DCIT, V. M/s Wipro Ltd.,

ITA 1224/BANG/2013

• Counselvise Citation: 122421114 RSA 2013
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 07-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B K MANJUNATH
• Keywords: Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NOS.1224 TO 1226/BANG/ 2013 ASSESSMENT YEARS : 2007-08 TO 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 12(5), BANGALORE. VS. M/S. WIPRO LIMITED, DODDAKANNELLI, SARJAPUR ROAD, BANGALORE 560 035. PAN : AAACW 0387R APPELLANT RESPONDENT APPELLANT BY : SHRI FARAHAT HUSSAIN QURESHI, CIT-II(DR) RESPONDENT BY : SHRI B.K. MANJUNATH, C.A. DATE OF HEARING : 29.09.2014 DATE OF PRONOUNCEMENT : 30.09.2014 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THESE ARE APPEALS BY THE REVENUE AGAINST THREE D IFFERENT ORDERS, ALL DATED 30.5.2013 OF THE CIT(APPEALS)-III, BANGALORE RELATING TO ASSESSMENT YEARS 2007-08 TO 2009-10. THE GROUNDS OF APPEAL R AISED BY THE REVENUE IN ALL THESE APPEALS ARE ALSO IDENTICAL. 2. GROUNDS 2 & 3 RAISED BY THE REVENUE READ AS FOLL OWS:- ITA NO. 1224 TO 1226/BANG/2013 PAGE 2 OF 9 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS NO T LIABLE FOR FRINGE BENEFIT TAX IN RESPECT OF REIMBURSEMENT OF M EDICAL EXPENSES TO THE EMPLOYEES UPTO RS. 15,000/- WITHOUT APPRECIATING THE FACT THAT SUCH AMOUNT IS NOT SUBJECT TO TAX IN THE HANDS OF THE EMPLOYEE IN AS MUCH AS THE MEDICAL EXPENSES IN EXCE SS OF RS. 15,000/- IS ONLY CONSIDERED AS PERQUISITES AS PER P ROVISO(V) TO SUBSECTION (2) OF SECTION 17 OF THE 1.T. ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION MA DE BY THE A.O. BY MERELY PLACING RELIANCE ON THE DECISION OF HONBLE ITAT IN ASSESSEES OWN CASE FOR A.Y. 2006-07 WITHOUT APP RECIATING THE FACT THAT THE ORDER OF THE ITAT WAS NOT ACCEPTED BY THE DEPARTMENT AND FILED FURTHER APPEAL BEFORE THE HON BLE HIGH COURT OF KARNATAKA, WHICH IS PENDING FOR ADJUDICATI ON. 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE MANUFAC TURE OF COMPUTER SOFTWARE AND PROVIDING RELATED SERVICES. THE RETURN OF FRINGE BENEFITS FOR THE A.YS. 2007-08 TO 2009-10 WAS FILED BY THE ASSESSEE. THE ASSESSING OFFICER PASSED AN ORDER OF ASSESSMENT DET ERMINING THE CHARGEABLE VALUE OF FRINGE BENEFIT U/S. 115WE(3) OF THE INCOME-TAX ACT, 1961 [THE ACT]. THE ASSESSEE FILED DETAILS INCLU DING THE DIVISIONS AND THE EXPENSES ATTRIBUTABLE TO THE PERMANENT ESTABLISHMEN TS OF THE ASSESSEE OUTSIDE INDIA, WHICH HAVE BEEN EXCLUDED FOR COMPUTI NG THE FRINGE BENEFIT TAX LIABILITY. AFTER CONSIDERING THE SAME, THE AO OBSERVED THAT THE ASSESSEE HAS MADE REIMBURSEMENT OF MEDICAL EXPENSES TO ITS EMPLOYEES AND IT HAS CLAIMED THAT UPTO RS.15,000/- IS EXEMPT IN THE HANDS OF THE EMPLOYEE AND THEY ARE NOT LIABLE TO FRINGE BENEFIT TAX (FBT) . IT WAS SUBMITTED TO THE AO THAT THESE EXPENSES ARE INCURRE D BY THE COMPANY, ITA NO. 1224 TO 1226/BANG/2013 PAGE 3 OF 9 PURSUANT TO THE CONTRACT OF EMPLOYMENT AND IT IS A PART OF COMPENSATION TO ITS EMPLOYEES AND FALLS WITHIN THE PURVIEW OF CON SIDERATION FOR EMPLOYMENT USED IN SEC.115WB(1) BUT IS NOT TAXABLE , AS IT IS A PERQUISITE TAXABLE IN THE HANDS OF THE EMPLOYEE AND FBT IS NOT ATTRACTED MERELY ON THE GROUND THAT THE MEDICAL BENEFIT IS NOT TAXED IN THE HANDS OF THE EMPLOYEE UPTO RS.15,000/- THE CONTENTION OF THE AS SESSEE WAS NOT ACCEPTED BY THE AO AND HE HELD THAT THE EXEMPT PORT ION OF THE MEDICAL REIMBURSEMENT I.E., UPTO RS.15,000/- IS LIABLE TO F BT AS IT IS A FRINGE BENEFIT UNDER SUB-CLAUSE(E) OF SEC.115WB(2) OF THE ACT. HE ACCORDINGLY, BROUGHT TO TAX THE FOLLOWING AMOUNTS:- A.Y. AMOUNT RS. 2007-08 7,74,27,268 (20% OF 38,71,36,341) 2008-09 11,26,94,658 (20% OF 11,26,94,658) 2009-10 16,43,25,077 (20% OF 82,16,25,385) 4. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS), FOL LOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2006-07 IN ITA NO.24(BNG.)/2010, ORDER DATED 21.12.2012, HELD THAT THE ADDITIONS MADE BY THE AO TO THE VALUE OF TAXABLE PERQUISITE HAD TO BE DELETED. 5. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE REVENUE HAS RAISED GROUND NOS. 2 & 3 BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR, WHO SUBMITTED THAT THE AFORESAID ORDER OF THE TRIBUNAL HAS NOT BEEN AC CEPTED BY THE ITA NO. 1224 TO 1226/BANG/2013 PAGE 4 OF 9 DEPARTMENT AND THEREFORE TO KEEP THE MATTER ALIVE, THE AFORESAID GROUNDS HAVE BEEN RAISED BY THE REVENUE. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR . WE FIND THAT THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2006-0 7 IN ITA NO.24(BNG)/2010 HAD DEALT WITH THIS ISSUE AS FOLLOW S:- 8. HAVING HEARD BOTH THE PARTIES AND HAVING CONSI DERED THE RIVAL CONTENTIONS, WE FIND THAT THE B BENCH OF T HIS TRIBUNAL IN THE CASE OF M/S BOSCH LTD., CITED SUPRA, HAS CONSID ERED THE ISSUE AT LENGTH AND HAS HELD THAT THE PAYMENTS MADE BY TH E EMPLOYEES TO THE APPROVED HOSPITALS AND THE SUBSEQUENT REIMBU RSEMENT OF SUCH PAYMENTS TO THE EMPLOYEES BY THE EMPLOYER DO N OT ATTRACT FBT. IT WAS HELD THAT WHEN AN ITEM WHICH IS TO BE TREATED AS PERQUISITE IN THE HANDS OF THE EMPLOYEES, IS EXEMPT IN THE HANDS OF THE INDIVIDUAL EMPLOYEE THE SAME CANNOT BE SUBJE CTED TO FBT. AS ONE OF US I.E THE AM IS A SIGNATORY TO THE SAID ORDER, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINA TE BENCH, THESE GROUNDS OF APPEALS ARE ALLOWED. 8. IN VIEW OF THE AFORESAID DECISION OF THE TRIBUNA L ON THE SAME ISSUE, WE ARE OF THE VIEW THAT THERE IS NO MERIT IN GROUND S NO.2 & 3 RAISED BY THE REVENUE. THE FACT THAT THE REVENUE HAS PREFERRED A N APPEAL AGAINST THE ORDER OF THE TRIBUNAL WILL NOT BE A BAR AT THIS STA GE TO FOLLOW THE DECISION OF THE TRIBUNAL. 9. GROUND NO.4 RAISED BY THE REVENUE READS AS FOLLO WS:- 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT (A) HAS ERRED IN HOLDING THAT THE PROVISIONS OF FBT ARE NOT APPLICABLE IN RESPECT OF SALES PROMOTION EXPENSES I NCLUDING PUBLICITY EXPENSES INCURRED BY THE ASSESSEE DURING THE COURSE OF ITA NO. 1224 TO 1226/BANG/2013 PAGE 5 OF 9 BUSINESS ACTIVITIES WITHOUT APPRECIATING THE FACT T HAT BY VIRTUE OF DEEMING PROVISIONS OF SECTION 115WB(2), THERE IS NO DISTINCTION BETWEEN EXPENSES INCURRED TOWARDS EMPLOYEES AND TOW ARDS NON- EMPLOYEES. 10. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF FAST-MOVING CONSUMER PRODUCTS, WITH A SCHEME IN WHICH SOME PROD UCTS ARE BUNDLED AS FREE ALONG WITH OTHER PRODUCT SOLD BY THE COMPANY T O ITS CUSTOMERS, ACCORDING TO THE ASSESSEE, THE ARRANGEMENT IS IN TH E NATURE OF A COLLATERAL CONTRACT AND AS SUCH THE EXPENDITURE INCURRED IS IN THE NATURE OF A PURCHASE COST AND NOT COST OF SALES PROMOTION. HOWE VER, THE AO BY INVOKING THE PROVISIONS OF SECTION 115WB(2)(D) AND 115WC(1)(C) OF THE ACT REJECTED THE ASSESSEES CONTENTION AND HELD THAT TH E EXPENDITURE INCURRED ON BUNDLED PRODUCTS IS LIABLE TO FRINGE BENEFIT TAX . HE ACCORDINGLY ADDED THE FOLLOWING AMOUNTS BEING 20% OF THE TOTAL OUTLAY AS FBT. A.Y. AMOUNT RS. 2007-08 2,17,10,148 (20% OF 10,85,50,740) 2008-09 2,84,22,415 (20% OF 14,21,12,079) 2009-10 4,18,85,731 (20% OF 20,94,28,654) 11. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) FOL LOWING THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR THE A.Y. 200 6-07 IN ITA NO.24(BNG)/2010, DELETED THE ADDITION MADE BY THE A SSESSEE. 12. THE LD. DR REITERATED THE STAND OF THE REVENUE AS CONTAINED IN THE GROUND OF APPEAL. ITA NO. 1224 TO 1226/BANG/2013 PAGE 6 OF 9 13. THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 24(BNG)/2010 DEALT WITH AN IDENTICAL ISSUE AND HELD AS FOLLOWS:- 11. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE RE ITERATING THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW, SUBM ITTED THAT THERE IS NO BENEFIT DERIVED BY THE EMPLOYEES OF THE ASSESSEE COMPANY FROM BUNDLING OF ONE PRODUCT WITH ANOTHER A ND THEREFORE, FBT IS NOT ATTRACTED. IN SUPPORT OF HIS CONTENTION, HE PLACED RELIANCE UPON THE DECISION OF ITAT IN THE CA SE OF M/S TOYOTA KIRLOSKAR MOTOR PVT. LTD., IN ITA NOS..20(B) /2011 & 88(B)/2011 FOR AY: 2008-09 DATED 11-05-2011. 12. ON THE OTHER HAND, LEARNED DR SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW.. 13. HAVING HEARD BOTH THE PARTIES AND HAVING CONSI DERED THE RIVAL CONTENTIONS, WE FIND THAT THE TRIBUNAL IN THE CASE OF M/S TOYOTA KIRLOSKAR MOTOR PVT. LTD., HAS HELD THAT ANY EXPENDITURE WHICH IS NOT INCURRED DIRECTLY OR INDIRECTLY FOR TH E BENEFIT OF EMPLOYEES IS NOT LIABLE FOR FBT. IN THE CASE BEFOR E US ALSO, THE EMPLOYEES OF THE ASSESSEE COMPANY ARE NOT THE BENEF ICIARIES. THE CUSTOMERS ARE THE BENEFICIARIES. THEREFORE, RE SPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL TO WHICH ONE OF US I.E THE JM IS A SIGNATORY, THESE GROUNDS OF APPEALS ARE ALLOWED. 14. IN VIEW OF THE AFORESAID DECISION OF THE TRIBUN AL ON THE SAME ISSUE, WE ARE OF THE VIEW THAT THERE IS NO MERIT IN THE GR OUND RAISED BY THE REVENUE AND DISMISS THE SAME. 15. GROUND NO.5 RAISED BY THE REVENUE READS AS FOLL OWS:- 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE PROVISION OF F BT ARE NOT APPLICABLE IN RESPECT OF EXPENSES INCURRED TOWARDS PAYMENT OF FEES, VENUE HIRING CHARGES ON TRAINEES ENROLLED AS STUDENTS IN BITS AND SCHOLARSHIP GIVEN TO THE TRAINEES INCURRED BY THE ITA NO. 1224 TO 1226/BANG/2013 PAGE 7 OF 9 ASSESSEE DURING THE COURSE OF BUSINESS ACTIVITIES W ITHOUT APPRECIATING THE FACT THAT BY VIRTUE OF DEEMING PRO VISIONS OF SECTION 115WB(2), THERE IS NO DISTINCTION BETWEEN EXPENSES INCURRED TOWARDS EMPLOYEES AND TOWARDS NON-EMPLOYEE S. 16. THE FACTS OF THIS ISSUE ARE THAT THE ASSESSEE C OMPANY SPONSORS SCIENCE GRADUATES TO PURSUE POST GRADUATE COURSES ( WITH A STIPEND) WHICH IS EXEMPT U/S 10(16) AS IT IS GRANTED TO MEET THE C OST OF EDUCATION. HOWEVER, THE ASSESSEE ALSO INCURRED AN EXPENDITURE OF RS.4,10,81,201/- TOWARDS COURSE FEE, CHARGES TOWARDS CONDUCTING EXAM S ETC., ON THE COURSE AT BITS. THE ASSESSEES CONTENTION WAS THAT THE SAI D AMOUNT IS NOT IN THE NATURE OF SCHOLARSHIP FALLING WITHIN THE AMBIT OF F BT. HOWEVER, THE AO, INVOKING THE PROVISIONS OF SECTION 115WB(2)(P) HELD THAT THE EXPENDITURE OF RS.4,10,81,201/- INCURRED IS IN THE NATURE OF SCHOL ARSHIPS CHARGEABLE TO FBT AT 50% AS PRESCRIBED IN CLAUSE (D) OF SECTION 1 15WC(1). HE ACCORDINGLY ADDED THE FOLLOWING AMOUNTS AS TAXABLE FRINGE BENEFIT:- A.Y. AMOUNT RS. 2007-08 2,05,40,600 (50% OF 4,10,81,201) 2008-09 6,08,72,200 (50% OF 12,17,44,401) 2009-10 8,15,76,830 (50% OF 16,31,53,660) 17. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) FOL LOWING THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR THE A.Y. 200 6-07 IN ITA NO.24(BNG)/2010, DELETED THE ADDITION MADE BY THE A SSESSEE. ITA NO. 1224 TO 1226/BANG/2013 PAGE 8 OF 9 18. THE LD. DR REITERATED THE STAND OF THE REVENUE AS CONTAINED IN THE GROUND OF APPEAL. 19. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR AND WE FIND THAT SIMILAR ISSUE HAD BEEN DEALT WITH BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006-07 IN ITA NO.24(BNG)/2010, WHEREIN IT WAS HELD AS FOLLOWS:- 14. AS REGARDS GROUNDS NO. 7 & 8 RELATING TO TREA TING THE PAYMENTS TOWARDS FEES, VENUE HIRING CHARGES ETC., F OR TRAINEES ENROLLED AS STUDENTS IN BIRLA INSTITUTE OF TECHNOLO GY & SCIENCE (BITS) AND TREATING THE SCHOLARSHIPS GIVEN TO THE TRAINEE S AS FRINGE BENEFITS AND BRINGING THE SAME TO TAX, THE L EARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S TOYOTA KIRLOSKAR MOTOR PVT.LTD., (CITED SUPRA). 15. THE LEARNED DR HOWEVER, SUPPORTED THE ORDERS O F THE AUTHORITIES BELOW. 16. HAVING HEARD BOTH THE PARTIES AND HAVING CONSI DERED THE RIVAL CONTENTIONS, WE FIND THAT THE ASSESSEE, IN AS SOCIATION WITH BITS, HAS INCURRED CERTAIN EXPENDITURE ON TRAINING PROGRA MME OF FRESH GRADUATES TO PREPARE THEM TO WORK WITH THE AP PLICATION PROGRAMMES AND FOR THIS PURPOSE HAS INCURRED AN EXP ENDITURE OF RS.4,41,96,480/- TOWARDS PAYMENT OF STIPEND TO THE TRAINEES WHICH IS IN THE NATURE OF SALARY, COURSE FEES, VENU E HIRING CHARGES ETC., IT IS THE CONTENTION OF THE ASSESSEE THAT TH E AMOUNT PAID TOWARDS TRAINING IS TAXABLE IN THE HANDS OF THE TRA INEES AS PERQUISITES U/S 17(2) WHICH IS EXEMPT U/S 10(16) AS THE SAME IS PAID TO MEET THE COST OF EDUCATION OF STUDENT AND H ENCE, IT IS NOT TO BE INCLUDED AS FRINGE BENEFIT U/S 115WB(2). WE FIND THAT THE TRIBUNAL IN THE CASE OF M/S TOYOTA KIRLOSKAR MOTOR PVT.LTD , (SUPRA), AFTER CONSIDERING THE DECISION OF THE TRIB UNAL IN THE CASE OF VIJAYA BANK VS JCIT,LTU IN ITA NO.1066(B)/2010 D ATED 26- 10-2011 HAS HELD THAT FBT IS NOT LEVIABLE IN THE AB SENCE OF COLLECTIVE ENJOYMENT OF BENEFITS BY ITS EMPLOYEES. IN THE CASE BEFORE US, THE TRAINEES ARE NOT THE EMPLOYEES OF TH E ASSESSEE COMPANY AND THEREFORE, THERE IS NO BENEFIT TO THE E MPLOYEES. ITA NO. 1224 TO 1226/BANG/2013 PAGE 9 OF 9 THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF T HE CO-ORDINATE BENCH, THESE GROUNDS ARE ALLOWED. 20. RESPECTFULLY FOLLOWING THE AFORESAID DECISION O F THE TRIBUNAL, WE UPHOLD THE ORDER OF THE CIT(APPEALS) AND DIMISS GRO UND NO.5 RAISED BY THE ASSESSEE. 21. IN THE RESULT, ALL THE APPEALS BY THE REVENUE A RE DISMISSED . PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF SEPTEMBER , 2014 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 30 TH SEPTEMBER , 2014 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.