Appeal details
Counselvise Citation
[2014] 140 COUNSELVISE.COM (IT) 73675 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
7 month(s) 20 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
31-01-2014
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
D
Next Hearing Date
30-01-2014
Assessment Year
2006-2007
Appeal Filed On
10-06-2013
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , ! , ' # $ BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER ./ I.T.A. NO. 1312/MDS/2013 / ASSESSMENT YEAR : 2006-07 DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(1), CHENNAI 34 VS M/S. AIRCELL CELLULAR SERVICES LTD., 5 TH FLOOR, SPENCER PLAZA, 769, ANNA SALAI, CHENNAI-600 002 [PAN: AAACA 5136 R] ./ I.T.A. NO. 1313/MDS/2013 / ASSESSMENT YEAR : 2006-07 DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(1), CHENNAI 34 ( !% /APPELLANT) VS M/S. AIRCELL LTD., 5 TH FLOOR, SPENCER PLAZA, 769, ANNA SALAI, CHENNAI-600 002 [PAN: AAACS 4449 J] ( &'!% /RESPONDENT) / APPELLANT BY : SHRI S. DASGUPTA, JCIT / RESPONDENT BY : SHRI KHIRENDRA MOHAN GUPTA, CA I.T.A. NOS. 1312 & 1313/MDS/13 2 / DATE OF HEARING : 30-01-2014 /DATE OF PRONOUNCEMENT : 31-01-2014 #( / O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THE APPEALS HAVE BEEN FILED BY THE REVENUE IMPUGNI NG THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VI, CHENNAI BOTH DATED 27-12-2012 RELEVANT TO THE ASSES SMENT YEAR (AY) 2006-07. 2. THE ASSESSEES HAD FILED THEIR RETURN OF FRINGE B ENEFITS FOR THE AY.2006-07. THE CASE OF THE ASSESSEES WERE TAK EN UP FOR SCRUTINY AND NOTICE U/S.115WE(2) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT) WERE ISSUED TO THE ASSESSEES ON 11-10-2007. FACTS IN BOTH THE APPEALS ARE SIMIL AR FOR THE SAKE OF CONVENIENCE, THE SAME ARE TAKEN FROM ITA NO.1312 /2013. THE ASSESSEE HAD DEBITED P&L A/C WITH ` 3,66,59,698/- AS SALES PROMOTION EXPENSES. THE ASSESSING OFFICER OBSERVED THAT THE AMOUNT CONSIDERED AS TAXABLE FOR FRINGE BENEFIT TAX [FBT] UNDER THE HEAD DID NOT MATCH WITH THE AMOUNT DEBITED IN T HE P&L A/C. THE ASSESSING OFFICER MADE AN ADDITION OF ` 67,19,985/- TOWARDS THE VALUE OF FRINGE BENEFITS. I.T.A. NOS. 1312 & 1313/MDS/13 3 AGGRIEVED AGAINST THE ASSESSMENT ORDER DATED 28-11 -2008 PASSED U/S.115WE(3), THE ASSESSEES PREFERRED RESPEC TIVE APPEALS BEFORE THE CIT(APPEALS). THE CIT(APPEALS) VIDE IMP UGNED ORDERS, ALLOWED THE APPEALS OF THE ASSESSEE. THE REVENUE H AS NOW COME IN APPEAL BEFORE THE TRIBUNAL ASSAILING THE OR DERS OF THE CIT(APPEALS) IN CASE OF BOTH THE ASSESSEES. 3. SHRI S. DASGUPTA, APPEARING ON BEHALF OF THE REV ENUE SUBMITTED THAT SALES PROMOTION EXPENSES FALL UNDER THE DEEMING PROVISIONS OF FRINGE BENEFITS UNLESS THE EXPENSES A RE PROVED TO BE IN THE EXEMPTED CATEGORY. THE LD.DR VEHEMENTLY SUP PORTED THE ASSESSMENT ORDER AND PRAYED FOR SETTING ASIDE THE I MPUGNED ORDER. 4. ON THE OTHER HAND, SHRI KHIRENDRA MOHAN GUPTA, C A APPEARING ON BEHALF OF THE ASSESSEES STRONGLY SUPPO RTED THE ORDER OF CIT(APPEALS). THE LD.AR CONTENDED THAT THE IMPU GNED ORDERS ARE WELL REASONED AND WARRANT NO INTERFERENCE. THE LD.AR PRAYED FOR THE DISMISSAL OF THE APPEALS OF THE REVENUE. 5. BOTH SIDES HEARD. WE HAVE ALSO PERUSED THE ORDE RS OF THE AUTHORITIES BELOW IN BOTH THE APPEALS. THE LD.DR H AS NOT BEEN I.T.A. NOS. 1312 & 1313/MDS/13 4 ABLE TO SHOW AS TO HOW THE EXPENDITURE INCURRED UND ER THE HEAD SALES PROMOTION EXPENSES AS DETAILED IN THE ASSESSM ENT ORDER CONSTITUTES FRINGE BENEFITS. THE CIT(APPEALS) WHIL E ALLOWING THE APPEAL OF THE ASSESSEE HAS OBSERVED AS UNDER: 7.1 I HAVE GONE THROUGH THE DETAILS OF EXPENDITURE S SELECTED BY THE AO FOR EXAMINING U/S.115WE(1) AND ( 2) AND THE EXPLANATIONS OFFERED BY THE AO. THE CONTENTION OF THE AR THAT THE EXPENSES ARE SALES PROMOTION HAS BEEN DISC USSED IN THE CASED CITED ABOVE SALES PROMOTION IS AN ACTIVI TY WHICH WILL PROMOTE THE SALES OF THE ASSESSEE BY REASON OF THE ADVERTISEMENT AND PUBLICITY THAT WILL BE ATTENDANT ON IT OR BY REASON OF THE INCENTIVES OR OTHER ATTRACTIONS OFFER ED TO ATTRACT CUSTOMERS FOR THE ASSESSEES PRODUCTS. THE CIRCULA R NO.8 OF 2005 ALSO EXPLAINED THE PURPOSE TO BRING THE FRINGE BENEFITS AS GIVEN IN PARA 2.1 WHICH IS EXTRACTED BELOW: 2.1 THE TAXATION OF PERQUISITES OF FRINGE BENEFITS IS JUSTIFIED BOTH ON GROUNDS OF EQUITY AND ECONOMIC EF FICIENCY. WHEN FRINGE BENEFITS ARE UNDER-TAXED, IT VIOLATES BOTH H ORIZONTAL AND VERTICAL EQUITY. A TAXPAYER RECEIVING HIS ENTIRE I NCOME IN CASH BEARS A HIGHER TAX BURDEN IN COMPARISON TO ANOTHER TAXPAYER WHO RECEIVES HIS INCOME PARTLY IN CASH AND PARTLY IN KI ND, THEREBY VIOLATING HORIZONTAL EQUITY. FURTHER, FRINGE BENEF ITS ARE GENERALLY PROVIDED TO SENIOR EXECUTIVES IN THE ORGANIZATION. THEREFORE, UNDER-TAXATION OF FRINGE BENEFITS ALSO VIOLATES VER TICAL EQUITY. IT IS ALSO DISCRIMINATES BETWEEN COMPANIES WHICH CAN PROV IDE FRINGE BENEFITS AND THOSE WHICH CANNOT THEREBY ADVERSELY A FFECTING MARKET STRUCTURE. I.T.A. NOS. 1312 & 1313/MDS/13 5 7.2 ON A PERUSAL OF THE DETAILS FURNISHED UNDER EAC H ITEM OF EXPENDITURE, IT CANNOT BE INFERRED THAT THE RE IS ANY BENEFIT BESTOWED TO OR ON THE EMPLOYEES BY SPENDING THESE MONIES. THE EXPLANATION AND ARGUMENTS OF THE AR TH AT ALL THESE EXPENDITURES ARE PART OF THE SALES PROMOTION AS DISCUSSED IN POPULAR AUTOMOBILES CASE IS CLEARLY AC CEPTABLE. THE AO HAS NOT EXAMINED THE NATURE OF EXPENDITURES FILED BEFORE HIM BUT INSTEAD HAS TANGENTIALLY GONE TOWARD S BRINGING THE PROVISIONS OF S.115(WE) AND BRING THEM TO TAX A S FRINGE BENEFIT TO THE EMPLOYEES. THIS IS CLEARLY A PERVER SE INTERPRETATION AND HENCE THE ADDITION IS DIRECTED T O BE DELETED. WE AGREE WITH THE FINDINGS AND OBSERVATIONS OF THE CIT(APPEALS) ON THE ISSUE. THE REVENUE HAS NOT BEEN ABLE TO SUB STANTIATE ITS PLEA OR HAS BEEN ABLE TO CONTROVERT THE FINDINGS OF THE CIT(APPEALS). NO INTERFERENCE IN THE IMPUGNED ORDE RS OF THE CIT(APPEALS) IS CALLED FOR. BOTH THE APPEALS OF TH E REVENUE ARE DISMISSED BEING DEVOID OF MERIT. ORDER PRONOUNCED ON FRIDAY, THE 31 ST JANUARY, 2014 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) (VIK AS AWASTHY) VICE PRESIDENT JUDICIAL MEMBER DATED: 31 ST JANUARY, 2014 TNMM COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR
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