELY BY THE EMPLOYEES AND WHERE THE EXPENDITURE INCURRED BY THE EMPLOYER IS OSTENSIBLY FOR PURPOSES OF THE BUSI NESS BUT INCLUDES, IN PARTIAL MEASURE, A BENEFIT OF A PERSONAL NATURE, SUCH EXPENSES WOULD CLEARLY FALL WITHIN THE PURVIEW OF FBT. IN THE INSTANT CASE, TH E EXPENSES TOWARDS EVENT MANAGEMENT HAVE BEEN LARGELY INCURRED TOWARDS INAUGURATION OF ITS CHENNA I FACILITY AND THE CRICKET MATCH WHICH WERE FOR THE COLLECTIVE BENEFIT OF ITS EMPLOYEES BETWEEN DIFFERE NT PROJECT TEAMS. OBVIOUSLY, THE VERY NATURE OF THE EXPENSES INCURRED MAKES IT CRYSTAL CLEAR THAT THE E VENT MANAGEMENT EXPENSES INCURRED TO THE TUNE OF RS.6,47,363/- IS A DEEMED FRINGE BENEFIT LIABLE FOR FBT U/S 115WB(2)(A). THIS IS EVEN MORE APPARENT FROM A PERUSAL OF THE ANSWER TO Q NO.49 OF CBDT CIRCULAR NO.8/2005 DT. 29.8.2005 WHICH IS REPRODUCED BELOW: 49. WHAT IS THE SCOPE OF THE EXPRESSION ENTERTAINMENT IN CLAUSE (A) OF SECTION 115WB(2)? ANS: THE MEANING OF THE WORD ENTERTAINMENT IN CLAUSE (A) OF SUB-SECTION (2)( OF S. 115WB IS OF WI DE IMPORT . IT INCLUDES ALL EXPENDITURE IN CONNECTION WITH EXHIBITION, PERFORMANCE, AMUSEMENT, GAME OR SPORT, FOR AFFORDING SOME SORT OF AMUSEMENT AND GRATIFICATION. (EMPHASIS SUPPLIES) IN VIEW OF THE FOREGOING ANALYSIS, I HAVE NO HESITA TION IN UPHOLDING THE AOS STAND IN TREATING EVEN MANAGEMENT EXPENSES TO THE TUNE OF RS.6,47,363/- AS A DEEMED FRINGE BENEFIT EXCEPT THAT INSTEAD OF BRIN GING IT TO TAX UNDER THE HEAD CONFERENCE U/S 115WB(2(C ), I AM OF THE VIEW THAT IT SHOULD RIGHTLY BE BROUGHT TO TAX UNDER THE HEAD ENTERTAINMENT U/S 115WB(2)(A) ITA NO.1087 OF 2012 MINDTREE LTD BANGALORE PAGE 4 OF 15 ( II) RS.6,87,089/-, RS.41,772/- & RS.38,38,958/- BEING STAFF TRAINING, STAFF TRAINING EXPENSES EXTERNAL FACULTY & STAFF TRAINING EXPENSES RESPECTIVELY : 5.2. AS ALREADY POINTED OUT IN PARA 4.2, CLAUSES (A) TO (E), IT WAS EVIDENT THAT THE PURPOSE OR RATIONALE B EHIND INTRODUCTION OF FBT PROVISIONS WAS TO TAX A BENEFIT WHICH WAS ENJOYED COLLECTIVELY BY THE EMPLOYEES WHICH WAS ENJOYED COLLECTIVELY BY THE EMPLOYEES WHICH WAS HITHERTO UNTAXED IN THE HANDS OF THE EMPLOYEES AND IN R/O WHICH THE EMPLOYER WAS CLAIMING DEDUCTION. LIKEWISE, AN EXPENDITURE WHICH DID NOT RESULT IN ANY BENEFIT TO AN EMPLOYEE WOULD NOT BE LIABLE FOR FBT AS FBT WAS LEVIABLE ONLY IN A CAS E WHERE EXPENDITURE WAS INCURRED BY THE EMPLOYER OSTENSIBLY FOR THE PURPOSE OF BUSINESS BUT INCLUDED PARTIALLY A BENEFIT OF A PERSONAL NATURE WHICH COUL D NOT BE ATTRIBUTED OR WAS DIFFICULT TO ATTRIBUTE. I T IS CRYSTAL CLEAR FROM THE FINANCE MINISTERS SPEECH AN D MEMORANDUM EXPLAINING THE FBT PROVISIONS REPRODUCED IN PARA 4.2 ABOVE THAT THE RATIONALE FOR LEVYING FBT ON THE EMPLOYER LIES IN THE INHERENT DIFFICULTY IN ISOLATING THE PERSONAL ELEMENT WHEN THERE IS COLLECTIVE ENJOYMENT OF SUCH BENEFITS AND IN ATTRIBUTING THE SAME DIRECTLY TO THE EMPLOYEE. IT FURTHER PROVIDES THAT WHERE ATTRIBUTION OF THE PERS ONAL BENEFIT POSES PROBLEMS, OR FOR SOME REASONS, IT IS NOT FEASIBLE TO TAX BENEFITS IN THE HANDS OF THE EMPLOY EE, IT IS PROPOSED TO LEVY A SEPARATE TAX KNOWN AS FBT ON THE EMPLOYER ON THE VALUE OF SUCH BENEFITS PROVIDED OR DEEMED TO HAVE BEEN PROVIDED TO THE EMPLOYEES. THUS, THE INTENTION OF CREATION OF A DEEMING FICTIO N UNDER SECTION 115WB(2) IS TO INCLUDE AN EXPENDITURE RESULTING IN COLLECTIVE ENJOYMENT OF FRINGE BENEFIT S BY THE EMPLOYEES AND IT IS DIFFICULT OR NOT FEASIBLE T O ATTRIBUTE SUCH BENEFIT PERSONALLY TO EMPLOYEES. 5.2.1. IN THE INSTANT CASE, IT IS QUITE EVIDENT FRO M THE NATURE OF THE STAFF TRAINING EXPENSES INCURRED BY T HE APPELLANT ON ITS EMPLOYEES THAT BOTH ELEMENTS OF EMPLOYER EMPLOYEE RELATIONSHIP AS WELL AS COLLECT IVE BENEFIT TO THE EMPLOYEES ARE CLEARLY VISIBLE AND OMNIPRESENT THOUGH INCIDENTALLY THIS MAY ULTIMATELY ITA NO.1087 OF 2012 MINDTREE LTD BANGALORE PAGE 5 OF 15 RESULT IN IMPROVING PRODUCTIVITY IN THE LONG RUN. THE APPELLANT PLACED RELIANCE ON Q NO.51 OF THE BOARDS CIRCULAR WHEREIN THE BOARD CLARIFIED IN ITS ANSWER TO THE QUERY AS TO WHETHER EXPENDITURE INCURRED DURING IN-HOUSE EMPLOYEE TRAINING WOULD BE CONSIDERED AS CONFERENCE EXPENSES DEEMED TO BE A FRINGE BENEFIT U/S 115WB(2)(C), THE BOARD CLARIFIED THAT THOUGH FB T WAS NOT ENVISAGED ON EXPENDITURE INCURRED FOR PURPOSE OF IMPARTING IN-HOUSE TRAINING TO EMPLOYEES , FBT WOULD BE PAYABLE ON ANY EXPENDITURE INCURRED TOWARDS FOOD & BEVERAGE, TOUR & TRAVEL AND LODGING & BOARDING IN CONNECTION WITH SUCH IN-HOUSE TRAINING OF EMPLOYEES. AT THE OTHER END OF THE SPECTRUM, IT IS PERTINENT TO NOTE THAT EVEN WITH REGARD TO EXPENDIT URE INCURRED FOR ATTENDING TRAINING PROGRAMS ORGANIZED BY TRADE BODIES OR INSTITUTIONS, VIDE ANSWER TO Q NO.5 4, THE BOARD CLARIFIED THAT SINCE A TRAINING PROGRAM ENTAILS A CONGREGATION OF A NUMBER OF PERSONS FOR DISCUSSION OR EXCHANGE OF VIEWS, EXPENDITURE INCURR ED FOR ATTENDING TRAINING PROGRAMS ORGANIZED BY TRADE BODIES OR INSTITUTIONS OR ANY OTHER AGENCIES FELL W ITHIN THE SCOPE OF PROVISIONS RELATING TO EXPENDITURE INC URRED FOR PURPOSES OF CONFERENCE CONTAINED IN SEC. 115WB(2)(C) AND WOULD BE LIABLE TO FBT. HOWEVER, I T IS ABUNDANTLY CLEAR THAT BOTH THE QUERIES REFERRED TO ABOVE ARE IN CONNECTION WITH THE APPLICABILITY OR OTHERWISE OF THE DEEMING PROVISIONS OF SEC.115WB(2)(C) WHICH DIRECTLY RELATES TO CONFEREN CE WHEREAS THE AO HAS CLEARLY BROUGHT THE OTHER AMOUNT S TO TAX AS EMPLOYEES WELFARE UNDER THE DEEMING PROVISIONS OF SEC. 115 WB(2)(E). THEREFORE, THE WH OLE ARGUMENT OF WHETHER IN-HOUSE TRAINING INCLUDES WITHIN ITS AMBIT PAYMENT MADE TO EXTERNAL FACULTY O R NOT OR MERELY DENOTES LOCATION IS IRRELEVANT. UNDE R THE CIRCUMSTANCES, I AM INCLINED TO AGREE WITH THE AO T HAT STAFF TRAINING EXPENSES, WHETHER DIRECT, INDIRECT O R EXTERNAL FACULTY, ARE ALL LIABLE TO FBT UNDER THE DEEMING PROVISIONS OF SEC. 115 WB(2)(E).. 3.2. AGGRIEVED, THE ASSESSEE HAS COME UP WITH THE PRESENT APPEAL. DURING THE COURSE OF HEARING, THE LEARNED AR, EXTENSIVELY QUOTING THE FINANCE MINISTERS SPEECH O N 28.2.2005 AS WELL AS IN THE LOK SABHA ON 2.5.2005, MEMORANDUM TO ITA NO.1087 OF 2012 MINDTREE LTD BANGALORE PAGE 6 OF 15 FINANCE BILL 2005 AND ALSO HIS INTERVIEW WITH THE E CONOMIC TIMES, IT WAS CONTENDED THAT THE FRINGE BENEFITS CA N ONLY MEAN PRIVILEGE, SERVICE, BENEFIT OR AMENITY PROVIDED DIR ECTLY OR INDIRECTLY BY AN EMPLOYER TO HIS EMPLOYEES BY REASO N OF THEIR EMPLOYMENT. TAKING HINT FROM THE PROVISIONS OF S. 115WB (2), IT WAS SUBMITTED THAT THE DEEMING FICTION IN S. 115 WB (2) IS WITH A SPECIFIC PURPOSE. THE FM SPEECH AND MEMORANDUM EXP LAINING THE FBT PROVISIONS STATE THAT THE RATIONALE FOR LEV YING A FRINGE BENEFIT TAX ON THE EMPLOYER LIES IN THE INHERENT DI FFICULTY IN ISOLATING THE PERSONAL ELEMENT WHERE THERE IS COL LECTIVE ENJOYMENT OF SUCH BENEFITS AND ATTRIBUTING THE SAME DIRECTLY TO THE EMPLOYEE. IT WAS SUBMITTED THAT THE MEMORANDUM STATES THAT FBT IS SOUGHT TO BE LEVIED WHERE ATTRIBUTION O F THE PERSONAL BENEFIT POSES PROBLEMS. THUS, IT WAS CONTENDED THA T DEEMING FICTION U/S 115 WB IS ATTRACTED ONLY WHEN THE EXPEN DITURE RESULTS IN SOME BENEFIT TO EMPLOYEES AND/OR IT IS D IFFICULT TO ISOLATE THE PERSONAL ELEMENT OF ENJOYMENT OR BENEFI T. FURTHER, IT WAS CLAIMED THAT S. 115 WB (2) INCORPORATING A DEEM ING FICTION SHOULD BE READ ALONG WITH THE INTENTION OF LEGISLAT URE TO TAX THE COLLECTIVE ENJOYMENT OF BENEFITS BY THE EMPLOYEES A ND THAT U/S 115WB (2), THE EXPENDITURE SHOULD BE INCURRED IN TH E CAPACITY OF EMPLOYER FOR HIS EMPLOYEES AND, THEREFORE, LEGITI MATE BUSINESS EXPENDITURE BEREFT OF ANY BENEFIT TO EMPLOYEES IS O UTSIDE THE AMBIT OF FBT. FOR THIS PROPOSITION, THE LEARNED AR RELIED ON THE CASE LAWS, NAMELY, (I) CIT V. KARNATAKA POWER TRANS MISSION CORPORATION LTD (2012) 20 TAXMANN.COM 142 (KAR); ( II) M/S. TOYOTA KIRLOSKAR MOTOR PVT. LTD V. ADDL CIT 2012-T IOL-313- ITAT, BANG; (III) BOSCH LT V. DCIT (2011) 15 TAXMAN N.COM 187 (BANG); (IV) DCIT V. MESCON 2010-TIOL-419-ITAT-BAN G. ITA NO.1087 OF 2012 MINDTREE LTD BANGALORE PAGE 7 OF 15 3.2.1. REFERRING TO S. 115WB (1), IT WAS SUBMITTED THAT THE EXPRESSION CONSIDERATION FOR EMPLOYMENT WILL ONLY CONSIST OF THOSE BENEFITS WHICH THE EMPLOYEE IS ENTITLED TO AS A MATTER OF RIGHT OR AT HIS OPTION TO BE EXERCISED AS AN EMPLOY EES. IN OTHER WORDS, IT IS THAT BENEFIT WHICH THE EMPLOYEE CAN DE MAND AS HIS CONTRACTUAL RIGHT. IT WAS, FURTHER, CONTENDED THAT THE PHRASE CONSIDERATION FOR EMPLOYMENT AS USED IN S. 115WB (1) HAS TO BE READ WHILE INTERPRETING THE PROVISION OF S. 115 WB (2). IN OTHER WORDS, IT WAS EXPLAINED, IT IS THOSE EXPENDITURE WH ICH ARE INCURRED AS CONSIDERATION FOR EMPLOYMENT AND ENLI STED UNDER CLAUSES (A) TO (Q) IN S. 115 WB (2) OF THE ACT IS S UBJECTED TO FBT. FOR THIS PROPOSITION, THE ASSESSEE HAS RELIED ON TH E FINDINGS OF THE PUNE ITAT REPORTED IN (2012) 149 TTJ (PUNE) 365 . 3.2.2. TO DRIVE HOME HIS POINT, THE LEARNED AR HAD AVERRED THAT AN EXPENSE WOULD BE SUBJECTED TO FBT ONLY IF T HE FOLLOWING ATTRIBUTES ARE PRESENT, NAMELY: > BENEFIT IS GIVEN IN CONSIDERATION FOR EMPLOYMENT ; > BENEFIT IS AVAILABLE TO EMPLOYEE AS A MATTER OF RIGHT; > BENEFIT IS COLLECTIVELY ENJOYED BY THE EMPLOYEES ; > BENEFITS ENJOYED IN THE HANDS OF THE EMPLOYEE AR E QUANTIFIED; > EXPENDITURE INCURRED BY THE EMPLOYER IS OSTENSIB LY FOR THE PURPOSE OF BUSINESS BUT INCLUDES AN ELEMENT OF BENE FIT OF A PERSONAL NATURE WHICH CANNOT BE ATTRIBUTED OR IS DI FFICULT TO ATTRIBUTE; & > PAYMENTS WERE NOT MADE TO THIRD PARTIES. 3.2.3. WITH REGARD TO THE SUSTAINING OF THE ADDITION OF RS.1,29,473/- BY THE CIT (A), IT WAS ARGUED THAT TH E CIT (A) OUGHT NOT TO HAVE TREATED THE EXPENDITURE OF RS.6.4 7 LAKHS AS ENTERTAINMENT EXPENDITURE LIABLE TO BE TREATED AS DEEMED BENEFIT U/S 115WB (2) AS AGAINST THE ADDITION MADE BY THE A O AS ITA NO.1087 OF 2012 MINDTREE LTD BANGALORE PAGE 8 OF 15 CONFERENCE EXPENDITURE LIABLE TO TAX U/S 115WB(2) (C) WITHOUT AFFORDING AN OPPORTUNITY TO THE ASSESSEE TO EXPLAIN ITS STAND, EVEN THOUGH THE DETAILS OF EXPENSES WERE FURNISHED TO THE AO AS WELL AS THE CIT (A)-LTU. IT WAS CONTENDED THAT S. 1 15WB (2) PROVIDES THAT THE FRINGE BENEFIT SHALL BE DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES, IF THE E MPLOYER HAD INCURRED IN THE COURSE OF BUSINESS OR PROFESSION AN Y EXPENSE ON OR MADE ANY PAYMENT FOR THE PURPOSED ENLISTED IN CL AUSES (A) TO (Q). IN THIS CONTEXT, THE ASSESSEE RELIES ON THE C IRCULAR NO.8/2005 DT.29.8.2005 [Q NO.11]. WITH REGARD TO T HE EXPENSES INCURRED IN THE INAUGURATION OF ITS CHENNAI FACILIT Y, IT WAS CONTENDED THAT THE SAME CANNOT BE TERMED AS ENTERTA INMENT AS IT WAS IN THE COURSE OF THE EXPANSION OF THE ASSESS EES BUSINESS AND NOT MEANT FOR THE EMPLOYEES AND THE EMPLOYEES W ERE NOT BENEFITED FROM SUCH EXPENSES AND AS SUCH, THE FBT I S NOT ATTRACTED IN THE INSTANT CASE. IT WAS CLAIMED, THE CIT (A)-LTU ERRED IN TREATING RS.34000/- PAID TOWARDS ITEMS HIR ED FOR PANACHE CRICKET MATCH CONDUCTED BETWEEN DIFFERENT P ROJECT TEAM ALSO AS ENTERTAINMENT. QUOTING THE PROVISIONS OF S. 115 WB(2)(E), IT WAS ARGUED THAT IT WAS EVIDENT FROM TH E EXPLANATION TO CLAUSE (E) THAT IF AN EMPLOYER ORGANIZES ANY SPO RTS EVENT FOR EMPLOYEES, THE AMOUNT EXPENDED ON THE SAID EVENT SH ALL NOT BE CONSIDERED AS EMPLOYEES WELFARE AND THEREBY CANNOT BE REGARDED AS FB AND THE EMPLOYER WAS NOT REQUIRED TO PAY FBT ON THE SAME. IN CONCLUSION, IT WAS ARGUED THAT THE SUM OF RS.6,47,363/- INCURRED BY THE ASSESSEE CANNOT BE RE GARDED AS FB AND, THUS, NOT CHARGEABLE FBT ON THE SAID AMOUNT . 3.2.4. IN RESPECT OF THE STAFF TRAINING EXPENS ES OF RS.34,35,443/-, STAFF TRAINING EXPENSES EXTERNAL FACULTY OF ITA NO.1087 OF 2012 MINDTREE LTD BANGALORE PAGE 9 OF 15 RS.2,08,860/- AND RS.1,91,94,739/- PAID TOWARDS ORG . DIRECT UNDER THE HEAD STAFF TRAINING EXPENSES FOR WHICH 20% OF THE SAME WERE TREATED AS LIABLE TO FBT, AFTER EXPLAININ G THE GRAPHIC DESCRIPTION OF THE STAFF TRAINING EXPENSES AND ALSO ELABORATELY QUOTING THE CLAUSES (A) TO (Q) TO S.115WB(2) OF THE ACT, IT WAS SUBMITTED THAT THE AUTHORITIES BELOW WERE NOT JUSTI FIED IN CONSIDERING THE AFORESAID EXPENSES AS PART OF EMPL OYEE WELFARE U/S 115WB (2)(E) OF THE ACT AS THEY HAVE FAILED TO APPRECIATE THAT THE EXPRESSION WELFARE IN COMMON PARLANCE WOULD M EAN THE HEALTH, HAPPINESS AND FORTUNES OF A PERSON OR A GRO UP. THUS, IT WAS ARGUED, THE EXPENSES INCURRED TOWARDS STAFF TRA INING DO NOT FALL UNDER THE EXPRESSION EMPLOYEE WELFARE. IT W AS, FURTHER, ARGUED THAT THE EMPLOYEES WELFARE IS A COMPREHENSI VE EXPRESSION WHICH WOULD INCLUDE ANY EXPENDITURE WHER E WELFARE OF THE EMPLOYEE IS INVOLVED AS MEDICAL REIMBURSEMEN T, RECREATION FACILITIES OFFERED FOR EMPLOYEES, INCENTIVE AWARDS ETC. IN THE INSTANT CASE, STAFF TRAINING WAS PROVIDED BY THE AS SESSEE WITH AN INTENTION TO INCREASE THE PRODUCTIVITY OF THE EMPLO YEES WHICH WAS EVIDENT FROM THE ABOVE SAID DESCRIPTION. IT WAS AR GUED THAT THE CIT (A) HAD FAILED TO APPRECIATE THAT THE PURPOSE O F PROVIDING THE TRAINING WAS TO EQUIP THE EMPLOYEES TO PERFORM THEI R OFFICIAL DUTIES EFFICIENTLY. IN OTHER WORDS, IT WAS EXPLAIN ED, THE TRAINING PROVIDED WAS TO IMPROVE THE EMPLOYEES PRODUCTIVITY AT THE WORKPLACE BY GIVING CUTTING-EDGE KNOWLEDGE AND IDEA S WHICH DIRECTLY BENEFITS THE ASSESSEE IN CARRYING ON ITS B USINESS MORE EFFICIENTLY. IT WAS, FURTHER, ARGUED THAT THE CIT (A) HAD FAILED TO APPRECIATE THAT IF THE PURPOSE OF INCURRING THE EXP ENSES WAS TO PROTECT THE EMPLOYERS BUSINESS INTEREST AND NOT TH E WELFARE OF/BENEFIT TO THE EMPLOYEES, THE EXPENSES INCURRED THEREON WOULD NOT BE TERMED AS EMPLOYEE WELFARE. IT WAS THE STAND OF ITA NO.1087 OF 2012 MINDTREE LTD BANGALORE PAGE 10 OF 15 THE LEARNED AR THAT THE BOARDS CIRCULAR (SUPRA) HA S CLARIFIED THAT THE EXPENSES INCURRED FOR THE PURPOSE OF IMPAR TING IN-HOUSE TRAINING TO EMPLOYEES WOULD BE OUT OF THE AMBIT OF FBT AND THAT THE AUTHORITIES BELOW HAVE TO FAILED TO SEE THE REA SON THAT THE IMPARTING THE KNOWLEDGE WAS NOT MEANT FOR THE WELFA RE OF THE EMPLOYEES. REFERRING TO THE PROVISIONS OF S. 115WB (2)(C), IT WAS CLAIMED BY THE LEARNED AR THAT THE SAID PROVISION T HAT THE FEE PAID TOWARDS PARTICIPATION IN CONFERENCE WOULD NOT BE PART OF THE DEEMING PROVISION. THE EXPLANATION TO SUB-SECTION (C) ENLISTS EXPENDITURE ARE NOT FORMING PART OF CONFERENCE. AN Y FEE PAID TOWARDS THE PARTICIPATION BY THE EMPLOYEES IN ANY C ONFERENCE IS EXCLUDED FROM THE SCOPE OF S. 115 WB (2)(C) AND, TH US, THE PARTICIPATION FEE IN RESPECT OF A CONFERENCE ORGANI ZED BY AN OUTSIDE ENTITY WAS EXCLUDED FROM THE PURVIEW OF FBT . IF IT WERE SO, EVEN STAFF TRAINING PROVIDED BY THE EMPLOYER SH OULD ALSO BE FREE FROM FBT. THE PURPOSE OF PARTICIPATION, IT WA S CONTENDED, IN ANY CONFERENCE ORGANIZED BY A THIRD PARTY CANNOT BE DIFFERENT FROM PURPOSE OF TRAINING PROVIDED BY THE EMPLOYER I TSELF TO ITS EMPLOYEES. IF THE FORMER CANNOT BE REGARDED AS EMP LOYEE WELFARE, THE LATTER ALSO CANNOT BE REGARDED AS SUCH . WITHOUT PREJUDICE THE RULING OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF RAVI MARKETING (P) LTD V. CIT (2006) 280 IT R 519 (CAL), THE LEARNED AR SUBMITTED THAT THE REPLY TO Q. NO.54 [CIRCULAR NO.8/2005] DOESNT APPLY TO THE PRESENT CASE FOR TH E FOLLOWING REASONS: (I) THE AFORESAID EXPENDITURE WAS NOT INCURRED BY THE ASSESSEE FOR ATTENDING TRAINING PROGRAMMES ORGANIZE D BY TRADE BODIES OR INSTITUTIONS; & (II) THE TRAINING PROGRAMMES AS REFERRED TO IN THE ABO VE QUERY ARE GENERAL IN NATURE WHEREAS IN THE PRESENT CASE, IT WAS AN IN-HOUSE TRAINING PROVIDED TO THE ITA NO.1087 OF 2012 MINDTREE LTD BANGALORE PAGE 11 OF 15 EMPLOYEES OF THE ASSESSEE FOR IMPROVEMENT OF PRODUCTIVITY IN THE NORMAL WORKING HOURS. 3.2.5. IN CONCLUSION, IT WAS SUBMITTED TH AT THE AFORESAID EXPENSES INCURRED TOWARDS STAFF TRAINING WAS NOT FO R THE COLLECTIVE BENEFIT/WELFARE OF THE EMPLOYEES AND, TH US, THE SAME CANNOT BE REGARDED AS FB FOR THE PURPOSE OF CH., XI I-H AND NOT CHARGEABLE TO FBT. 3.2.6 . ON THE OTHER HAND, THE LEARNED DR SUPPORTED THE STAND OF THE AUTHORITIES BELOW. THE LEARNED DR HAD , FURTHER, ARGUED THAT THE ISSUE HAS SINCE BEEN DEALT WITH ELA BORATELY AND, SUBSEQUENTLY, CAME TO A RIGHT CONCLUSION BY THE CIT (A) THAT THE STAFF TRAINING EXPENSES WHETHER DIRECT, INDIRECT OR EXTERNAL FACULTY WERE ALL LIABLE TO FBT UNDER THE DEEMING PROVISIONS OF S. 115 WB (2)(E) OF THE ACT. IT WAS, THEREFORE, PLEADED THAT THE STAND OF THE CIT (A) REQUIRES TO BE SUSTAINED. 3.3. WE HAVE CAREFULLY CONSIDERED THE SUBM ISSIONS OF BOTH THE PARTIES AND ALSO PERUSED THE RELEVANT MATERIALS ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAD INCU RRED THE FOLLOWING EXPENSES: LIGHTING ARRANGEMENTS DURING CHENNAI EVENT RS. 15 ,000 ITEMS HIRED FOR PANACHE CRICKET MATCH FINALS FOR EMPLOYEES HELD IN BANGALORE BETWEEN DIFFERENT PROJECT TEAMS RS. 34,000 SHAREHOLDERS & CREDITORS MEET DURING MERGER OF AZTECSOFT WITH MINDTREE RS. 71,617 RELATES TO MINDTREE CHENNAI FACILITY INAUGURATION RS.5,26,310 ITA NO.1087 OF 2012 MINDTREE LTD BANGALORE PAGE 12 OF 15 3.3.1. THE BREAK-UP OF EXPENSES GROUPED UNDER EVE NT MANAGEMENT EXPENDITURE ACCOUNT ALONG WITH DOCUMENTA RY EVIDENCES WERE FURNISHED BEFORE THE AO AS WELL AS T HE CIT (A) BY THE ASSESSEE. HOWEVER, THE CIT (A)-LTU, AFTER ANAL YSING THE PROVISIONS OF S. 115 WB (1), 115WB(1)(A) OF THE ACT , WAS OF THE VIEW THAT THE NATURE OF EXPENSES CLAIMED MAKE IT AB UNDANTLY CLEAR THAT SUCH EXPENSES WERE IN THE NATURE OF ENT ERTAINMENT LIABLE TO BE TREATED AS A DEEMED BENEFIT U/S 115WB (2)(A) OF THE ACT RATHER THAN AS EXPENDITURE INCURRED TOWARDS CON FERENCE LIABLE TO BE TAXED U/S 115WB(2)(C) OF THE ACT. HOW EVER, ON A CAREFUL CONSIDERATION OF THE EXPENSES INCURRED/CLAI MED BY THE ASSESSEE CLEARLY ESTABLISH THAT THE AFORESAID EXPEN SES WERE INCURRED FOR THE PURPOSES OF (I) LIGHTING ARRANGEME NTS FOR CHENNAI EVENT; (II) SHARE-HOLDERS AND CREDITORS MEE T DURING MERGER OF AZTECSOFT WITH MINDTREE AND (III) MINDTRE E FACILITY INAUGURATION. 3.3.2. FROM THE ABOVE, IT IS ABUNDANTLY CLEAR THAT NONE OF THOSE EXPENSES WERE INCURRED BY THE ASSESSEE TO END URE ANY BENEFIT TO THE EMPLOYEES WHATSOEVER. (I) TO ILLUSTRATE FURTHER, THE ASSESSEE HAD INCURRE D AN EXPENDITURE OF RS.34,000/-FOR ORGANIZING THE CRICKE T MATCH. IN THIS CONNECTION, WE REFER TO EXP LANATION TO S. 115 WB(2)(E) OF THE ACT THAT EXPLANATION FOR THE PURPOSES OF THIS CLAUSE, ANY EXPENDITURE INCURRED OR PAYMENT MADE TO- (I) (VI) ORGANISE SPORTS EVENTS FOR EMPLOYEES, SHALL NO T BE CONSIDERED AS EXPENDITURE FOR EMPLOYEES WELFARE; (II) A SUM OF RS.71,617/- AND RS.15,000/- WERE INCU RRED FOR THE PURPOSE OF ORGANISING SHAREHOLDERS AND CREDITOR S MEET ITA NO.1087 OF 2012 MINDTREE LTD BANGALORE PAGE 13 OF 15 DURING MERGER OF AZTECSOFT WITH MINDTREE. IN THESE EVENTS, THE QUESTION OF INVOLVEMENT OF ANY EMPLOYEES WELFA RE DOESNT ARISE. THEREFORE, INVOKING THE PROVISIONS OF S. 115 WB (2)(A) OF THE ACT DO NOT ARISE AS THERE WAS NO A NY INVOLVEMENT OF ENTERTAINMENT ON THE ISSUE. (III) RS.5,26,310/- WAS CLAIMED BEING EXPENSES INC URRED TOWARDS THE INAUGURATION OF CHENNAI FACILITY. ON A PERUSAL OF THE INVOICE PRODUCED DURING THE COURSE OF HEARIN G, WE FIND THAT THE EXPENSES INCURRED TOWARDS ORGANIZING THE INAUGURATION OF CHENNAI FACILITY [SOURCE: PAGE 65 & 66 OF PB AR]. HERETO, WE FIND THERE WAS NO ANY ELEMENT O F ENTERTAINMENT IN THE SAID EXPENSES SO AS TO BRING IT UNDER THE PURVIEW OF S. 115 WB(2)(A) OF THE ACT. 3.3.3. IN SUBSTANCE, THE ENTIRE EXPENSES OF R S.6.47 LAKHS INCURRED BY THE ASSESSEE CANNOT BE REGARDED AS FB A ND, THEREFORE, FBT IS NOT CHARGEABLE ON THE SAID SUM. THEREFORE, THE CIT (A) WAS NOT JUSTIFIED IN INVOKING THE PROVISION S OF S. 115 WB(2)(A) OF THE ACT TO BRING THE SAID SUM OF RS.6.4 7 LAKHS UNDER THE AMBIT OF FBT. IT IS ORDERED ACCORDINGLY. 4. WITH REGARD TO THE SECOND GROUND OF THE ASSESSEE TO THE EFFECT THAT THE CIT (A) WAS NOT JUSTIFIED IN SU STAINING THE ADDITIONS OF RS.6.87 LAKHS, RS.41,772/- AND RS.38.3 8 LAKHS IN RESPECT OF STAFF TRAINING ETC., WE WOULD LIKE TO PO INT OUT THAT THE AUTHORITIES BELOW HAVE JUSTIFIED IN THEIR STAND THA T THE AFORESAID EXPENSES AS PART OF EMPLOYEE WELFARE U/S 115WB(2) (E) OF THE ACT. HOWEVER, AS RIGHTLY POINTED OUT BY THE LEARNE D AR, THEY HAVE FAILED TO APPRECIATE THAT THE EXPRESSION OF W ELFARE IN ITA NO.1087 OF 2012 MINDTREE LTD BANGALORE PAGE 14 OF 15 GENERAL PARLANCE WOULD MEAN THE HEALTH, FORTUNES OF A PERSON OR A GROUP. SUCH BEING THE SCENARIO, THEY HAVE FAILED TO JUSTIFY THAT THE STAFF TRAINING FALLS WITHIN THE SPHERE OF EMPL OYEE WELFARE. THE PURPOSE OF PROVIDING TRAINING TO ITS EMPLOYEES BY ITS EMPLOYER WAS TO PERFORM THEIR OFFICIAL DUTIES EFFIC IENTLY WHICH WILL DEFINITELY ENHANCE THE PRODUCTIVITY THEREBY THE ULT IMATE BENEFICIARY WOULD BE THE EMPLOYER IN CARRYING ON IT S BUSINESS MORE EFFECTIVELY AND NOT THE EMPLOYEES. IF THE PUR POSE OF INCURRING THE EXPENSES WAS TO PROTECT THE EMPLOYER S BUSINESS INTEREST AND NOT THE WELFARE OF THE EMPLOYEES AND, AS SUCH, IT CANNOT BE TERMED AS EMPLOYEES WELFARE. THESE ASPE CTS HAVE NEITHER BEEN CONSIDERED BY THE AO NOR BY THE CIT (A ). MOREOVER, THE COMPREHENSIVE DETAILS OF EXPENSES INCURRED FOR THE STAFF TRAINING HAVE NEITHER BEEN FURNISHED BEFORE THE AUT HORITIES BELOW NOR DURING THE COURSE OF HEARING BEFORE THIS BENCH BY THE ASSESSEE TO ASCERTAIN AS TO WHETHER THE ASSESSEES CLAIM THAT SUCH EXPENSES WERE NOT LIABLE TO FBT. 4.1. AS COULD BE SEEN FROM THE ORDER OF THE AO AS WELL AS THE FINDING OF THE CIT (A), THE ISSUE HAS NOT BEEN DELIBERATED THOROUGHLY BY THE AUTHORITIES BELOW BEFORE COMING T O AN CONCLUSION THAT THE STAFF TRAINING EXPENSES LIABLE TO FBT UNDER THE DEEMING PROVISIONS OF S. 115WB (2)(E) OF THE AC T, WE ARE OF THE VIEW THAT THE ISSUE REQUIRES A FRESH AND THOROU GH VERIFICATION AT THE LEVEL OF THE AO. TO FACILITATE THE AO TO HA VE A FRESH LOOK ON THE ISSUE AS DIRECTED (SUPRA), THE MATTER IS RESTOR ED ON THE FILE OF THE AO. IN THE MEANWHILE, THE ASSESSEE THROUGH ITS LEARNED AR IS ADVISED TO FURNISH ALL THE RELEVANT DETAILS WITH SU PPORTING DOCUMENTARY EVIDENCE TO ENABLE THE AO TO CARRY OUT THE ITA NO.1087 OF 2012 MINDTREE LTD BANGALORE PAGE 15 OF 15 DIRECTIONS OF THIS BENCH (SUPRA) EXPEDITIOUSLY. IT IS ORDERED ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH DECEMBER, 2013. SD/- SD/- (N. BARTHVAJASANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER BANGALORE DATED 5 TH DECEMBER, 2013. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCHES, BANGALORE