GIZA MARKETING P.LTD, MUMBAI V. ASST CIT 8(1), NAVI MUMBAI

ITA 1339/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75395 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 01-01-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 14-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: IN
• Assessee Lawyers: IN CIRCUMSTANCES

Judgement Text

GIZA MARKETING PVT. LTD. PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL 'G' BENCH, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 1339/MUM/2011 ASSESSMENT YEAR 2006-07 O R D E R PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 3.4.2010 OF CIT(A) FOR THE ASSESSMENT YEAR 2006-07. THE ASSESSE E HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES AND IN LA W, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOL DING THE ORDER PASSED UNDER SEC. 115WE(E) OF THE I.T. ACT BY THE LEARNED ASSESSING OFFICER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES AND IN LA W, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDI NG THAT SECONDARY SCHEMES GIVEN TO THE INDIVIDUALS RETAILERS/SHOPKEEP ERS CONSTITUTED FRINGE BENEFIT AS PER SECTION 115WB(2)(D) AND THUS UPHOLDI NG THE ACTION OF THE LEARNED AO IN BRINGING TO TAX THE SAID VALUE OF RS. 57,55,848/-. GIZA MARKETING PVT. LTD. 101/102 G.N. TOWER, OFF S.V. ARD, ANDHERI (W) MUMBAI -400058. PAN:- AAACG2409A ASST. CIT 8(1) AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020. APPELLANT RESPONDENT DATE OF HEARING: 01 / 01/2014 DATE OF PRONOUNCEMENT: 15 / 01/2014 DEPARTMENT BY. SHRI MAURYA PRATAP ASSE SSEE BY: SHRI M. SUBRAMANIAM GIZA MARKETING PVT. LTD. PAGE 2 OF 5 3. ON THE FACTS AND IN THE CIRCUMSTANCES AND IN LA W, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT A PPRECIATING THAT THE SUBSTITUTION OF SEC. 115WB(2)(D)(VII) BY FINANCE AC T 2007 WAS CURATIVE AND THUS RETROSPECTIVE IN EFFECT IN THE APPELLANTS CAS E. 4. ON THE FACTS AND IN THE CIRCUMSTANCES AND IN LA W, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE VIEW OF THE LEARNED ASSESSING OFFICER THAT THE TRAINING AND SEM INAR CHARGES REPRESENTED THE FRINGE BENEFIT AS PER SECTION 115WB (2)(C). 5. IN VIEW OF THE ABOVE GROUNDS, THE APPELLANT PRAYS THAT THE ORDER OF THE AUTHORITIES BELOW BE SET ASIDE AND THE RETURNED VALUE OF THE FRINGE BENEFIT BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER, AME ND OR DELETE ANY OF THE GROUNDS OF APPEAL AT ANY TIME AS MAY BE ADVISED. THE ONLY ISSUE ARISES FOR OUR CONSIDERATION AND ADJ UDICATION IS WHETHER THE CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE AO IN BRINGING TO TAX THE VALUE OF RS. 57,55,848/- AND RS. 1,60,525/- AS FRINGE BENEFIT AS PER SECTION 115WB(2) (D) & (C) OF THE INCOME TAX ACT. 2. THE ASSESSEE FILED RETURN OF FRINGE BENEFIT ALO NG WITH RETURN OF INCOME DECLARING VALUE OF TOTAL FRINGE BENEFIT OF RS. 3065 12/-. THE AO NOTED THAT THE ASSESSEE HAS INCURRED EXPENDITURE AMOUNTING TO RS. 57,55,848/- ON ACCOUNT OF SECONDARY SCHEME ON PRODUCTS WHICH IN THE OPINION O F AO WAS A FRINGE BENEFIT TO THE EMPLOYEES. THE AO ISSUED SHOW CAUSE NOTICE AS T O WHY THE SAID AMOUNT OF RS. 57, 55,848/- SHOULD NOT BE TREATED AS FRINGE BENEFI T. 3. IN RESPONSE THE ASSESSEE SUBMITTED THAT IT HAS G IVEN FREE PIECES AND SPECIAL DISCOUNT AT THE RETAILER POINT TO BOOST THE SALE OF NON MOVABLE PRODUCTS AND THE SCHEME IS TREATED AS SECONDARY SCHEME. THE ASSESSEE EXPLAINED THAT THESE SCHEMES ARE GIVEN ONLY TO RETAILERS/WHOLESALERS AND REIMBUR SED TO DISTRIBUTORS THROUGH SUPER STOCKIEST. THUS THE ASSESSEE CONTENDED THAT THIS EX PENDITURE IS IN THE NATURE OF SALES DISCOUNT/REBATE WHICH IS OUTSIDE THE SCOPE OF SALES PROMOTION IN TERMS OF SECTION 115WB (2). SIMILARLY THE AO ALSO NOTED THAT THE ASS ESSEE HAS INCURRED EXPENSES AMOUNTING TO RS. 1, 60,525/- ON ACCOUNT OF TRAINING CHARGES AND SEMINAR CHARGES. THE ASSESSEE SUBMITTED THAT THE CHARGES FOR TRAININ G SALES PROMOTERS FOR COUNTER AND GIZA MARKETING PVT. LTD. PAGE 3 OF 5 DOOR TO DOOR PERSONNEL ARE COVERED UNDER THIS HEAD. WHEREAS THE SEMINAR CHARGES ARE THE EXPENDITURE INCURRED DURING THE SEMINAR CON DUCTED FOR PARLOUR AND BEAUTY ADVISORS TO EDUCATE THEM ABOUT THE BEAUTY PRODUCTS. THUS THE ASSESSEE URGED THAT THIS EXPENDITURE DO NOT COVER UNDER THE FRINGE BENE FIT AS PER THE PROVISIONS OF SECTION 115WB(2). THE AO DID NOT ACCEPT THE CONTENT ION OF THE ASSESSEE AND HELD THAT THE AMOUNT OF RS. 55, 57,848/- AS WELL AS RS. 1, 60,525/- ARE IN THE NATURE OF FRINGE BENEFIT. HE HAS WORKED OUT THE VALUE OF THE FRINGE BENEFIT AT 20% ON THESE EXPENDITURE AND ACCORDINGLY THE ADDITION OF RS. 11, 83,275/- HAS BEEN MADE. 4. ON APPEAL THE CIT(A) HAS CONFIRMED THE ACTION OF THE AO IN THIS RESPECT. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE EXPENDITURE BY THE ASSESSEE IN RESPECT OF THE DISCOUNT AND REBATE GIVE N TO THE RETAILERS IS NOT A BENEFIT GIVEN TO THE EMPLOYEES OF THE ASSESSEE. THEREFORE, THE SAID EXPENDITURE DOES NOT FALL UNDER THE PROVISION OF SECTION 115WB(2)(D). HE HAS FURTHER SUBMITTED THAT THE SALES DISCOUNT/REBATE IS GIVEN TO THE RETAILERS/WHOLESALE RS THROUGH SUPER STOCKIEST AND, THEREFORE, THE SAID BENEFIT DOES NOT FALL UNDER THE CATEGORY OF FRINGE BENEFIT IN THE SHAPE OF ANY PRIVILEGE, SERVICE, FACILITY OR ANY OT HER BENEFIT TO THE EMPLOYEES. AS REGARDS THE TRAINING CHARGES AND SEMINAR CHARGES TH E LD. AR HAS SUBMITTED THAT THE SEMINAR EXPENSES ARE INCURRED FOR EDUCATING THE THI RD PARTY BEING THE BEAUTY PARLOURS AND BEAUTY ADVISORS ABOUT THE PRODUCT OF T HE ASSESSEE AND, THEREFORE, IT DOES NOT FALL UNDER THE AMBIT OF FRINGE BENEFIT. AS REGARDS THE TRAINING CHARGES SINCE THIS IS ALLOWABLE EXPENDITURE OF THE ASSESSEE AND D OES NOT FALL UNDER THE CATEGORY OF ANY EXPENDITURE PROVIDED IN SECTION 115WB(2)(C) OF THE INCOME TAX ACT. IN SUPPORT OF HIS CONTENTION HE RELIED UPON THE DECISION OF HO NBLE HIGH COURT OF DELHI IN CASE OF T AND T MOTORS LTD . VERSUS ASSISTANT COMMISSIONER OF INCOME TAX ( 341 ITR 332 ) AND SUBMITTED THAT THE SALES PROMOTION INCLUDING PU BLICITY EXPENSES IS EXCLUDED FROM FBT SO FAR THE EXPENDITURE IN THE FORM OF PAYM ENT TO THIRD PARTY. THE LEARNED AR HAS ALSO RELIED UPON THE DECISION OF THIS TRIBUN AL IN CASE OF DCIT VS. KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LTD. 134 ITD 388 (MUM). 5. LEARNED DR ON THE OTHER HAND RELIED UPON THE ORD ERS OF AUTHORITIES BELOW AND SUBMITTED THAT THE NATURE OF EXPENDITURE IS NO T IN DISPUTE, THEREFORE, THE AO IS JUSTIFIED IN MAKING THE ADDITION OF FRINGE BENEFIT VALUE. GIZA MARKETING PVT. LTD. PAGE 4 OF 5 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION AS WELL AS RELEVANT MATERIAL ON RECORD. AS PER SECTION 115WB(1) FRINGE BENEFIT MEAN S ANY CONSIDERATION FOR EMPLOYMENT PROVIDED BY WAY OF ANY PRIVILEGE, SERVIC E, FACILITY, FEE, CONCESSIONAL TICKETS ETC TO THE EMPLOYEES. THUS FOR INVOKING THE PROVISIONS OF SECTION 115WB IT IS MANDATORY CONDITION THAT THE BENEFIT HAS BEEN PROVI DED BY THE EMPLOYER TO HIS EMPLOYEES. IN THE CASE IN HAND THE EXPENDITURE INCU RRED BY THE ASSESSEE IN RESPECT OF BOOSTING THE SALE OF NON MOVABLE PRODUCTS BY PRO VIDING SPECIAL DISCOUNT/REBATE FREE PIECES TO THE RETAILER, IN OUR VIEW DOES NOT A MOUNT OR CONSTITUTE THE BENEFIT PROVIDED BY THE ASSESSEE TO ITS EMPLOYEES. THERE IS NO AMBIGUITY OR DISPUTE REGARDING THE NATURE OF EXPENDITURE AND BENEFIT GIV EN TO THE RETAILER. THEREFORE, WHEN THE BENEFIT IN THE SHAPE OF DISCOUNT/REBATE GI VEN TO THE THIRD PARTY AND NOT TO THE EMPLOYEES OF THE ASSESSEE THEN THE SAME EXPENDI TURE DOES NOT FALL UNDER THE CATEGORY OF FRINGE BENEFIT AS STIPULATED IN SECTION 115WB(2)(D) OF THE INCOME TAX ACT. SIMILARLY THE EXPENDITURE INCURRED ON CONDUCTI NG OF SEMINARS FOR PARLOURS AND ADVISORS TO EDUCATE THEM ABOUT THE BEAUTY PRODUCTS OF THE ASSESSEE ALSO THE EXPENDITURE NOT FOR PROVIDING ANY BENEFIT TO THE EM PLOYEES AND, THEREFORE, IT WOULD NOT FALL IN THE AMBIT OF SECTION 115WB(2)(C) OF THE INCOME TAX ACT. AS REGARDS THE TRAINING PROVIDED TO THE SALES PERSONNEL THOUGH THI S EXPENDITURE HAS BEEN INCURRED FOR IMPARTING TRAINING TO THE EMPLOYEES OF THE ASSE SSEE, HOWEVER THE SAID EXPENDITURE DOES NOT FALL IN ANY OF THE CATEGORIES OF FRINGE BENEFIT AS PROVIDED U/S 115WB(2)(C). THE HONBLE HIGH COURT OF DELHI IN CAS E OF T AND T MOTORS LTD . VERSUS ASSISTANT COMMISSIONER OF INCOME TAX (SUPRA) HAS OB SERVED IN PARA 17 AS UNDER:- A CAREFUL READING OF CLAUSES (I), (II), (IV), (V), (VI), AND (VII) OF SECTION 115WB (D) ELUCIDATES THAT THE LEGISLATURE HAS EXCLU DED FROM FBT EXPENDITURE IN FORM OF PAYMENTS TO THIRD PERSONS. T HE EXEMPTION IN THESE CLAUSES, IT IS APPARENT, HAS BEEN GRANTED BEC AUSE THIS IS NOT A FRINGE BENEFIT WHICH IS ENJOYED BY THE EMPLOYEE/RE CIPIENT BUT IT IS AN EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS AND THE PAYMENT IS INCOME EARNED BY THE THIRD PARTY. IN THE HANDS OF THE SAID RECIPIENT THE EXPENDITURE IS TAXABLE AS INCOME EARNED. 7. SIMILAR VIEW HAS BEEN TAKEN BY THE COORDINATE BE NCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LTD. (SUP RA). IN VIEW GIZA MARKETING PVT. LTD. PAGE 5 OF 5 OF THE ABOVE DISCUSSION AND BY FOLLOWING THE DECISI ON OF HONBLE HIGH COURT OF DELHI IN THE CASE OF T AND T MOTORS LTD . VERSUS ASSISTANT COMMISSIONER OF INCOME TAX (SUPRA), WE HOLD THAT THE EXPENDITURE IN QUESTION D OES NOT FALL UNDER THE CATEGORY OF FRINGE BENEFIT PROVIDED TO THE EMPLOYEES AND, THERE FORE, IS NOT SUBJECT TO FBT. ACCORDINGLY, WE DELETE THE ADDITION MADE BY THE AO. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 15-01-2014 SD/- SD/- (SANJAY ARORA) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER SKS SR. P.S, MUMBAI DATED 15 .01.2014 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI