Deputy Commissioner of Income Tax, Circle17(2), Hyderabad V. M/s VST Intustries Limited, Hyderabad

ITA 1857/Hyd/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4540 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-B
• Next Hearing Date: 06-02-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 13-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PHANI RAJU
• Assessee Lawyers: T S AJAI
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER I.T.A. NO. 1857/HYD/2017 ASSESSMENT YEAR: 2009-10 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-17(2), HYDERABAD VS M/S. VST INDUSTRIES LTD., HYDERABAD [PAN: AAACV6799C] (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI PHANI RAJU, DR FOR ASSESSEE : SHRI T.S. AJAI, AR DATE OF HEARING : 06-02-2019 DATE OF PRONOUNCEMENT : 13-02-2019 O R D E R PER SMT. P. MADHAVI DEVI, J.M. : THIS IS REVENUES APPEAL FOR THE AY. 2009-10, AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-5, HYDERABAD, DATED 22-09-2017. 2. BRIEF FACTS OF THE CASE ARE THAT, ASSESSEE-COMPANY, ENGAGED IN THE BUSINESS OF MANUFACTURE OF SALE OF CIG ARETTES AND TRADING OF TOBACCO, FILED ITS RETURN OF FRINGE BENE FIT TAX FOR THE AY. 2009-10 ON 25-09-2009, DECLARING TOTAL FRINGE BENEFITS OF RS. 2,82,69,350/-. THE SCRUTINY ASSESSMENT OF THE FRINGE BENEFIT WAS COMPLETED U/S. 115WE(3) OF THE ACT ON 30-11-2011, ASSESSING THE TOTAL FRINGE BENEFITS AT THE A MOUNT ITA. NO. 1857/HYD/2017 :- 2 -: DECLARED BY THE ASSESSEE. SUBSEQUENTLY, ASSESSING OFF ICER OBSERVED THAT THE ASSESSEE HAS NOT CONSIDERED PAYMENT OF RS. 1,84,83,124/- MADE TO SUPERANNUATION FUND FOR FBT WHI CH WAS DEBITED TO THE PROFIT & LOSS A/C. THEREFORE, HE RE -OPENED THE ASSESSMENT U/S. 115WH OF THE FBT ACT AND REQUIRED ASSESSEE TO EXPLAIN AS TO WHY THE AMOUNT OF VOLUNTARY RETIREMENT SCHEME (VRS) CONTRIBUTION TO SUPERANNUATION FUND SHOULD NOT BE BROUGHT TO TAX. ASSESSEE SUBMITTED THAT THE AMOUNT OF RS. 1,84,83,124/- WAS NOT A CONTRIBUTION TO SUPERANNUATION FUND, BUT WAS AN AMOUNT PAID TO THE EMPLOYEES UNDER THE VOLUNTARY RETIREMENT SCHEME DURING THE FY. 2006-07, RELEVANT TO THE AY. 2007-08 AND WHICH W AS CLAIMED AS DEDUCTION U/S. 35DDA OF THE ACT. THEREFORE, ACCORDING TO THE ASSESSEE, IT WAS NOT A CONTRIBUTION TO TH E SUPERANNUATION FUND AND CANNOT BE TREATED AS A FRINGE BENEFIT. ASSESSING OFFICER, HOWEVER, HELD THAT VOLUNTA RY RETIREMENT SCHEME IS ALSO COVERED UNDER THE AMBIT OF SUPERANNUATION FUND AND THEREFORE IT HAS TO BE BROUGHT TO FBT AND ACCORDINGLY, HE BROUGHT IT TO TAX. 2.1. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), WHO ALLOWED THE SAME BY OBSERVING THAT THE AMOU NT WHICH WAS CLAIMED AS A DEDUCTION U/S. 35DDA WAS A PA YMENT MADE TO THE EMPLOYEE UNDER EMPLOYEES VOLUNTARY RETIREME NT SCHEME AND CANNOT BE HELD AS A CONTRIBUTION TO THE SUPERANNUATION FUND OF THE EMPLOYEES. AGAINST THE RELIE F GRANTED BY THE CIT(A), REVENUE IS IN APPEAL BEFORE US BY RAISING THE FOLLOWING GROUNDS OF APPEAL: ITA. NO. 1857/HYD/2017 :- 3 -: 1. THE LEARNED CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE. 2. THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFF ICER TO ALLOW THE DEDUCTION U/S. 35DDA TOWARDS PAYMENT MADE TO EMPLOY EES UNDER AN EMPLOYEE VOLUNTARY RETIREMENT SCHEME WITHOUT APP RECIATING THE PRINCIPLE THAT THE PROVISION MADE FOR VRS SCHEME IS ALSO COVERED UNDER THE AMBIT OF SUPERANNUATION FUND WHICH ATTRAC TS FRINGE BENEFIT TAX. 3. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 3. WHILE LD.DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER, LD. COUNSEL FOR THE ASSESSEE RELIED UPON TH E ORDER OF THE CIT(A). 4. HAVING REGARD TO THE RIVAL CONTENTIONS AND AFTER PER USING THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAD SUBMITTED BEFORE THE ASSESSING OFFICER AND CIT(A) THAT IT HAD PAID THE SUM TO ITS EMPLOYEES ON THEIR OPTING TO AVAIL THE VOLUNTARY RETIREMENT SCHEME AND THAT IT WAS NOT A CONTRIBUTION TO THE APPROVED SUPERANNUATION FUND AS OBSERVED BY THE ASSESSING OFFICER. THE ASSESSEE HA D CLAIMED THE SUM AS A DEDUCTION U/S. 35DDA AND WAS ALLOWED DU RING THE ASSESSMENT U/S. 143(3) OF THE ACT. THUS, IT IS CLEA R THAT THE PAYMENT IS NOT TOWARDS THE SUPERANNUATION FUND AS HE LD BY THE ASSESSING OFFICER. IN FACT SECTION 2(6) OF THE INCOME TAX ACT DEFINES THE APPROVED SUPERANNUATION FUND' AS A SUPERANNUATION FUND OR ANY PART OF A SUPERANNUATION FUND WHICH HAS BEEN AND CONTINUES TO BE APPROVED BY THE PRINCIPAL CHIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIP AL ITA. NO. 1857/HYD/2017 :- 4 -: COMMISSIONER OR COMMISSIONER IN ACCORDANCE WITH THE RULES CONTAINED IN PART B OF THE FOURTH SCHEDULE ; 4.1. FRINGE BENEFITS ARE DEFINED U/S. 115WB OF THE ACT CLAUSE-C OF SECTION-1 THEREOF REFERS TO - ANY CONTRIBUTION BY THE EMPLOYER TO AN APPROVED SUPERANNUATION FUND FOR EMP LOYEES ; 4.2. IN THE CASE BEFORE US, THE PAYMENT MADE TOWARDS VOLUNTARY RETIREMENT SCHEME IS NOT A CONTRIBUTION TO THE APPROVED SUPERANNUATION FUND FOR EMPLOYEES AS RIGHT LY HELD BY THE CIT(A). THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD.CIT(A). THE GROUNDS RAISE D BY REVENUE ARE ACCORDINGLY REJECTED. 5. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH FEBRUARY, 2019 SD/- S D/- (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMB ER HYDERABAD, DATED 13 TH FEBRUARY, 2019 TNMM ITA. NO. 1857/HYD/2017 :- 5 -: COPY TO : 1. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-17(2) , HYDERABAD. 2. M/S. VST INDUSTRIES LTD., 1-7-1063/1065, AZAMABA D, MUSHEERABAD, HYDERABAD. 3. CIT(A)-5, HYDERABAD. 4. PR.CIT-5, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.