Tata Global Beverage Limited, Kolkata V. ACIT, CIR-4, KOLKATA, Kolkata

ITA 1868/KOL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0717 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 29-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: PIYUSH CHAWLA
• Keywords: Gift; Earning of tax free income
• Section: 14A; 10; 11

Judgement Text

1 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B KOL KATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & DR.ARJUN LAL SAINI, AM ] ITA NO.1866 /KOL/2014 ASSESSMENT YEAR : 2006-07 TATA GLOBAL BEVERAGES LTD. -VERSUS- A.C.I.T., CIR CLE-4, KOLKATA KOLKATA (PAN:AABCT 0602 K) (APPELLANT) (RESPONDENT) ITA NO.1867/KOL/2014 ASSESSMENT YEAR : 2007-08 TATA GLOBAL BEVERAGES LTD. -VERSUS- D.C.I.T., CIR CLE-4, KOLKATA KOLKATA (PAN:AABCT 0602 K) (APPELLANT) (RESPONDENT) ITA NO.1868 /KOL/2014 ASSESSMENT YEAR : 2008-09 TATA GLOBAL BEVERAGES LTD. -VERSUS- ADDL.C.I.T., CIRCLE-4, KOLKATA KOLKATA (PAN:AABCT 0602 K) (APPELLANT) (RESPONDENT) ITA NO.1869 /KOL/2014 ASSESSMENT YEAR : 2009-10 TATA GLOBAL BEVERAGES LTD. -VERSUS- D.C.I.T., CIR CLE-4, KOLKATA KOLKATA (PAN:AABCT 0602 K) (APPELLANT) (RESPONDENT) ITA NO.1870 /KOL/2014 ASSESSMENT YEAR : 2009-10 TATA GLOBAL BEVERAGES LTD. -VERSUS- ADDL.C.I.T., CIRCLE-4, KOLKATA KOLKATA (PAN:AABCT 0602 K) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI KANCHUN KAUSHAL, FCA & SHRI PIYUSH CHAWLA, FCA FOR THE RESPONDENT: SHRI S.DASGUPTA, ADDL. CIT(DR) DATE OF HEARING : 07.12.2017. DATE OF PRONOUNCEMENT : 13.12.2017. 2 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 ORDER PER N.V.VASUDEVAN, JM: ITA NOS. 1866 TO 1868 AND 1870/KOL/2014 ARE APPEAL S FILED BY THE ASSESSEE AGAINST FOUR DIFFERENT ORDERS ALL DATED 18.07.2014 OF CIT(A)-4, KOLKATA RELATING TO A.Y.2006-07, 2007-08, 2008-09 AND 2009-10. ALL THES E APPEALS ARISE OUT OF ORDERS PASSED U/S 115WE(3) OF THE INCOME TAX ACT, 1961 (AC T), I.E., ASSESSMENT UNDER CHAPTER-XIIH OF THE ACT, I.E., INCOME TAX ON FRING E BENEFITS. 2. FRINGE BENEFIT TAX (FBT) WAS INTRODUCED AS PART OF FINANCE ACT, 2005 AS AN ADDITIONAL INCOME-TAX AND CAME INTO FORCE FROM APRIL 1, 2005. THE TERM F RINGE BENEFITS MEANS ANY CONSIDERATION FOR EMPLOYMENT PR OVIDED BY WAY OF ANY PRIVILEGE, SERVICE, FACILITY OR AMENITY PROVIDED BY THE EMPLOY ER TO THE EMPLOYEES. FRINGE BENEFIT TAX IS TO BE LEVIED ON THE EMPLOYER IN RESPECT OF FRINGE BENEFITS PROVIDED/DEEMED TO BE PROVIDED BY THE EMPLOYER TO H IS EMPLOYEES DURING ANY FINANCIAL YEAR COMMENCING ON OR AFTER 1.4.2005. FR INGE BENEFIT TAX IS PAYABLE AT THE RATE OF 30% OF THE VALUE OF FRINGE BENEFITS COMPUTED IN THE MA NNER PRESCRIBED UNDER THE SECTION 115WC . DIRECT FRINGE BENEFIT AS CLASSIFIED UNDER SECTION 1 15(WB) (1) ARE: ANY PRIVILEGE, SERVICE, FACILITY OR AMENITY, WHICH IS DIRECTLY OR INDIRECTLY PROVIDED BY AN EMPLOYER TO HIS EMPLOYEES (INCLUDING FORMER EMPLOYEE OR EMPLOYEES). ANY FREE OR CONCESSIONAL TICKETS PROVIDED BY THE EM PLOYER FOR PRIVATE JOURNEYS TO EMPLOYEES OR THEIR FAMILY MEMBERS. ANY CONTRIBUTION BY THE EMPLOYER TOWARDS AN APPROVE D SUPERANNUATION FUND FOR EMPLOYEES. ANY REIMBURSEMENT, WHICH IS DIRECTLY OR INDIRECTLY MADE BY THE EMPLOYER TO EMPLOYEES FOR ANY PURPOSE. INDIRECT OR DEEMED FRINGE BENEFITS ARE: THE FRINGE BENEFITS ARE DEEMED TO HAVE BEEN PROVIDE D IF THE EMPLOYER INCURS ANY EXPENDITURE OR MAKES ANY PAYMENT IN THE COURSE OF B USINESS OR PROFESSION. THIS 3 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 INCLUDES ANY ACTIVITY WHETHER OR NOT SUCH ACTIVITY IS CARRIED ON WITH THE OBJECT OF DERIVING INCOME, PROFITS OR GAINS. ANY EXPENDITURE INCURRED OR PAYMENT MADE FOR THE FOLLOWING CONSTITUTES DEEMED FRINGE BENEFIT. ENTERTAINMENT HOSPITALITY CONFERENCE SALES PROMOTION INCLUDING PUBLICITY EMPLOYEE WELFARE CONVEYANCE, TOURS AND TRAVEL HOTEL, BOARDING, LODGING REPAIR, RUNNING AND MAINTENANCE OF CARS REPAIR, RUNNING AND MAINTENANCE OF AIRCRAFT USE OF TELEPHONE MAINTENANCE OF ANY ACCOMMODATION IN THE NATURE OF G UEST HOUSE FESTIVAL CELEBRATIONS HEALTH CLUB ANY OTHER CLUB GIFTS SCHOLARSHIP TO EMPLOYEES CHILDREN CONSUMPTION OF FUEL OTHER THAN INDUSTRIAL FUEL ITA NO.1866/KOL/2014 A.Y.2006-07 : 3. GROUND NOS. 1 AND 1.1 RAISED BY THE ASSESSEE REA D AS FOLLOWS :- 1.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSES SING OFFICER IN SUBJECTING TO FRINGE BENEFIT TAX, AN AMOUNT OF RS. 13,68,522/-, B EING 20% OF THE MEDICAL EXPENSES OF RS. 68,42,608/- INCURRED BY APPELLANT. 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT CA) FAILED TO APPRECIATE THAT REIMBURSEMENT OF MEDICAL EXPENSES TO EMPLOYEES FALLS WITHIN THE MEANING OF ALARY' AND ANY-EXPENDITURE IN CURRED FOR THE PURPOSES OF SALARY, DOES NOT FALL WITHIN THE PURVIEW OF FRINGE BENEFIT TAX UNDER THE PROVISIONS OF SECTION 115WB OF THE ACT. 4. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BUSINESS OF CULTIVATING, MANUFACTURING AND SALE OF TEA. FOR A.Y.2006-07 THE ASSESSEE FILED RETURN OF INCOME DISCLOSING FRINGE BENEFIT OF RS.8,16,26,00,000/-. I N THE ASSESSMENT OF VALUE OF FRINGE BENEFIT FOR THE PURPOSE OF LEVY OF FBT U/S 115WE(3) OF THE ACT, THE AO NOTICED THAT THE ASSESSEE INCURRED A SUM OF RS.68,42,608/- TOWAR DS MEDICAL REIMBURSEMENT OF ITS 4 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 EMPLOYEES. THE ASSESSEE HAD NOT CONSIDERED THE ABOV E EXPENSE FOR THE PURPOSE OF FRINGE BENEFIT TAX ON THE GROUND THAT MEDICAL EXPEN SES SO REIMBURSED FALLS WITHIN THE MEANING OF SALARY AS DEFINED U/S 17 OF THE ACT AND HENCE IS NOT LIABLE TO FRINGE BENEFIT TAX. IN ANNEXURE-II FORM NO.3CB WHICH IS THE FORM O F AUDITORS REPORT U/S 44AB OF THE ACT, IN NOTE NO.2 THE ASSESSEE HAD EXPLAINED THAT T HE MEDICAL REIMBURSEMENT TO EMPLOYEES OF RS.68,42,608/- WAS THE BASIC EXEMPTION LIMIT OF RS.15,000/- WHICH IS NOT CHARGEABLE TO TAX U/S 17(1) OF THE ACT IN THE H ANDS OF THE EMPLOYEE. NOTE NO.2 READS AS FOLLOWS :- NOTE NO.2 : DOES NOT INCLUDE ANY SUM PAID BY THE C OMPANY FOR EXPENDITURE ACTUALLY INCURRED BY THE EMPLOYEES FOR MEDICAL TREA TMENT NOT EXCEEDING RS.15000/- PER EMPLOYEE IN THE PREVIOUS YEAR AS IN THE OPINION OF THE COMPANY SUCH REIMBURSEMENT COMES WITHIN THE MEANING OF SAL ARY AS DEFINED IN CLAUSE (1) OF SECTION 17 OF THE INCOME TAX ACT, 1961. 5. SECTION 17(1)( IV) STATES THAT 'SALARY' INCLUDES PERQUISITES. SECTION 17(2) DEFINES PERQUISITE AND HAS SIX CLAUSES. CLAUSE (VI) LAYS D OWN THAT PERQUISITE INCLUDES ( VI ) THE VALUE OF ANY OTHER FRINGE BENEFIT OR AMENITY (EXCLUDING THE FRINGE BENEFITS CHARGEABLE TO TAX UNDER CHAPTER XII-H) AS MAY BE PRESCRIBED : PROVISO TO CLAUSE (VI) OF SEC.17(2) HAS FIVE SUB-CL AUSES AND SUB-CLALUSE (V) LAYS DOWN AS FOLLOWS: PROVIDED THAT NOTHING IN THIS CLAUSE SHALL APPLY TO, '(V) ANY SUM PAID BY THE EMPLOYER IN RESPECT OF ANY EXPENDITURE ACTUALLY INCURRED BY THE EMPLOYEE ON HIS MEDICAL TREATMENT O R TREATMENT OF ANY MEMBER OF HIS FAMILY OTHER THAN THE TREATMENT REFER RED TO IN CLAUSES (I) AND (II); SO, HOWEVER, THAT SUCH SUM DOES NOT EXCEED FI FTEEN THOUSAND RUPEES IN THE PREVIOUS YEAR; ' MEDICAL REIMBURSEMENT, WOULD BE PERQUISITE WITHIN T HE MEANING OF SEC.17(2)(V) OF THE ACT, WHETHER WE CONSIDER THE SAME AS FALLING WITHIN THE MEANING OF FRINGE BENEFIT OR AMENITY WITHIN THE MEANING OF CLAUSE (VI) TO SEC.17(2) OF THE ACT. PROVISO (V) TO CLAUSE (VI) OF SEC.17(2) OF THE ACT EXCLUDES MEDICAL TREATMENT EXPENDITURE PROVIDED BY THE EMPLOYER TO THE EMPLOYE E FROM THE PURVIEW OF TAXATION UPTO RS.15000/- PER ANNUM. THE SUM OF RS.68,42,608/- IS ADMITTEDLY THE SUM TOTAL OF THE BASIC EXEMPTION OF RS.15,000/- PER EMPLOYEE ALLOWED UNDER THE ACT IN THE HANDS OF THE EMPLOYEE AND IS NOT TAXED. THOU GH THE SUM OF RS.15,000/- IS THE 5 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 BASIC EXEMPTION YET IT IS IN THE NATURE OF PERQUISI TE PROVIDED TO THE EMPLOYEE INDIVIDUALLY AND NOT COLLECTIVELY. THEREFORE THE A SSESSEE DID NOT CONSIDER THE AFORESAID SUM AS FRINGE BENEFIT. THE AO DID NOT AGR EE WITH THE SUBMISSIONS MADE BY THE ASSESSEE AS ABOVE AND HE CONSIDERED 20% OF THE AFORESAID EXPENSES AS VALUE OF FRINGE BENEFIT FOR THE PURPOSE OF LEVYING OF FRINGE BENEFIT TAX. 6. BEFORE CIT(A) THE ASSESSEE, APART FROM REITERAT ING THE SUBMISSIONS MADE BEFORE THE AO, BROUGHT TO THE NOTICE OF CIT(A), THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE FINANCE BILL 2005, WHICH INTRODUCED FBT, WH EREIN IT WAS STATED AS FOLLOWS: 'THEREFORE, IT IS PROPOSED TO ADOPT A TWO PRONGED A PPROACH FOR THE TAXATION OF FRINGE BENEFITS UNDER THE INCOME-TAX ACT . PERQUISITES WHICH CAN BE DIRECTLY ATTRIBUTED TO THE EMPLOYEES WILL CONTINUE TO BE TAXED IN THEIR HANDS IN ACCORDANCE WITH THE EXISTING PROVISI ONS OF SECTION 17(2) OF THE INCOME TAX ACT AND SUBJECT TO THE METHOD OF VALUATION OUTLINED IN RULE 3 OF THE INCOME-TAX RULE S.' (EMPHASIS OURS) ATTENTION WAS DRAWN TO THE BUDGET SPEECH OF THE FIN ANCE MINISTER AT PARA 160 REPORTED IN 273 ITR (ST.) 25, AT PAGE 56, WHEREIN I T WAS OBSERVED AS FOLLOWS : 'I HAVE LOOKED INTO THE PRESENT SYSTEM OF TAXING PE RQUISITES AND I HAVE FOUND THAT MANY PERQUISITES ARE DISGUISED AS FRINGE BENEFITS, AND ESCAPE TAX. NEITHER THE EMPLOYER NOR THE EMPLOYEE PAYS ANY TAX ON THESE BENEFITS WHICH ARE CERTAINLY OF CONSIDERABLE MATERIAL VALUE. AT PRESENT WHERE THE BENEFITS ARE FULLY ATTRIBUTABLE TO THE EMPLOYEE THE Y ARE TAXED IN THE HANDS OF THE EMPLOYEE; THAT POSITION WILL CONTINUE. IN AD DITION, I NOW PROPOSE THAT WHERE THE BENEFITS ARE USUALLY ENJOYED COLLECT IVELY BY THE EMPLOYEES AND CANNOT BE ATTRIBUTED TO INDIVIDUAL EMPLOYEES, T HEY SHALL BE TAXED IN THE HANDS OF THE EMPLOYER.' (EMPHASIS OURS) IT WAS SUBMITTED THAT THE BENEFIT IN THIS CASE IS C LEARLY IDENTIFIABLE WITH AN EMPLOYEE AND THE SAME IN THE NATURE OF PERQUISITE OF THE CON CERNED EMPLOYEE. REFERENCE WAS MADE TO THE PROVISIONS OF SECTION 115WB(3) WHICH READS AS FOLLOWS : ' FOR THE PURPOSES OF SUB-SECTION (1), THE PRIVILEG E, SERVICE, FACILITY OR AMENITY DOES NOT INCLUDE PERQUISITES IN RESPECT OF WHICH TAX IS PAID OR PAYABLE BY THE EMPLOYEE [OR ANY BENEFIT OR AMENITY IN THE NATURE OF FREE OR SUBSIDIZED TRANSPORT OR ANY SUCH ALLOWANCE PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES FOR JOURNEYS BY THE EMPLOYEES FROM THEIR RESIDENCE TO THE PLACE OF WORK OR SUCH PLACE OF WORK TO THE PLACE OF RESID ENCE]' (EMPHASIS OURS). 6 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 IT WAS ARGUED THAT MEDICAL REIMBURSEMENT WAS CHARG EABLE TO TAX IN THE HANDS OF THE INDIVIDUAL EMPLOYEE AS SALARY (BEING A PERQUISITE) AND THE FACT THE SUM IN QUESTION IS EXEMPT PERQUISITE BY VIRTUE OF SUB-CLAUSE (VI) OF P ROVISO TO CLAUSE (V) OF SEC.17(2) OF THE ACT DOES NOT TAKE THE MEDICAL REIMBURSEMENT OUT OF THE AMBIT OF SEC.1115WB(3) OF THE ACT. THEREFORE THE SUM IN QUESTION CANNOT BE CONSIDERED AS FRINGE BENEFIT. THE ASSESSEE SUBMITTED THAT EVEN THOUGH THE SAID AMOUNT S ARE EXEMPTED UNDER THE RELEVANT PROVISIONS OF THE ACT, TAX IS PAYABLE BY REASON OF CHARGING PROVISION AND THEREFORE UNDER THE PROVISIONS OF SECTION 115WB(3), THE SAID AMOUNT BEING LIABLE TO TAX IN HANDS OF EMPLOYEES EVEN THOUGH IN THE QUANTIFICATIO N OF TAX PAID THE SAID AMOUNT IS NOT TO BE INCLUDED, THE SAID AMOUNT CANNOT BE INCLU DED IN COMPUTATION OF FBT. 7. THE ASSESSEE ALSO BROUGHT TO THE NOTICE OF CIT( A) THE CIRCULAR NO.8 OF 2005 ISSUED BY CBDT DATED 28.09.2005 CLARIFYING ON VARIOUS ASPE CTS OF FBT, IN WHICH THE FOLLOWING CLARIFICATIONS WERE GIVEN ON SEVERAL ASPE CTS OF FRINGE BENEFIT TAX. (ANSWER 44, 47, 69 AND 104 ARE GIVEN BELOW): WHETHER PAYMENT OF LEAVE TRAVEL CONCESSION OR ASSIS TANCE TO EMPLOYEES IS LIABLE TO FBT? 44. THE VALUE OF ANY TRAVEL CONCESSION OR ASSISTANC E RECEIVED BY AN EMPLOYEE NORMALLY FALL WITHIN THE MEANING OF 'SALARY' AS DEF INED IN CLAUSE (1) OF SECTION 17 OF THE INCOME-TAX ACT. THESE BENEFITS ARE TAXABL E UNDER THE HEAD 'SALARIES' SUBJECT TO THE EXEMPTION UNDER CLAUSE (5) OF SECTIO N 10 OF THE INCOME-TAX ACT. ACCORDINGLY, IT WOULD NOT BE LIABLE TO FBT. HOWEVER , IF THE LEAVE TRAVEL CONCESSION/ASSISTANCE IS NOT INCLUDED IN 'SALARY' A S DEFINED IN SECTION 17 WILL BE CLASSIFIED AS AN EXPENSE FOR THE PURPOSES REFERRED TO CLAUSE (F) OF SUB-SECTION (2) OF SECTION 115WB AND WILL ACCORDINGLY BE LIABLE TO FBT. WHETHER EXPENDITURE INCURRED BY WAY OF ALLOWANCE TO THE EMPLOYEES, OF THE NATURE REFERRED TO IN SUB-CLAUSE (II) OF CLAUSE (14) OF SECTION 10 AND SPECIFIED IN SUB-MILE (2) OF MILE 2BB LIKE CHILDREN EDUCATION ALLOWANCE, TRANSPORT ALLOWANCE (RS. 800) GRANTED TO EMPLOYEES, WHICH ARE EXEMPT IN THE HANDS OF THE EMPLOYEE, LIABLE TO FBT? 47 . THE ALLOWANCES GRANTED TO THE EMPLOYEES, OF TH E NATURE REFERRED TO IN SUB- CLAUSE (II) OF CLAUSE (14) OF SECTION 10 AND SPECIF IED IN SUB-RULE (2) OF RULE 2BB OF INCOME-TAX RULES ARE NEITHER CONTRIBUTIONS TO AN APPROVED SUPERANNUATION FUND NOR REPRESENT THE COST OF FREE AND CONCESSIONA L TICKETS FOR PRIVATE JOURNEYS 7 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 OF EMPLOYEES OR THEIR FAMILY MEMBERS. THESE ALLOWAN CES FALL WITHIN THE MEANING OF 'SALARY' AS DEFINED IN CLAUSE (1) OF SEC TION 17 OF THE INCOME-TAX ACT AND, ANY EXPENDITURE INCURRED FOR THE PURPOSES OF S ALARY, DOES NOT FALL WITHIN THE SCOPE OF SUB-SECTION (2) OF SECTION 115W'B. THE REFORE, THE ALLOWANCES OF THE NATURE REFERRED TO IN SUB-CLAUSE (II) OF CLAUSE (14) OF SECTION 10, FALL OUTSIDE THE SCOPE OF CLAUSES (B) AND (C) OF SUB-SECTION (1) AS WELL AS SUB-SECTION (2) OF SECTION 115WB. WHETHER MEDICAL REIMBURSEMENT UP TO RS. 15,000 (EXE MPT IN THE HANDS OF THE EMPLOYEES) AND MEDICAL REIMBURSEMENT OVER RS, 1 5,000 (TAXED AS PERQUISITE IN THE HANDS OF THE EMPLOYEE) IS LIABLE TO FBT? 69. AT PRESENT, IF ANY SUM IS PAID BY THE EMPLOYER FOR EXPENDITURE ACTUALLY INCURRED BY THE EMPLOYEE FOR MEDICAL TREATMENT IN A N UNAPPROVED HOSPITAL AND IT EXCEEDS RS. 15,000 DURING THE YEAR, UCH SUM IS ' SALARY' AS DEFINED IN CLAUSE (1) OF SECTION 17 OF THE INCOME-TAX ACT AND LIABLE TO INCOME-TAX IN THE HANDS OF THE EMPLOYEE. THERE IS NO CHANGE IN THIS POSITION. SINCE SUCH SUM IS TAXABLE IN THE HANDS OFTHE EMPLOYEE, THE SAME IS NOT LIABLE TO FBT. HOWEVER, IF ANY SUM IS PAID BY THE EMPLOYER FOR EXP ENDITURE ACTUALLY INCURRED BY THE EMPLOYEE FOR MEDICAL TREATMENT IN AN UNAPPRO VED HOSPITAL AND IT DOES NOT EXCEED RS. 15,000 DURING THE YEAR, SUCH SUM DOE S NOT FALL WITHIN THE MEANING OF 'SALARY' AS DEFINED IN CLAUSE (1) OF SEC TION 17 OF THE INCOME-TAX ACT AND NOT LIABLE TO INCOME-TAX IN THE HANDS OF THE EM PLOYEE. THERE IS NO CHANGE IN THIS POSITION. SINCE SUCH SUM IS NOT TAXABLE IN THE HANDS OF THE EMPLOYEE, THE SAME IS LIABLE TO FBT. WHETHER EXPENDITURE INCURRED BY THE EMPLOYER FOR TH E PURPOSES OF PROVIDING FREE OR SUBSIDIZED TRANSPORTFOR JOURNEYS TO EMPLOYEESFROM THEIR RESIDENCE TO THE PLACE OF WORK OR SUCH PLACE OF WOR K TO THE PLACE OF RESIDENCE WOULD ATTRACT FBT ? 104. THE FREE OR SUBSIDIZED TRANSPORT PROVIDED TO E MPLOYEES FOR JOURNEYS FROM THEIR RESIDENCE TO THE PLACE OF WORK OR SUCH PLACE OF WORK TO THE PLACE OF RESIDENCE IS IN LIEU OF CONVEYANCE/TRANSPORTATION A LLOWANCE, WHICH IS NOT LIABLE TO FBT. ACCORDINGLY, THE EXPENDITURE INCURRED BY TH E EMPLOYER FOR THE PURPOSES OF PROVIDING FREE OR SUBSIDIZED TRANSPORT FOR JOURNEYS TO EMPLOYEES FROM THEIR RESIDENCE TO THE PLACE OF WORK OR SUCH P LACE OF WORK TO THE PLACE OF RESIDENCE WILL NOT BE LIABLE TO FBT. 8. IT WAS SUBMITTED THAT WITH REGARD TO THE TREAT MENT OF MEDICAL REIMBURSEMENT OF RS, 15,000/- PER EMPLOYEE FOR THE PURPOSE OF FBT( IN QU ESTION NO. 69), THE CBDT HAS CLARIFIED THAT IF THE AMOUNT PAID BY EMPLOYER TO EM PLOYEE IS LESS THAN RS, 15,000/- THEN IT DOES NOT FALL WITHIN THE DEFINITION OF SALA RY AS PER SECTION 17(1) OF THE ACT AND 8 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 ACCORDINGLY THE SAME IS SUBJECTED TO THE LEVY OF FB T. IN OTHER WORDS, AS PER THE CLARIFICATION ISSUED BY THE CBDT, PAYMENTS MADE BY THE EMPLOYER TO MEET THE COSTS OF MEDICAL TREATMENT OF EMPLOYEES OR THEIR FAMILY M EMBERS, TO THE EXTENT TAXABLE IN THE HANDS OF THE EMPLOYEES WOULD NOT BE SUBJECTED T O FBT. HOWEVER, THE EXEMPT PORTIONS OF SUCH MEDICAL REIMBURSEMENTS IN THE HAND S OF THE EMPLOYEES BY VIRTUE OF PROVISO TO SECTION 17(2) OF THE ACT WOULD BE SUBJEC TED TO FBT AT THE HANDS OF THE EMPLOYER. HOWEVER, WITH RESPECT TO QUERIES RELATIN G TO FBT ON LEAVE TRAVEL CONCESSION (LTC) / LEAVE TRAVEL ALLOWANCE (LTA) AND WITH THAT RELATING TO THE ALLOWANCES EXEMPTED U/S 10(14)(II) OF THE ACT, ( IN QUESTION 44,47 AND 104) THE CBDT HAS TAKEN A CONTRADICTORY APPROACH WHILE DEALI NG WITH THE CHARGE OF FBT WITH REGARD TO THE AFORESAID EXPENSES. THE CBDT HAS CLAR IFIED THAT THESE ALLOWANCES FALL WITHIN THE MEANING OF 'SALARY' AS DEFINED IN CLAUSE (1) OF SECTION 17 OF THE INCOME-TAX ACT (THOUGH NOT TAXABLE BECAUSE OF SPECIFIC EXEMPTI ON) AND, ANY EXPENDITURE INCURRED FOR THE PURPOSES OF SALARY, DOES NOT FALL WITHIN TH E SCOPE OF SUB-SECTION (2) OF SECTION 115WB. THUS, IT WAS ARGUED THAT THERE WAS AN APPARE NT CONTRADICTION IN THE APPROACH OF THE CBDT ITSELF IN THE MATTER OF THE APPLICATION OF FBT ON ALLOWANCES / REIMBURSEMENTS MADE BY THE EMPLOYER TO THE EMPLOYEE S WHICH ARE EXEMPT FROM INCOME-TAX IN THE HANDS OF THE EMPLOYEES UNDER EXPR ESS EXEMPTION PROVISIONS. IT WAS ARGUED THAT LIKE LTC/LTA AND OTHER ALLOWANCES, MED ICAL RE-IMBURSEMENT ALSO FORMS PART OF SALARY AS PER THE PROVISIONS OF SECTION 17( 2) OF THE ACT, HOWEVER, BY WAY OF SPECIFIC DISPENSATION PROVIDED IN THE SAID SUB- SEC TION BY WAY OF PROVISO, THE SAME IS NOT TAXABLE IN THE HANDS OF THE EMPLOYEE. THUS, APP LYING THE SAME ANALOGY WHICH THE CBDT HAS ADOPTED FOR NON APPLICABILITY OF FBT ON LT A/LTC AND OTHER ALLOWANCES WHERE THEY FORM PART OF SALARY BUT ARE EXEMPTED BY WAY OF SPECIFIC EXEMPTION, EXPENSES ON ACCOUNT OF MEDICAL REIMBURSEMENT SHOULD ALSO NOT BE LIABLE TO FBT. 9. THE ASSESSEE PLACED RELIANCE ON THE DECISION O F THE HON'BLE MUMBAI ITAT G BENCH, IN THE CASE OF GRINDWELL NORTON LTD. VS ACIT [ITA NO. 6551/MUM/2011 ORDER DATED 23.4.2014 WHEREIN WHILE DEALING WITH IDENTICA L ISSUE, IT WAS HELD THAT MEDICAL EXPENSES WERE DIRECTLY ATTRIBUTABLE TO EACH EMPLOYE E DISTINCTLY AND WERE NOT IN THE 9 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 NATURE OF COLLECTIVE BENEFIT ENJOYED BY THE EMPLOYE ES. THE HON'BLE ITAT OBSERVED THAT MEDICAL REIMBURSEMENT WAS TO BE TREATED AS A P ERQUISITE U/S 17(2) OF INCOME TAX ACT, 1961 THOUGH A THRESHOLD LIMIT OF EXEMPTION WAS PROVIDED UNDER CLAUSE (V) AT RS. 15,000. ACCORDINGLY, THE ITAT HELD THAT REIMBURSEME NT OF MEDICAL EXPENDITURE DID NOT CONSTITUTE FRINGE BENEFIT AS DEFINED IN SEC. 11 5WB OF THE ACT. IN THE SAID RULING THE ITAT ALSO REFERRED TO CO-ORDINATE BENCH RULING OF HON'BLE MUMBAI ITAT IN BOSCH LTD AND GODREJ PROPERTIES (2011) 135 ITJ 426(MUM.), DEALING WITH SIMILAR ISSUE, WHEREIN IT WAS HELD, 'IT IS ONLY A CASE WHERE A BEN EFIT ABOVE A CERTAIN SPECIFIED AMOUNT ONLY IS LIABLE TO BE TAXED IN THE HANDS OF T HE EMPLOYEE. SUCH CASE, IN OUR HUMBLE OPINION, DOES NOT CONSTITUTE FRINGE BENEFIT AS DEFINED IN S. 115WB OF THE ACT.' 10. THE CIT(A) HOWEVER DID NOT AGREE WITH THE AFOR ESAID SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE. THE CIT(A) RELIED ON THE ANSWER TO QUESTION NO.69 GIVEN IN THE CBDT CIRCULAR NO.8/2005 AND CONCLUDED THAT BECAUSE THE E XEMPT PORTION OF RS.15,000/- OF MEDICAL REIMBURSEMENT IS EXEMPT IN THE HANDS OF THE ASSESSEE THE SAME HAS TO BE CONSIDERED AS FRINGE BENEFIT AND CHARGEABLE TO FRIN GE BENEFIT TAX. THE FOLLOWING ARE THE CONCLUSIONS OF CIT(A) ON THIS ASPECT :- 3.2. I HAVE EXAMINED THE ASSESSMENT ORDER AS WELL AS FACTS/RELEVANT DETAILS/ DOCUMENTS OF THE APPELLANT. IT IS OBSERVED THAT THE CBDT VIDE QUESTION NO. 69 OF THE CIRCULAR NO. 8/2005 DATED 29-08-2005 HAS CLARIF IED THAT WHERE ANY SUM PAID BY THE EMPLOYER FOR EXPENDITURE ACTUALLY INCURRED B Y THE EMPLOYEE FOR MEDICAL TREATMENT IN AN UNAPPROVED HOSPITAL DOES NOT EXCEED RS. 15,000 DURING THE YEAR, SUCH SUM DOES NOT FALL WITHIN THE MEANING OF 'SALAR Y' AS DEFINED IN CLAUSE (1) OF SECTION 17 OF THE INCOME-TAX ACT AND IS THEREFORE N OT LIABLE TO INCOME-TAX IN THE HANDS OF THE EMPLOYEE. SINCE SUCH SUM IS NOT TAXAB LE IN THE HANDS OF THE EMPLOYEE, THE SAME IS LIABLE TO FBT. THE CBDT CIRC ULAR BEING VERY CLEAR, THERE CANNOT BE ANY SCOPE OF INTERPRETATION. THIS GROUND OF APPEAL IS DISMISSED. 11. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE HAS RAISED GROUND NO.1 AND 1.1 BEFORE THE TRIBUNAL. 12. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COUNS EL FOR THE ASSESSEE AND THE LEARNED DR. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATE D SUBMISSIONS MADE BEFORE CIT(A) 10 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 AND RELIED ON THE ORDER OF THE HONBLE ITAT MUMBAI IN THE CASE OF M/S. GRINDWELL NORTON LTD.(SUPRA). THE LD. DR RELIED ON THE ORDER OF CIT(A). 13. WE HAVE GIVEN CAREFUL CONSIDERATION TO THE RIV AL SUBMISSIONS. WE ARE OF THE VIEW THAT THE ISSUE IN QUESTION IS SQUARELY COVERED BY T HE DECISION OF THE HONBLE MUMBAI BENCH IN THE CASE OF M/S. GRINDWELL NORTON LTD. VS ACIT (SUPRA). IN THE CASE BEFORE THE HONBLE ITAT, MUMBAI THE ISSUE WAS AS TO WHETHE R A SUM OF RS.15,000/- WHICH IS EXEMPT PREREQUISITE IN THE HANDS OF THE EMPLOYEE SH OULD BE CONSIDERED AS EXPENDITURE TOWARDS FRINGE BENEFIT FOR LEVYING OF FRINGE BENEFI T TAX. THIS WAS THE ISSUE THAT WAS CONSIDERED BY THE TRIBUNAL. THE TRIBUNAL IN PARA 9. 1. AFTER REFERRING TO CIRCULAR NO.8/2005 HELD THAT THE CIRCULAR WAS CONTRARY TO LE GISLATIVE INTENTION AND THE EXPENDITURE IN QUESTION CANNOT BE CONSIDERED AS FRI NGE BENEFIT. THE TRIBUNAL AFTER REFERRING TO SEC.115WB(3) AND THE MEMORANDUM EXPLAI NING THE PROVISIONS OF FBT, HELD THAT WHERE PERQUISITES/BENEFITS WHICH ARE FULLY ATTRIBU TABLE TO THE EMPLOYEE AND ARE TAXED IN THEIR HANDS, THAT WOULD BE CONTINU ED TO BE TAXED UNDER THE EXISTING PROVISIONS OF SECTION 17(2) OF THE ACT. ONLY IN CASE WHERE THE BENEFITS ARE USUALLY ENJOYED COLLECTIVELY BY THE EMPLOYEES AND C ANNOT BE ATTRIBUTED TO AN INDIVIDUAL EMPLOYEE, THEY SHALL BE TAXED IN THE HAN DS OF THE EMPLOYER. THE TRIBUNAL AFTER REFERRING TO SEC.115WB(3) OF THE ACT HELD THAT IN SUB-SECTION (3) OF SECTION 115WB IT IS MADE CLEAR THAT SECTION 115WB(1)(A) , DOES NOT INCLUDE, SUCH PERQUISITE IN RESPECT OF WHICH TAX IS PAID OR PAYAB LE BY THE EMPLOYEES HELD THAT EVEN THOUGH TAX IS NOT PAYABLE ON THE BASIC EXEMPTI ON LIMIT OF RS.15000 ON MEDICAL REIMBURSEMENT YET THE NATURE OF THE MEDICAL REIMBURSEMENT WAS PERQUISITE CHARGEABLE TO TAX IN THE HANDS OF THE EM PLOYEE. THE TRIBUNAL IT WAS NOT A CASE WHERE THE ATTRIBUTION OF PERSONAL BENEFI TS DIRECTLY TO AN EMPLOYEE POSES PROBLEM OR A CASE WHERE IT IS NOT FEASIBLE TO TAX T HE BENEFIT IN QUESTION IN THE HANDS OF THE EMPLOYEE. IT IS ONLY A CASE WHERE A BE NEFIT ABOVE A CERTAIN SPECIFIED AMOUNT ONLY IS LIABLE TO BE TAXED IN THE HANDS OF T HE EMPLOYEE. THE TRIBUNAL HELD THAT SUCH CASE DOES NOT CONSTITUTE FRINGE BENEFIT A S DEFINED IN SECTION 115WB OF THE ACT. RESPECTFULLY FOLLOWING THE AFORESAID DECISION WE HO LD THAT THE SUM OF 11 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 RS.68,42,608/- CANNOT BE CONSIDERED AS THE VALUE OF FRINGE BENEFIT FOR THE PURPOSE OF DETERMINING THE VALUE OF FRINGE BENEFIT FOR LEVYING OF FRINGE BENEFIT TAX. GROUND NO.1 AND 1.1 ARE ALLOWED. 14. GROUND NO.2 RAISED BY THE ASSESSEE READS AS FO LLOWS :- 2.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT CA) ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSES SING OFFICER IN ATTRIBUTING ADDITIONAL 10% OF THE COMPOSITE PARTICIPATION FEES AS EXPENDITURE LIABLE TO FRINGE BENEFIT TAX WITHOUT GIVING ANY COGENT REASONS AND O N A MERE ASSUMPTION, SURMISE AND CONJECTURE. 15. .DURING THE PREVIOUS YEAR RELEVANT TO THE ASSE SSMENT YEAR UNDER CONSIDERATION THE APPELLANT INCURRED AN AMOUNT OF RS. 66,82,748/- TOW ARDS EMPLOYEES PARTICIPATION FEES FOR TRAINING, SEMINAR ETC. THE SAID PARTICIPATION F EES PAID WAS A COMPOSITE FEE PAID TO THE ORGANIZERS WHICH PRIMARILY WAS TOWARDS CONDUCTI NG THE PROGRAM ALONG WITH FEES FOR HALL, COORDINATOR AND SPEAKERS. HOWEVER, SINCE THE SAID COMPOSITE FEES ALSO INCLUDED SOME CHARGES FOR BOARDING, FOOD EXPENSES, THE ASSESSEE, IN ABSENCE OF ANY BREAK UP, SUO MOTTO CONSIDERED 10% OF THE TOTAL EXP ENDITURE AMOUNTING TO RS. 6,68,275/- AS ATTRIBUTABLE TOWARDS SUCH EXPENSES AN D ACCORDINGLY COMPUTED THE VALUE OF FRINGE BENEFITS LIABLE TO FBT A PER THE PROVISIO NS OF SECTION 115WB(2)(C) OF THE ACT. THE RELEVANT STATUTORY PROVISION APPLICABLE R EADS THUS: 115WB (2) THE FRINGE BENEFITS SHALL BE DEEMED TO HAVE BEEN P ROVIDED BY THE EMPLOYER TO HIS EMPLOYEES, IF THE EMPLOYER HAS, IN THE COURSE OF HIS BUSINESS OR PROFESSION (INCLUDING ANY ACTIVITY WHETHER OR NOT S UCH ACTIVITY IS CARRIED ON WITH THE OBJECT OF DERIVING INCOME, PROFITS OR GAINS) IN CURRED ANY EXPENSE ON, OR MADE ANY PAYMENT FOR, THE FOLLOWING PURPOSES, NAMELY:- (C) CONFERENCE (OTHER THAN FEE FOR PARTICIPATION BY THE EMPLOYEES IN ANY CONFERENCE) EXPLANATION FOR THE PURPOSES OF THIS CLAUSE, ANY EXPENDITURE ON CONVEYANCE, TOUR AND TRAVEL (INCLUDING FOREIGN TRAVEL), ON HOTE L, OR BOARDING AND LODGING IN CONNECTION WITH ANY CONFERENCE SHALL BE DEEMED TO B E EXPENDITURE FOR THE PURPOSES OF CONFERENCE. 12 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 IT CAN BE SEEN FROM CLAUSE ( C) ABOVE THAT EXPENSES INCURRED BY THE EMPLOYER ON PAYING FEES FOR CONFERENCE TO BE ATTENDED BY THE EM PLOYEE IS COVERED BUT TO THE EXTENT THE FEE IS ATTRIBUTABLE TO FEE FOR PARTICIPATION IT IS OUTSIDE THE AMBIT OF CLAUSE ( C). 16. THE ASSESSING OFFICER IN HIS ORDER U/S 115WE(3 ) WAS OF THE VIEW THAT THE ESTIMATION BY THE ASSESSSEE OF 10% OF THE CONFERENC E FEE AS ATTRIBUTABLE TO FOOD AND BOARDING WAS LESS AND HE HELD THAT 30% OF THE CONFE RENCE SHOULD BE ATTRIBUTABLE AS RELATING TO FOOD AND BEVERAGES AND ACCORDINGLY HAS ADDED AN AMOUNT OF RS. 1,33,655/- TOWARDS THIS EXPENDITURE AS LIABLE TO FBT. 17. BEFORE CIT(A), THE ASSESSEE RELIED ON CLARIFIC ATION ISSUED BY THE CBDT IN ITS CIRCULAR 8/2005 DATED 29-08-2005 VIDE QUESTION NO. 55, WHICH READS THUS: WHETHER EXPENDITURE IN THE NATURE OF FEE FOR PARTI CIPATION BY THE EMPLOYEES IN ANY CONFERENCE IS LIABLE TO FBT? 55. IN TERMS OF THE PROVISIONS OF CLAUSE (C) OF SU B -SECTION (2) OF SECTION 115WB,EXPENDITURE IN OF FEE FOR PARTICIPATION BY TH E EMPLOYEES IN ANY CONFERENCE IS NOT LIABLE TO FBT. HOWEVER, IF THE P ARTICIPATION FEE INCLUDES ANY EXPENDITURE OF THE NATURE REFERRED TO IN CLAUSES (A ), (B) AND (D) TO (P) OF SUB - SECTION (2) OF SECTION 115WB, SUCH EXPENDITURE WILL BE LIABLE TO FBT. THE ASSESSEE SUBMITTED THAT IN ITS CASE, THE ORGANI ZERS OFFERED ONE LUMP-SUM FEE FOR PARTICIPATION WHICH INCLUDED AMOUNT ON ACCOUNT OF F OOD/LODGING. HENCE, NO- SEGREGATION OF EXPENSES ON ACCOUNT OF LODGING/FOOD WAS POSSIBLE. THE PARTICIPATION FEES MAINLY CONSTITUTED FEES FOR CONDUCTING THE PR OGRAMME WITH FEES FOR HALL, COORDINATOR, SPEAKERS ETC AND THE ELEMENT OF CHARGE S FOR LODGING/FOOD WAS VERY NOMINAL SINCE THE EMPLOYEES STAY WAS IN THE ORGANIZ ERS CAMPUS AND NOT IN ANY HOTEL. THUS, ATTRIBUTION OF 10% OF THE TOTAL PARTICIPATION FEES TOWARDS THESE EXPENSES BY THE ASSESSEE WAS FAIR AND REASONABLE. IT WAS SUBMITTED THAT THE AO ON PURE SURMISE AND ASSUMPTION HAS CONSIDERED 30% OF THE FEES OF THE FE ES AS ATTRIBUTABLE TOWARDS FOOED AND LODGING. IT WAS SUBMITTED THAT THE SAID ATTRIBU TION BY THE ASSESSING OFFICER WAS 13 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 EXCESSIVE AND UNREASONABLE. THE ASSESSEE SUBMITTED THAT THE AMOUNT CONSIDERED BY THE ASSESSEE AS LIABLE TO FBT ON ACCOUNT OF PARTICI PATION FEES SHOULD BE ACCEPTED. 18. THE CIT(A) HOWEVER DID NOT AGREE WITH THE AFOR ESAID SUBMISSIONS OF THE ASSESSEE AND HE HELD THAT 20% OF THE AFORESAID PARTICIPATION FEE SHOULD BE TAKEN AS FRINGE BENEFIT LIABLE TO FRINGE BENEFIT TAX. THE FOLLOWING WERE HIS CONCLUSIONS :- 4.2 I HAVE EXAMINED THE ASSESSMENT ORDER AS WELL A S FACTS/RELEVANT DETAILS/ DOCUMENTS OF THE APPELLANT. THE ASSESSING OFFICER I N HIS ORDER HAS INCREASED THE QUANTUM OF ATTRIBUTION FROM 10% TO 30% AS RELATING TO FOOD AND BEVERAGES. HOWEVER, IN COMPUTING THE AMOUNT OF FRINGE BENEFIT LIABLE TO FBT, HE HAS CONSIDERED 20% OF THE COMPOSITE FEES INSTEAD OF 30% AS RELATING TO FOOD AND BEVERAGES. 4.3 IT IS ALSO OBSERVED THAT WHILE CONSIDERING SIMI LAR ISSUE IN SUBSEQUENT ASSESSMENT YEAR, THE ASSESSING OFFICER HAS CONSIDER ED 20% OF TOTAL COMPOSITE PARTICIPATION FEES AS AMOUNT ATTRIBUTABLE ON ACCOUN T OF FOOD . AND BEVERAGES LIABLE TO FBT. THE SAID ATTRIBUTION BEING REASONABLE, 20% OF THE TOTAL PARTICIPATION FEES IS CONSIDERED AS AMOUNT ATTRIBUTABLE ON ACCOUNT OF FOOD AND BEVERAGES LIABLE TO FBT UNDER THE PROVISIONS OF SECTION 115WB (2) (E) A ND (G). HENCE LSALLOWANCE OF RS.1,33,655/- IS SUSTAINED. THIS GROUND OF APPEA L IS DISMISSED. 19. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE HAS RAISED GROUND NO.2 BEFORE THE TRIBUNAL. 20. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD. C OUNSEL FOR THE ASSESSEE APART FROM REITERATING THE SUBMISSIONS AS WERE MADE BEFORE CIT (A) FURTHER BROUGHT TO OUR NOTICE THAT CBDT CIRCULAR NO.8/2005 IN ANSWER TO QUESTION NO.11 HAS EXPLAINED THE MEANING TO BE ATTRIBUTED TO THE PURPOSE FOR WHICH EXPENDITU RE IS INCURRED BY AN EMPLOYER WHEN CONSIDERING WHETHER THE EXPENDITURE RESULTS IN A FR INGE BENEFIT TO THE EMPLOYEE FOR THE PURPOSE OF FBT PROVISIONS, AS FOLLOWS:- WHAT IS THE MEANING OF THE WORD 'PURPOSES' IN THE T ERM 'FOR THE FOLLOWING PURPOSES' REFERRED TO IN SUB-SECTION (2) OF SECTIO N 115WB? 11. THE WORD 'PURPOSES' IN THE TERM 'FOR THE FOLLO WING PURPOSES' REFERRED TO IN SUB-SECTION (2) OF SECTION 115WB REFERS TO THE PROX IMATE PURPOSE AND NOT THE DISTANT PURPOSE. FOR EXAMPLE, IF EXPENDITURE IS INC URRED ON TRAVEL FOR DISCUSSING 14 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 AN ADVERTISEMENT PLAN FOR A PRODUCT, SUCH EXPENDITU RE SHALL BE CONSTRUED TO HAVE BEEN INCURRED FOR THE PROXIMATE PURPOSE OF TRAVELLI NG AND NOT THE ULTIMATE PURPOSE OF ADVERTISEMENT AND ACCORDINGLY LIABLE TO FBT. IT WAS SUBMITTED BY HIM THAT IT WAS NOT DISPUTED TH AT THE SUM IN QUESTION WAS A COMPOSITE FEE AND THERE EXISTED NO BREAK-UP OF THE FEE. IT IS A FEE PAID FOR THE PURPOSE OF PARTICIPATION IN A CONFERENCE. IT MAY BE TRUE TH AT BOARDING AND FOOD WILL BE PROVIDED INCIDENTALLY BUT THE MAIN PURPOSE WAS PARTICIPATION OF THE EMPLOYEE IN THE CONFERENCE WAS TO GAIN KNOWLEDGE AND NOT THE PURPOSE OF ENJOYI NG THE BENEFIT OF FOOD AND LODGING. THE LD. DR RELIED ON THE ORDER OF CIT(A) A ND SUBMITTED THAT IN THE ABSENCE OF ANY BREAK UP GIVEN BY THE ASSESSEE ATTRIBUTION OF 2 0% OF THE COMPOSITE FEE AS TOWARDS FOOD AND BEVERAGES AS ESTIMATED BY THE CIT(A) HAS T O BE UPHELD. 21. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION. WE ARE OF THE VIEW THAT THE PROVISION OF SECTION 115WB(2)(C) OF THE ACT, WHICH WE HAVE EX TRACTED IN THE EARLIER PARAGRAPHS, EXCLUDES FROM THE DEFINITION OF FRINGE BENEFIT EXPE NDITURE BY WAY OF PAYMENT BY THE EMPLOYER OF ANY SUM FOR THE EMPLOYEE ATTENDING CONF ERENCE. FEE PAID FOR PARTICIPATION BY THE EMPLOYEES IS HOWEVER EXCLUDED AND NOT CONSIDERED AS FRINGE BENEFIT. THE STATUTORY PROVISIONS ARE SILENT WHERE THE FEE FOR PARTICIPATION BY THE EMPLOYEE IN ANY CONFERENCE IS A COMPOSITE FEE WHICH COMPRISES OF EXPENSES SET OUT IN EXPLANATION TO SECTION 115WB(2)(C) OF THE ACT. FROM A READING OF THE AFORESAID EXPLANATION IT CAN BE CONCLUDED THAT IT IS ONLY IN CASE WHERE EXPENDITURE ON CONVEYANCE, TOUR AND TRAVEL AND HOTEL OR BOARDING O R IN CONNECTION WITH ANY CONFERENCE THAT CAN BE CONSIDERED AS EXPENDITURE IN CURRED FOR THE PURPOSE OF CONFERENCE, WHERE THE FEE FOR PARTICIPATION IS NOT A COMPOSITE FEE WITH BIFURCATION. THE MAIN PURPOSE OF PARTICIPATION BY THE EMPLOYEE I N CONFERENCE IS TO GAIN KNOWLEDGE AND BOARDING AND FOOD WILL BE PROVIDED INCIDENTALLY BUT THE MAIN PURPOSE WAS PARTICIPATION OF THE EMPLOYEE IN THE CONFERENCE WAS TO GAIN KNOWLEDGE AND NOT THE PURPOSE OF ENJOYING THE BENEFIT OF FOOD AND LODGING . THE CBDT CIRCULAR NO.8/2005 IN ANSWER TO Q.NO.11 HAS CLARIFIED THAT ONE HAS TO GO BY THE PRIMARY PURPOSE OF THE EXPENDITURE. IN THE CASE OF COMPOSITE FEE, IT IS D IFFICULT TO APPORTION THE COMPONENT OF 15 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 EXPENDITURE ON FOOD AND LODGING AND A PROPORTIONATE EXPENDITURE FOR PARTICIPATION IN CONFERENCE BY THE EMPLOYEE. KEEPING IN MIND THE SPI RIT OF FBT AS EXPLAINED IN THE CBDT CIRCULAR, WE ARE OF THE VIEW THAT IN THE CASE OF COMPOSITE FEE PAID FOR PARTICIPATION OF EMPLOYEE IN A CONFERENCE, THE SAME SHOULD NOT BE CONSIDERED AS FRINGE BENEFIT AND THERE IS NO QUESTION OF RESORTING TO A PPORTIONMENT OF THOSE EXPENSES. IN OUR VIEW IN THE GIVEN FACTS AND CIRCUMSTANCES APPOR TIONMENT OF THE TOTAL EXPENDITURE AS DONE BY THE ASSESSEE WAS JUST AND PROPER. THERE IS NO BASIS FOR THE ASSESSEE/AO OR THE CIT(A) IN CONCLUDING THAT A PERCENTAGE OF COMPO SITE FEE IS ATTRIBUTABLE TO FOOD AND LODGING. SINCE WE HAVE CONCLUDED THAT IN THE CASE O F COMPOSITE FEE PAID WITH NO BIFURCATION, THE EXPENDITURE ON FEE PAID FOR PARTIC IPATION OF AN EMPLOYEE IN A CONFERENCE OR SEMINAR WILL HAVE TO BE NOT REGARDED AS FRINGE BENEFIT, WE ACCEPT THE CONTENTION OF THE ASSESSEE AND HOLD THAT 10% OF THE COMPOSITE PARTICIPATION FEE BE TREATED AS EXPENDITURE LIABLE TO FRINGE BENEFIT TAX . 22. GROUND NO.3 RAISED BY THE ASSESSEE READS AS FO LLOWS : 3.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND WITHOUT PREJUDICE TO THE GROUNDS MENTIONED ABOVE, THE APPEL LANT BEING IN THE BUSINESS OF PLANTATION AND MANUFACTURING OF TEA, WAS LIABLE TO PAY FRINGE BENEFIT TAX ONLY ON 40% OF THE VALUE OF FRINGE BENEFIT ARRIVED AT ON AP PLICATION OF RULE 8 OF THE INCOME TAX RULES, 1962. 23. THIS GROUND HAS NOT BEEN RAISED BY THE ASSESSE E BEFORE AO OR CIT(A). IT WAS SUBMITTED THAT THIS GROUND IS A LEGAL GROUND. IT WA S ARGUED THAT THE LEGAL GROUND WHICH CAN BE DECIDED ON THE BASIS OF FACTS AVAILABLE ON R ECORD HAS TO BE ADMITTED. IT WAS SUBMITTED THAT THE SAME SHOULD BE PERMITTED TO BE R AISED. THE LD. COUNSEL RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F NTPC 229 ITR 283 (SC) IN THIS REGARD. THE LD. DR OPPOSED THE PRAYER MADE BY THE L D. COUNSEL FOR THE ASSESSEE AND SUBMITTED THAT THIS ISSUE WAS NOT RAISED EITHER BEF ORE AO OR CIT(A) AND THE SAME SHOULD NOT BE PERMITTED TO BE RAISED. THE LD. COUNS EL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF APEEJAY TEA LTD. (2015) 62 TAXMAN.COM 131 (CAL) WHEREIN THE HONBLE CALCUTTA HIGH COURT TOOK A 16 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 VIEW THAT RULE 8 OF THE IT RULES, 1962, WHICH HAS T O BE APPLIED FOR DETERMINING INCOME OF A COMPANY ENGAGED IN THE BUSINESS OF GROW ING AND MANUFACTURING OF TEA AND IN WHICH ONLY 40% OF THE COMPOSITE INCOME FROM THE BUSINESS OF GROWTH AND MANUFACTURE OF TEA IS CONSIDERED AS TAXABLE IS ALSO APPLICABLE WHILE VALUING THE FRINGE BENEFIT FOR THE PURPOSE OF LEVY OF FBT IN THE CASE OF SUCH COMPANIES. 24. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND A RE OF THE VIEW THAT SINCE BOTH THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE HAVE BEEN ADJUDICATED IN FAVOUR OF THE ASSESSEE, THERE IS NO NECESSITY TO ADJUDICATE THIS GROUND OF APPEAL. THE ISSUE IS LEFT OPEN FOR THE PRESENT AND THE GROUND IS DISMISSED AS NOT ADJUDICATED. 25. IN THE RESULT ITA NO.1866/KOL/2014 IS PARTLY A LLOWED. I TA NO.1867/KOL/2014 A.Y.2007-08 26. GROUND NO.1 AND 1.1 , GR.NO.3 & 4 RAISED BY TH E ASSESSEE READS AS FOLLOWS :- 1.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSES SING OFFICER IN SUBJECTING TO FRINGE BENEFIT TAX, AN AMOUNT OF RS. 20,41,559/-, B EING 20% OF THE MEDICAL EXPENSES OF RS 1,02,07,796/- INCURRED BY APPELLANT. 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT (A) FAILED TO APPRECIATE THAT REIMBURSEMENT OF MEDICAL EXPENSES TO EMPLOYEES FALLS WITHIN THE MEANING OF 'SALARY' AND ANY EXPENDITURE INCURRED FOR THE PURPOSES OF SALARY, DOES NOT FALL WITHIN THE PURVIEW OF FRINGE BENEFIT TAX UNDER THE PROVISIONS OF SECTION 115WB OF THE ACT. 3.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSES SING OFFICER IN ATTRIBUTING ADDITIONAL 10% OF THE COMPOSITE PARTICIPATION FEES AS EXPENDITURE LIABLE TO FRINGE BENEFIT TAX WITHOUT GIVING ANY COGENT REASONS AND O N A MERE ASSUMPTION, SURMISE AND CONJECTURE. 4.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND WITHOUT PREJUDICE TO THE GROUNDS MENTIONED ABOVE, THE APPEL LANT BEING IN THE BUSINESS OF PLANTATION AND MANUFACTURING OF TEA, WAS LIABLE TO PAY FRINGE BENEFIT TAX ONLY ON 17 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 40% OF THE VALUE OF FRINGE BENEFIT ARRIVED AT ON AP PLICATION OF RULE 8 OF THE INCOME TAX RULES, 1962. 27. THESE GROUNDS ARE IDENTICAL TO GROUND NO.1 AND 1.1., GR.NO.2 & 3 RAISED BY THE ASSESSEE FOR A.Y.2006-07. FOR THE REASONS STATED WH ILE ADJUDICATING THE SAID GROUND WE ALL GROUND NO.1 AND 1.1 & 2 AND DISMISS GR.NO.3 AS NOT CALLING FOR ANY ADJUDICATION. 28. GROUND NO.2 AND 2.1. READS AS FOLLOWS :- 2.0 THAT ON THE FACTS-AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSES SING OFFICER IN SUBJECTING TO FRINGE BENEFIT TAX, AN AMOUNT OF RS. 15,65,793/- BE ING 20% OF THE MEDICAL INSURANCE PREMIUM OF RS 78,28,963/- INCURRED BY APP ELLANT. 2.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT (A) FAILED TO APPRECIATE THAT THE MEDICAL INSURANCE PRE MIUM PAID BY THE APPELLANT ON BEHALF OF THE EMPLOYEES FALLS WITHIN THE MEANING OF 'SALARY' AND ANY EXPENDITURE INCURRED FOR THE PURPOSES OF SALARY, DOES NOT FALL WITHIN THE PURVIEW OF FRINGE BENEFIT TAX UNDER THE PROVISIONS OF SECTION 115WB O F THE ACT. 29. THE ISSUE THAT ARISES FOR CONSIDERATION IN GRO UND NO.2 AND 2.1 IS AS TO WHETHER MEDICAL INSURANCE PREMIUM PAID IN RESPECT OF A POLI CY OF MEDICAL INSURANCE IN THE NAME OF AN EMPLOYEE CAN BE CONSIDERED AS A FRINGE B ENEFIT FOR THE PURPOSE OF LEVYING OF FRINGE BENEFIT TAX. SECTION 17(1)(IV) STATES THAT 'SALARY' INCLUDES PERQUISITES. SECTION 17(2) DEFINES PERQUISITE AND HAS SIX CLAUSES. CLAUSE (V I) LAYS DOWN THAT PERQUISITE INCLUDES ( VI ) THE VALUE OF ANY OTHER FRINGE BENEFIT OR AMENITY (EXCLUDING THE FRINGE BENEFITS CHARGEABLE TO TAX UNDER CHAPTER XII-H) AS MAY BE PRESCRIBED : PROVISO TO CLAUSE (VI) OF SEC.17(2) HAS FIVE SUB-CL AUSES AND SUB-CLALUSE (V) LAYS DOWN AS FOLLOWS: PROVIDED THAT NOTHING IN THIS CLAUSE SHALL APPLY TO, ' ( III ) ANY PORTION OF THE PREMIUM PAID BY AN EMPLOYER I N RELATION TO AN EMPLOYEE, TO EFFECT OR TO KEEP IN FORCE AN INSURANCE ON THE HEAL TH OF SUCH EMPLOYEE UNDER ANY SCHEME APPROVED BY THE CENTRAL GOVERNMENT 42A [ OR THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY ESTABLISHED UNDER SUB-SEC TION (1) OF SECTION 3 OF THE 18 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY ACT, 1999 (41 OF 1999), ] FOR THE PURPOSES OF CLAUSE ( IB ) OF SUB-SECTION (1) OF SECTION 36 ; PREMIUM PAID ON INSURANCE POLICY FOR AN EMPLOYEE, W OULD BE PERQUISITE WITHIN THE MEANING OF SEC.17(2)(V) OF THE ACT, WHETHER WE CONS IDER THE SAME AS FALLING WITHIN THE MEANING OF FRINGE BENEFIT OR AMENITY WITHIN THE MEANING OF CLAUSE (VI) TO SEC.17(2) OF THE ACT. PROVISO (III) TO CLAUSE (VI) OF SEC.17(2) OF THE ACT EXCLUDES SUCH EXPENDITURE FROM THE PURVIEW OF TAXATION. 30. THE ARGUMENTS ADVANCED IN THIS REGARD ARE ALMO ST IDENTICAL TO THE EXPENDITURE ON MEDICAL REIMBURSEMENT UPTO RS.15,000/- WHETHER SHOU LD BE CONSIDERED AS EXPENDITURE ON PROVIDING FRINGE BENEFIT FOR THE PURPOSE OF FBT. THE SAME REASONING GIVEN WHILE DEALING WITH THE REIMBURSEMENT OF MEDICAL EXPENSES WILL EQUALLY APPLY TO THIS EXPENDITURE ALSO. 31. THE CIT(A) ON THIS ISSUE HAS HELD THAT THE EXP ENDITURE IN QUESTION IS LIABLE TO LEVYING OF FRINGE BENEFIT TAX FOR THE FOLLOWING REA SONS :- 3.3. I HAVE EXAMINED THE ASSESSMENT ORDER AS WELL AS FACTS, RELEVANT DETAILS AND DOCUMENTS OF THE APPELLANT COMPANY. SIMILAR ISSUE W AS INVOLVED IN A.Y. 2006- 07 WHEREIN IN VIEW OF THE CBDT CIRCULAR NO. 8/2005 DATED 29-08-2005 I HAVE DECIDED THAT EXPENSES INCURRED ON MEDICAL REIMBURSE MENT BELOW RS. 15,000/-WAS LIABLE TO FBT. THERE BEING NO CHANGE IN FACTS THE A DDITION IS CONFIRMED. 3.4. IT IS FURTHER OBSERVED. THAT THE APPELLANT HAS MADE SIMILAR CLAIM ON ACCOUNT OF MEDICAL INSURANCE PREMIUM AS NOT LIABLE TO FBT. IT IS OBSERVED THAT THE CBDT VIDE QUESTION NO. 70 OF THE CIRCULAR NO. 8/2005 DAT ED 29-08-2005 HAS CLARIFIED THAT EXPENDITURE BY THE EMPLOYER ON GROUP HEALTH IN SURANCE OR GROUP MEDICAL INSURANCE OR GROUP LIFE INSURANCE IS FOR THE PURPOS ES OF EMPLOYEE WELFARE AND, THEREFORE, FALLS WITHIN THE SCOPE OF CLAUSE (E) OF SUB-SECTION (2) OF SECTION 115WB OF THE INCOME-TAX ACT. ACCORDINGLY, SUCH EXPE NDITURE IS LIABLE TO FBT. HOWEVER, IF SUCH EXPENDITURE IS A STATUTORY OBLIGAT ION, THE SAME WOULD NOT BE LIABLE TO FBT. IN THE INSTANT CASE, SINCE THE CONTR IBUTION TO MEDICAL INSURANCE IS CONTRACTUAL AND NOT STATUTORY, THE SAME IS LIABLE T O FBT. THE CBDT CIRCULAR BEING VERY CLEAR, THERE CANNOT BE ANY SCOPE OF INTE RPRETATION. THESE GROUNDS OF APPEAL ARE DISMISSED. 19 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 32. WE ARE OF THE VIEW THAT THE REASONING CONTAINE D IN PARA 3.4 OF THE CIT(A)S ORDER REFERRED TO ABOVE IS NOT CORRECT. THE CASE OF GROU P LIFE INSURANCE IS A COLLECTIVE BENEFIT WHEREAS IN THE PRESENT CASE, WE ARE CONCERNED WILL INDIVIDUAL POLICY OF MEDICAL INSURANCE IN THE NAME OF INDIVIDUAL EMPLOYEE. THE REASON GIVEN BY THE CIT(A) IN PARA 3.3 IS THE SAME AS THE REASONS FOR TREATING ME DICAL REIMBURSEMENT AS FRINGE BENEFIT. WE HAVE ALREADY HELD THAT SUCH EXPENDITUR E WILL NOT BE IN THE NATURE OF FRINGE BENEFIT. FOR THE REASONS GIVEN WHILE DECIDING GROU ND NO.1 AND 1.1 IN A.Y.2006-07, WE ARE OF THE VIEW THAT EXPENDITURE IN QUESTION CAN NOT BE CONSIDERED AS A FRINGE BENEFIT. GR.NO.2 & 2.1 IS ACCORDINGLY ALLOWED. 33. IN THE RESULT ITA NO.1867/KOL/2014 IS PARTLY A LLOWED. ITA NOS. 1868 AND 1870/KOL/2014 A.Y.2008-09 AND 200 9-10 : 34. GROUND NOS OF APPEAL RAISED IN THESE APPEALS R EAD AS FOLLOWS :- 1.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSES SING OFFICER IN SUBJECTING TO FRINGE BENEFIT TAX, AN AMOUNT OF RS. 16,98,080/- BE ING 20% OF THE MEDICAL EXPENSES OF RS 84,90,403/- INCURRED BY APPELLANT. 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT (A) FAILED TO APPRECIATE THAT REIMBURSEMENT OF MEDICAL EXPENSES TO EMPLOYEES FALLS WITHIN THE MEANING OF 'SALARY' AND ANY EXPENDITURE INCURRED FOR THE PURPOSES OF SALARY, DOES NOT FALL WITHIN THE PURVIEW OF FRINGE BENEFIT TAX UNDER THE PROVISIONS OF SECTION 115WB OF THE ACT. 2.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT (A) ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSES SING OFFICER IN SUBJECTING TO FRINGE BENEFIT TAX, AN AMOUNT OF RS. 19,18,302/- BE ING 20% OF THE MEDICAL INSURANCE PREMIUM OF RS 95,91,509/- INCURRED BY APP ELLANT. 2.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT (A) FAILED TO APPRECIATE THAT THE MEDICAL INSURANCE PRE MIUM PAID BY THE APPELLANT ON BEHALF OF THE EMPLOYEES FALLS' WITHIN THE MEANING O F 'SALARY' AND ANY EXPENDITURE INCURRED FOR THE PURPOSES OF SALARY, DOES NOT FALL WITHIN THE PURVIEW OF FRINGE BENEFIT TAX UNDER THE PROVISIONS OF SECTION 1I5WB O F THE ACT. 3.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT (A) ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSES SING OFFICER IN ATTRIBUTING ADDITIONAL 10% OF THE COMPOSITE PARTICIPATION FEES AS EXPENDITURE LIABLE TO FRINGE 20 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 BENEFIT TAX WITHOUT GIVING ANY COGENT REASONS AND O N A MERE ASSUMPTION, SURMISE AND CONJECTURE. ITA NO.1870/KOL/2014 (A.Y.2009-10) 1.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSES SING OFFICER IN SUBJECTING TO FRINGE BENEFIT TAX, AN AMOUNT OF RS. 15,91,000/- BE ING 20% OF THE MEDICAL EXPENSES OF RS 79,55,000/- INCURRED BY APPELLANT. 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT (A) FAILED TO APPRECIATE THAT REIMBURSEMENT OF MEDICAL EXPENSES TO EMPLOYEES FALLS WITHIN THE MEANING OF 'SALARY' AND ANY EXPENDITURE INCURRED FOR THE PURPOSES OF SALARY, DOES NOT FALL WITHIN THE PURVIEW OF FRINGE BENEFIT TAX UNDER THE PROVISIONS OF SECTION 115WB OF THE ACT. 2.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT (A) ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSES SING OFFICER IN SUBJECTING TO FRINGE BENEFIT TAX, AN AMOUNT OF RS. 26,13,540/- BE ING 20% OF THE MEDICAL INSURANCE PREMIUM OF RS 1,30,67,698/- INCURRED BY A PPELLANT. 2.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT (A) FAILED TO APPRECIATE THAT THE MEDICAL INSURANCE PRE MIUM PAID BY THE APPELLANT ON BEHALF OF THE EMPLOYEES FALLS' WITHIN THE MEANING O F 'SALARY' AND ANY EXPENDITURE INCURRED FOR THE PURPOSES OF SALARY, DOES NOT FALL WITHIN THE PURVIEW OF FRINGE BENEFIT TAX UNDER THE PROVISIONS OF SECTION 1I5WB O F THE ACT. 3.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT (A) ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSES SING OFFICER IN ATTRIBUTING ADDITIONAL 10% OF THE COMPOSITE PARTICIPATION FEES AS EXPENDITURE LIABLE TO FRINGE BENEFIT TAX WITHOUT GIVING ANY COGENT REASONS AND O N A MERE ASSUMPTION, SURMISE AND CONJECTURE. 35. THESE GROUNDS ARE IDENTICAL TO GROUND NOS. 1 T O 3 RAISED BY THE ASSESSEE IN A.Y.2007-08. FOR THE REASONS STATED WHILE ADJUDICAT ING GROUND NOS. 1 TO 3 IN A.Y.2007-08 THE SAME ARE ALLOWED. 36. IN THE RESULT ITA NOS.1868 AND 1870/KOL/2014 A RE ALLOWED. ITA NO.1869/KOL/2014 A.Y.2009-10 : 21 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 37. THIS IS AN APPEAL BY THE ASSESSE AGAINST THE O RDER DATED 23.01.2014 OF CIT(A)-4, KOLKATA RELATING TO A.Y.2009-10. THIS APPEAL ARISE S OUT OF ORDER OF ASSESSMENT PASSED U/S.143(3) OF THE ACT. 38. GROUNDS OF APPEAL RAISED BY THE ASSESSEE READ AS FOLLOWS :- 1.A THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE LEA RNED ASSESSING OFFICER IN DISALLOWING A SUM OF RS. 1,60,96,045/-, UNDER SECTI ON 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. 1 B. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) WHILE CONFIRMING THE ACTION OF THE LEARNE D ASSESSING OFFICER IN DISALLOWING A SUM OF RS. 1,60,96,045/-, FAILED TO A PPRECIATE THAT NO EXPENSES OVER AND ABOVE THE AMOUNT QUANTIFIED BY THE APPELLANT WA S ACTUALLY INCURRED IN EARNING DIVIDEND INCOME. 1C THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE LEA RNED ASSESSING OFFICER IN DISALLOWING A SUM OF RS. 1,60,96,045/- WITHOUT APPR ECIATING THAT THE LEARNED ASSESSING OFFICER ARBITRARILY APPLIED RULE 8D BASED ON MERE SURMISES AND CONJECTURES AND WITHOUT PROVIDING ANY COGENT REASON AS TO HOW THE AMOUNT OF RS. 19,82,000/- QUANTIFIED BY THE APPELLANT WAS INCORRE CT. 1 D THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND WITHOUT PREJUDICE TO GROUNDS TAKEN HEREIN ABOVE, THE LEARNED CIT (APP EALS) ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER IN DISA LLOWING RS. 1,60,96,045/- UNDER SECTION 14A READ WITH RULE 8D WITHOUT APPRECIATING THAT STRATEGIC INVESTMENTS MADE PURELY FOR BUSINESS PURPOSES OUGHT TO HAVE BEE N EXCLUDED IN COMPUTING EXPENSES DISALLOWABLE UNDER RULE 8D(2)(III)OF THE I NCOME TAX RULES. 1 E.. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO THE GROUNDS TAKEN HEREIN ABOVE, THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFI CER IN DISALLOWING RS. 1,60,96,045/- UNDER SECTION 14A READ WITH RULE 80 W ITHOUT APPRECIATING THE FACT THAT ONLY THOSE INVESTMENTS ON WHICH DIVIDEND INCOM E WAS ACTUALLY EARNED OUGHT TO HAVE BEEN CONSIDERED FOR COMPUTING DISALLOWANCE UNDER RULE 8D(2)(III)OF THE INCOME TAX RULES. 22 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 39. THOUGH THE ASSESSEE HAS RAISED SEVERAL GROUNDS OF APPEAL, THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO THE CORRECTNESS OF THE QUANTUM OF DISALLOWANCE OF EXPENDITURE INCURRED TO EARN EXEMPT INCOME IN TERMS OF SEC.14A OF THE ACT READ WITH RULE 8D(2)(III) OF THE RULES. 40. THE ASSESSEE IS A COMPANY ENGAGED IN THE GROWI NG AND MANUFACTURING OF TEA. THE ASSESSEE WAS IN RECEIPT OF EXEMPT DIVIDEND INCOME O F RS.35.49,38,602/- DURING THE RELEVANT PREVIOUS YEAR. IT IS THE CLAIM OF THE ASSE SSEE THAT IN EARNING SUCH EXEMPT INCOME, NO DIRECT EXPENSES WERE INCURRED BY THE ASS ESEE. HOWEVER, WHILE FILING THE RETURN OF INCOME, THE ASSESSEE IDENTIFIED AND SUO-M OTTO OFFERED AN AMOUNT OF RS. 19,82,000/- AS INDIRECT EXPENSES ATTRIBUTABLE TO E ARNING EXEMPT INCOME WHICH HAS TO BE DISALLOWED U/S 14A OF THE ACT WHILE COMPUTING TO TAL INCOME. 41. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE PROVIDED WORKINGS OF ARRIVING AT THE AMOUNT OF RS. 19,82,000/- WHICH WAS OFFERED TO TAX U/S 14A. THE COPY OF THE SAID WORKINGS IS ANNEXED TO THIS ORDER AS ANNEXURE 1. IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE AO THAT NO DIRECT EXPENDITURE W AS INCURRED BY THE ASSESSEE IN EARNING DIVIDEND INCOME. MAJORITY OF THE INVESTMENT S HAVE BEEN MADE BY THE ASSESSEE IN PAST YEARS AND HAVE BEEN CARRIED FORWAR D YEAR AFTER YEAR. MAJORITY OF THE INVESTMENTS ARE STRATEGIC INVESTMENTS IN GROUP COMP ANIES FOR THE PURPOSE OF EXPANSION OF BUSINESS AND THE ASSESSEE DOES NOT TRA DE IN THESE INVESTMENTS WITH THE PURPOSE OF EARNING CAPITAL GAINS OR DIVIDEND. ACCOR DINGLY, NO DIRECT EXPENDITURE HAS BEEN INCURRED IN RESPECT OF THESE INVESTMENTS. HOWE VER, CONSIDERING THE FACT THAT SOME OF THE MANAGERIAL/STAFF TIME WERE SPENT ON INVESTME NT RELATED WORK OF THE COMPANY, THE ASSESSEE HAS SUO-MOTTO OFFERED A PORTION OF SAL ARY OF SUCH EMPLOYEES AMOUNTING TO RS 19,82,000/- AS EXPENSES INCURRED IN EARNING E XEMPT DIVIDEND INCOME. 42. THE AO APPLIED THE PROVISIONS OF RULE 8D(2) (III) OF THE RULES AND DISALLOWED A SUM OF RS.1,60,96,045/- (0.50% OF THE AVERAGE VALUE OF INVESTMENTS OF RS.361,56,09,000) AS EXPENDITURE INCURRED TO EARN E XEMPT INCOME AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 43. BEFORE CIT(A), THE ASSESSEE SUBMITTED THAT IT HAD SUO-MOTTO IDENTIFIED AND DISALLOWED THE EXPENSES WHICH COULD AT BEST BE ATTR IBUTABLE TO MANAGEMENT OF THESE 23 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 INVESTMENTS AND THUS, SAID TO BE INCURRED FOR THE P URPOSE OF EARNING EXEMPT DIVIDEND INCOME. IT WAS ARGUED THAT THE ASSESSING OFFICER FA ILED TO APPRECIATE THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE ASSESSEE AND FAILE D TO BRING ANY EVIDENCE RECORD TO SUBSTANTIATE THAT THE ASSESSEE HAD INCURRED EXPENSE S IN EARNING EXEMPT INCOME OVER AND ABOVE IDENTIFIED AND OFFERED BY THE ASSESSEE. I T WAS POINTED OUT THAT THE ASSESSING OFFICER HAS ALSO NOT PROVIDED ANY BASIS O R REASONS FOR REJECTING THE ASSESSEE'S CALCULATION OR HOLDING IT TO BE INAPPROP RIATE. IT WAS SUBMITTED THAT THE ASSESSING OFFICER ARBITRARILY PROCEEDED TO APPLY RU LE 8D ON MERE SURMISE, ASSUMPTION AND CONJECTURE. RELIANCE WAS PLACED ON T HE FOLLOWING DECISIONS WHEREIN IT HAS BEEN HELD THAT WHERE THE ASSESSING OFFICER DID NOT BRING ANY EVIDENCE ON RECORD TO ESTABLISH THAT ANY EXPENDITURE HAD BEEN INCURRED BY ASSESSEE FOR EARNING EXEMPT INCOME, DISALLOWANCE U/S 14A READ WITH RULE 8D COU LD NOT BE MADE: - DCIT VS. ASHISH JHUNJHUNWALA [2013] I.T.A NO. 1809/ KOL/2012 (KOL) CITVS. HERO CYCLES LTD. [2010] 323 ITR518 (PUNJ & H AR) ACIT VS. SIL INVESTMENT LTD. [2012] 54 SOT 54 (DELH I) PRIYA EXHIBITORS (P.) LTD. VS. ACIT [2012] 54 SOT 3 56 (DELHI) RAJ SRI PRODUCTION PVT. LTD. [TS~570~ITAT~2013(MUM) ] IT WAS SUBMITTED THAT SINCE THE ASSESSING OFFICER H AS FAILED TO DISCHARGE HIS ONUS OF ESTABLISHING THE FACT THAT EXPENDITURE OVER AND ABO VE IDENTIFIED BY THE ASSESSEE WAS INCURRED IN EARNING DIVIDEND INCOME, THE ACTION OF THE ASSESSING OFFICER IN APPLYING RULE 8D IS BASELESS AND SHOULD BE STRUCK DOWN. RELI ANCE IN THIS REGARD IS ALSO PLACED ON FOLLOWING DECISIONS WHEREIN IT HAS BEEN HELD THA T PROVISION OF RULE 8D COMES INTO PLAY ONLY WHEN THE AO RECORDS A FINDING THAT HE IS NOT SATISFIED WITH THE ASSESSEE'S METHOD AND THE SAID RULE CANNOT BE ARBITRARILY APPL IED BY THE ASSESSING OFFICER WITHOUT SHOWING HOW THE ASSESSES METHOD OF CALCULAT ION OF DISALLOWANCE U/S 14A IS INCORRECT. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE 10, KO LKATA V. CHAMPION COMMERCIAL CO. LTD. [2013] 152 TTJ 241 (KOLKATA) COMMISSIONER OF INCOME-TAXVS- CONSOLIDATED PHOTO & FINVEST LTD. [2012] 211 TAXMAN 184 (DELHI HIGH COURT) MAXOPP INVESTMENTS LIMITED - VS CIT (2012) 347 ITR 272 (DELHI) 24 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 DCIT -VS.- JINDAL PHOTO LIMITED -ITA NO. 814 (DEL) 2011 AUCHTEL PRODUCTS LTD. -VS.~ ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-6(1), MUMBAI [2012] 52 SOT 39 (MUM) RAJ SHIPPING AGENCIES LTD VS. ACIT [2013] 38 TAXMAN .COM 345(MUM) DCIT VS. ALLIED INVESTMENTS HOUSING P. LTD [2013] ( ITAT CHENNAI) REIAXO FOOTWEARS LTD. VS ADDL. CIT [2012] 50 SOT 10 2 (DELHI) IT WAS ARGUED THAT SINCE THE ASSESSING OFFICER HAS FAILED TO RECORD A FINDING THAT THE ASSESSEE'S METHOD IS INCORRECT AND NOT SATISFACTORY , THE ACTION OF THE ASSESSING OFFICER IN APPLYING RULE 8D IS ERRONEOUS AND ACCORDINGLY, S HOULD BE STRUCK DOWN. 44. WITHOUT PREJUDICE TO THE ABOVE SUBMISSION , IT WAS SUBMITTED THAT OUT OF THE TOTAL INVESTMENTS, MAJORITY OF THE INVESTMENTS WERE MADE BY THE ASSESSEE IN SUBSIDIARIES, ASSOCIATE COMPANIES AND JOINT VENTURE S WHICH WERE IN THE NATURE OF STRATEGIC INVESTMENTS IN GROUP COMPANIES FOR THE PU RPOSE OF EXPANDING THE BUSINESS OF THE ASSESSEE. MAJORITY OF SUCH INVESTMENTS HAVE BEE N MADE BY THE ASSESSEE IN PAST YEARS AND THE SAME ARE LONG TERM IN NATURE. IT WAS POINTED OUT THAT THE ASSESSEE HAS NEITHER MADE THESE INVESTMENTS TO EARN CAPITAL GAIN S NOR TO EARN DIVIDEND BUT OUT OF BUSINESS EXPEDIENCY TO EXPAND ITS BUSINESS. ACCORDI NGLY, THE SAID STRATEGIC INVESTMENTS SHOULD NOT FALL UNDER THE PURVIEW OF RU LE 8D(2)(III) AND EXPENDITURE INCURRED, IF ANY, IN CONNECTION WITH SUCH STRATEGIC INVESTMENTS SHOULD NOT BE DISALLOWED UNDER RULE 8D(2)(III). RELIANCE IN THIS REGARD, WAS PLACED ON THE DECISION OF THE CHENNAI TRIBUNAL IN THE CASE OF EIH _ASSOCIA TED HOTELS LIMITED VS. DY. CIT [2012] I.T.A. NO. 1503/MDS/2012 (CHENNAI) WHEREIN T HE TRIBUNAL HAS HELD AS UNDER: WE ARE OF THE CONSIDERED OPINION THAT THE INVESTME NTS MADE BY THE ASSESSEE IN THE SUBSIDIARY COMPANY ARE NOT ON ACCOUNT OF INVES TMENT FOR EARNING CAPITAL GAINS OR DIVIDEND INCOME. SUCH INVESTMENTS HAVE BE EN MADE BY THE ASSESSEE TO PROMOTE SUBSIDIARY COMPANY INTO THE HOTEL INDUSTRY. A PERUSAL OF THE ORDER OF THE CIT(APPEALS) SHOWS THAT OUT OF TOTAL INVESTMEN T OF RS. 64,18,19,775/-, RS. 63,31,25,715/- IS INVESTED IN WHOLLY OWNED SUBSIDI ARY. THIS FACT SUPPORTS THE CASE OF THE ASSESSEE THAT THE ASSESEE IS NOT INTO T HE BUSINESS OF INVESTMENT AND THE INVESTMENTS MADE BY THE ASSESSEE ARE ON ACCOUN T OF BUSINESS EXPEDIENCY. ANY DIVIDEND EARNED BY THE ASSESSEE FROM INVESTMENT IN SUBSIDIARY COMPANY IS PURELY INCIDENTAL. THEREFORE, THE INVESTMENT MADE B Y THE ASSESSEE IN ITS SUBSIDIARY ARE NOT TO BE RECKONED FOR DIS-ALLOWANCE U/S. 14A R.W.R. 8D. THE ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE THE AVE RAGE VALUE OF INVESTMENT 25 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 UNDER THE PROVISIONS OF RULE 8D AFTER DELETING INVE STMENTS MADE BY THE ASSESSEE IN SUBSIDIARY COMPANY. ACCORDINGLY, THIS G ROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THAT OF THE REVENUE IS DISMISSED. IT WAS POINTED OUT THAT IN THE CASE OF THE ASSESSEE ALSO OUT OF TOTAL INVESTMENT CONSIDERED BY THE AO FOR CALCULATING AVERAGE VALUE OF INVESTMENT, INVESTMENTS OF RS.83318.07 LACS WERE IN THE NATURE OF STRATEGIC I NVESTMENTS AND HAVE BEEN MADE BY THE ASSESSEE IN SUBSIDIARIES, ASSOCIATE COMPANIES A ND JOINT VENTURES FOR THE PURPOSE OF EXPANDING BUSINESS AND NOT WITH THE INTENTION OF EA RNING EXEMPT INCOME. THE DIVIDEND INCOME EARNED IF ANY IS ONLY INCIDENTAL. A CCORDINGLY, NO DISALLOWANCE IS CALLED FOR UNDER SECTION 14A OF THE ACT R.W. RULE 8 D(2)(III). 45. THE CIT(A) HOWEVER DID NOT AGREE WITH THE SUBM ISSIONS MADE BY THE ASSESSEE AND HE CONFIRMED THE ORDER OF THE AO BY OBSERVING A S FOLLOWS :- 3.3. I HAVE GONE THROUGH THE SUBMISSIONS FILED BY THE APPELLANT. THOUGH THE APPELLANT HAS SUO MOTO DISALLOWED SALARY EXPENSES OF VARIOUS EMPLOYEES, IT CANNOT BE DENIED THAT VARIOUS ADMINISTRATIVE EXPENS ES MUST HAVE BEEN INCURRED IN MANAGING THE INVESTMENT AND EARNING DIVIDEND INC OME. ACCORDINGLY, THE ASSESSING OFFICER WAS CORRECT IN APPLYING RULE 80(2 )(III) AND DISALLOWING 0.5% OF THE AVERAGE VALUE OF INVESTMENT OF RS. 1,60,96,0 45/- FOR COMPUTING DISALLOWANCE U/S 14A OF THE ACT. 3.4 AS REGARD THE RELIANCE PLACED BY THE APPELLANT ON THE DECISION OF REI AGRO LTD. [2013] 35 TAXMANN.COM 404 (KOLKATA - TRIB.) IN HOLDING THAT ONLY THOSE INVESTMENTS ON WHICH DIVIDEND HAS BEEN EARNED BY TH E APPELLANT SHOULD HAVE BEEN CONSIDERED FOR COMPUTING 0.5% OF AVERAGE VALUE OF INVESTMENTS AND NOT ALL INVESTMENTS ON WHICH NO DIVIDEND HAS BEEN EARNED DU RING THE RELEVANT FINANCIAL YEAR, THE SAME IS MISPLACED IN VIEW OF THE RECENT C BDT CIRCULAR NO.5 DATED 11- 02-2014 WHERE IN IT HAS BEEN CLARIFIED THAT DISALLO WANCE U/S 14A IN RESPECT OF EXPENSES IS REQUIRED TO BE MADE EVE IF NO EXEMPT IN COME IS EARNED FROM INVESTMENTS DURING THE YEAR. ACCORDINGLY, DISALLOWA NCE MADE BY THE ASSESSING OFFICER STANDS CONFIRMED. 46. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 47. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATE D SUBMISSIONS MADE BEFORE THE AO. THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A). WE HAVE HEARD THE RIVAL SUBMISSIONS. 26 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 48. THOUGH THE ASSESSEE HAS PLACED RELIANCE ON SEV ERAL JUDICIAL PRONOUNCEMENTS, WE ARE OF THE VIEW THAT THE DECISION OF THE HONBLE DE LHI HIGH COURT RENDERED IN THE CASE OF H.T.MEDIA LTD. VS PR. CIT (2017) 85 TAXMAN. COM 113 (DELHI) WOULD BE APPROPRIATE TO THE FACTS AND CIRCUMSTANCES OF THE P RESENT CASE. IN THE AFORESAID DECISION THE HONBLE DELHI HIGH COURT HAD LAID DOWN THE LAW WITH REGARD TO DISALLOWANCE U/S.14A OF THE ACT AS FOLLOWS :- IN ORDER TO DISALLOW THIS EXPENSE THE ASSESSING OF FICER HAD TO FIRST RECORD, ON EXAMINING THE ACCOUNTS, THAT HE WAS NOT SATISFIED W ITH THE CORRECTNESS OF THE ASSESSEE'S CLAIM OF RS. 3 LAKHS BEING THE ADMINISTR ATIVE EXPENSES. THIS WAS MANDATORILY NECESSITATED BY SECTION 14A(2) READ WIT H RULE 80( I )(A) OF THE RULES. [PARA 35] IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER RE CORDS THAT, IN ANSWER TO THE QUERY POSED BY THE ASSESSING OFFICER REQUIRING IT T O PRODUCE CALCULATION FOR DISALLOWANCES, THE ASSESSEE 'SUBMITTED THAT THEY HA VE NOT INCURRED ANY EXPENDITURE FOR EARNING THE DIVIDEND INCOME.' THERE AFTER, THE ASSESSING OFFICER RECORDS THAT IT HAS CONSIDERED THE SUBMISSIONS OF T HE ASSESSEE AND FOUND NOT TO BE ACCEPTABLE. THEREAFTER, THE ASSESSING OFFICER PROCE EDED TO DEAL WITH THE SAID PROVISIONS OF SECTION 14A AND RULE 8D AND OBSERVED THAT MAKING OF INVESTMENT, MAINTAINING OR CONTINUING INVESTMENT AND TIME OF EX IT FROM INVESTMENT ARE WELL INFORMED AND WELL COORDINATED MANAGEMENT DECISIONS THAT, IN RELATION TO EARNING OF INCOME, ARE EMBEDDED IN INDIRECT EXPENSES. IT IS THEN STATED THAT, THE PROVISIONS OF SUB-SECTION (2) OF SECTION 14A AND RU LE 8D OF THE RULES ARE IN OPERATION AND THEREFORE, WILL STRICTLY BE ADHERED T O BY THE ASSESSEE. THEREAFTER, DISCUSSING SECTION 14A(I) READ WITH RULE 80 AND REF ERRING TO THE DECISION OF THE BOMBAY HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. V . CIT [2010] 328 ITR 81/194 TAXMAN 203, THE ASSESSING OFFICER SIMPLY STA TED THAT HE WAS SATISFIED THAT THE ASSESSEE HAD INCURRED EXPENSES TO MANAGE ITS IN VESTMENTS WHICH MAY YIELD EXEMPT INCOME, AND ASSESSEE GROSSLY FAILED TO CALCU LATE SUCH EXPENSES IN A REASONABLE MANNER TO ASCERTAIN THE TRUE AND CORRECT PICTURE OF ITS INCOME AND EXPENSES. IT IS VIEWED THAT THE ABOVE OBSERVATIONS OF THE A SSESSING OFFICER IN THE ASSESSMENT ORDER ARE OF A BROAD GENERAL NATURE NOT WITH PARTICULAR REFERENCE TO THE FACTS OF THE CASE ON HAND. THERE BEING CONCURRENT FINDINGS OF BOTH THE COMMI SSIONER (APPEALS) AS WELL AS THE TRIBUNAL ON THIS ASPECT IS NOT AGREEABLE. THE C OMMISSIONER (APPEALS) DISALLOWED THE EXEMPT EXPENSES BY MERELY REPEATING WHAT THE ASSESSING OFFICER HAD STATED ABOUT THE COST THAT IS BUILT INTO SO CAL LED 'PASSIVE' INVESTMENTS AND SIMPLY RECORDED THAT THE ASSESSING OFFICER WAS BOUN D TO RULE 8D AND, THEREFORE, 27 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 WAS JUSTIFIED IN DETERMINING ADMINISTRATIVE COSTS A T 0.5 PER CENT. HERE AGAIN, THE COMMISSIONER (APPEALS) FAILED TO NOTE THAT WITHOUT THE MANDATORY REQUIREMENT UNDER SECTION 14A AND RULE 8D OF THE RULES, OF SATI SFACTION BEING RECORDED BEING MET, THE QUESTION OF APPLYING RULE 8D(1) DID NOT AR ISE. THE TRIBUNAL IN ITS ORDER RECORDED THE SUBMISSION OF THE ASSESSEE THAT THE ASSESSING OFFICER DID NOT RECORD ANY SATISFACTION A BOUT THE ASSESSEE NOT PROPERLY OFFERING EXPENDITURE INCURRED IN RELATION TO THE EX EMPT INCOME AT RS. 3 LAKHS. THE TRIBUNAL REPRODUCED THE CONTENTS OF THE ASSESSMENT ORDER WHICH CONTAINS GENERAL OBSERVATIONS REGARDING EARNING OF EXEMPT INCOME. TH IS CANNOT BE ACCEPTED AS A RECORDING BY THE ASSESSING OFFICER OF SATISFACTION REGARDING THE CLAIM OF THE ASSESSEE AFTER EXAMINING ITS ACCOUNTS. AGAIN, THE T RIBUNAL IN ITS ORDER SIMPLY REPRODUCED THE ASSESSMENT ORDER WHERE, AGAIN, NO RE ASONS HAVE BEEN PROVIDED BUT ONLY A CONCLUSION HAS BEEN REACHED THAT THE ASS ESSING OFFICER WAS SATISFIED THAT THE ASSESSEE HAD INCURRED EXPENSES TO MANAGE I TS INVESTMENTS WHICH MAY YIELD EXEMPT INCOME. AND ASSESSEE GROSSLY FAILED TO CALCULATE SUCH EXPENSES IN A REASONABLE MANNER TO ASCERTAIN THE TRUE AND CORRECT PICTURE OF ITS INCOME AND EXPENSES. CONSEQUENTLY, ON THE ASPECT OF ADMINISTRATIVE EXP ENSES BEING DISALLOWED, SINCE THERE WAS A FAILURE BY THE ASSESSING OFFICER TO COM PLY WITH THE MANDATORY REQUIREMENT OF SECTION 14A(2) READ WITH RULE 8D( 1 )(A) OF THE RULES AND RECORD HIS SATISFACTION AS REQUIRED THERE UNDER, THE QUES TION OF APPLYING RULE 8D(2)(III) OF THE RULES DID NOT ARISE. 49. IN THE PRESENT CASE NEITHER THE AO NOR CIT(A) HAS GIVEN ANY REASON WHY THEY ARE NOT AGREEING WITH THE CLAIM OF THE ASSESSEE. A SUM OF RS.90,82,000/- IS THE EXPENSES THAT HAVE TO BE DISALLOWED U/S 14A OF THE ACT BY TH E ASSESSEE SUO-MOTTO. IN THE PRESENT CASE THE AO HAS MERELY OBSERVED THAT THE ME MBERS OF THE STAFF UTILISING THE INFRASTRUCTURE OF THE COMPANY FOR CARRYING OUT THE JOB OF PORTFOLIO MANAGEMENT OF THE COMPANY CANNOT BE RULED OUT. THIS OBSERVATION IN OU R VIEW WILL NOT BE SUFFICIENT TO INVOKE THE PROVISION OF RULE 8D(2) (III) OF THE RUL ES. THE CIT(A) AFTER MAKING A REFERENCE TO SEVERAL DECISIONS AND ARGUMENTS PUT FO RTH BY THE ASSESSEE HAS WITHOUT ANY CONSIDERATION TO THOSE SUBMISSIONS, FOLLOWED THE S AME PATTERN AS THAT OF THE AO. IT WAS THE STAND OF THE ASSESSEE THAT NO DIRECT EXPENS ES HAVE BEEN INCURRED BY THE ASSESSEE IN EARNING THE DIVIDEND INCOME. IT WAS ALS O THE PLEA OF THE ASSESSEE THAT THE MAJORITY OF THE INVESTMENT WERE MADE BY THE ASSESSE E IN THE PAST YEARS AND HAVE BEEN CARRIED FORWARD YEAR AFTER YEAR. IT WAS ALSO PLEADE D BY THE ASSESSEE THAT MAJOR 28 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10 INVESTMENTS ARE STRATEGIC INVESTMENTS IN GROUP COMP ANIES FOR THE PURPOSE OF EXPANSION OF THE BUSINESS AND THE ASSESSEE DOES NOT TRADE IN THESE INVESTMENTS WITH THE PURPOSE OF EARNING CAPITAL GAINS OR DIVIDEND. THE A SSESSEE HAS ALSO EXPLAINED THAT CONSIDERING THAT THE SOME MANAGERIAL TIME HAS BEEN SPENT ON PORTFOLIO RELATED WORK, A SUM OF RS.19,82,000/- WAS OFFERED AS EXPENSES INCUR RED IN EARNING EXEMPT DIVIDEND INCOME. THESE SUBMISSIONS OF THE ASSESSEE HAVE NEIT HER BEEN DEALT WITH BY THE REVENUE AUTHORITIES IN OUR VIEW, FOUND TO BE NOT CO RRECT. IN THESE CIRCUMSTANCE, WE ARE OF THE VIEW THAT THE DISALLOWANCE MADE BY THE AO AN D CONFIRMED BY THE CIT(A) CANNOT BE SUSTAINED. THE SAME IS DIRECTED TO BE DEL ETED AND GROUND OF APPEAL ARE ALLOWED. 50. IN THE RESULT ITA NO.1869/KOL/2014 IS ALLOWED. 51. IN THE RESULT, ITA NO.1866 & 1867/KOL/2014 ARE PARTLY ALLOWED. WHILE ITA NO.1868 & 1870/KOL/2014 ARE ALLOWED. ITA NO.1869/K OL/2014 IS ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON 13.12.2017. SD/- SD/- [DR.ARJUN LAL SAINI] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13.12.2017. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1.TATA GLOBAL BEVERAGES LTD., 1, BISHOP LEFROY ROAD , KOLKATA-700029. 2.A.C.I.T., CIRCLE-4, KOLKATA../ADDL. C.I.T., CIRCL E-4/D.C.I.T., CIRCLE-4, KOLKATA. 3. CIT(A)-IV, KOLKATA. 4. CIT-II, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHES 29 ITA NOS.1866 -1868,1870 & 1869/KOL/2014 TATA GLOBAL BEVERAGES LIMITED A.Y.2006-07 TO 2009-10