M/s Janani Tours & Resorts Pvt. Ltd., Bangalore V. ACIT, Bangalore

ITA 219/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57549 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 02-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Opportunity of being heard
• Section: 6

Judgement Text

PAGE 1 OF 8 ITA NO.21 9/BANG/2011 1 INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES A BEFORE SHRI N K SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NO.219/BANG/2011 (ASST. YEAR 2006-07) M/S JANANI TOURS & RESORTS PVT. LTD., JANANI, L-171, RING ROAD, 6 TH SECTOR, HSR LAYOUT, BANGALORE-34. PA NO.AAACJ9953G VS THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE- 11(5), BANGALORE. (APPELLANT) (RESPONDENT) DATE OF HEARING : 21.03.20 12 DATE OF PRONOUNCEMENT : 30.03.2012 APPELLANT BY : SHRI BALRAM R RAO, ADVOCATE RESPONDENT BY : SHRI SARAVANAN B., JCIT O R D E R PER GEORGE GEORGE K : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE CIT(A)-I, BANGALORE, DATED 10/12/2010. THE R ELEVANT ASSESSMENT YEAR IS 2006-07. THE CIT(A)S ORDER ARIS E OUT OF ACITS ORDER PASSED UNDER SECTION 115WE(3) DATED 12/12/200 8. 2. THE GROUNDS RAISED READS AS FOLLOWS:- I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN UPHOLDING THE ORDER OF THE ASSESSING AUTHORITY WITH REGARD TO VALUATION OF PAGE 2 OF 8 ITA NO.21 9/BANG/2011 2 FRINGE BENEFIT IN THE CASE OF THE EXPENDITURE WITH REGARD TO TRANSPORTATION FACILITIES PROVIDED TO THE VARIOUS CORPORATE BODIES AT BANGALORE WITHOUT APPRECIATING THE PROVISIONS OF SECTION 115WB(2)(H) READ WITH WC HAD NO APPLICATION AND THERE WAS NO OBLIGATION ON THE APPELLANT TO PAY FRINGE BENEFIT TAX. II) ON THE FACTS, THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAVING NOT PROVIDED ANY BENEFITS TO ITS EMPLOYEES, THE VALUATION OF FRINGE BENEFIT DID NOT ARISE IN THE CASE OF THE APPELLANT FOR THE PURPOSE OF TAXATION. III) WITHOUT PREJUDICE, THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE VEHICLES TATA SUMO, QUALIS AND SCORPIO WILL NOT FALL WITHIN THE DEFINITION OF MOTOR CAR FOR THE PURPOSE OF VALUATION OF FRINGE BENEFIT AS PROVIDED UNDER THE ACT. IV) THE LEARNED CIT(A) HAD CATEGORICALLY ACCEPTED THE APPELLANTS CASE, OUGHT TO HAVE GIVEN THE RELIEF PRAYED FOR INSTEAD OF HOLDING THAT THESE VEHICLES WOULD FALL UNDER MOTOR CAR JUST TO DENY THE BENEFIT PRAYED FOR. 3. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE APPELLANT IS A COMPANY. IT DERIVES INCOME FRO M OPERATION OF CABS FOR TOURS AND TRAVEL PURPOSES. I T PROVIDES TRANSPORT FACILITIES TO VARIOUS CORPORATE OFFICES A T BANGALORE FOR TRANSPORTATION OF THEIR EMPLOYEES. FOR THE ABOVE PU RPOSE, IT USES VARIOUS TYPES OF MOTOR VEHICLES (EITHER ITS OWN OR T AKEN ON HIRE) FOR RENDERING THE SERVICES. THE APPELLANT COMPANY FILED THE RETURN OF INCOME UNDER SECTION 115WD FOR THE CONCERNED ASSESS MENT YEAR ON 30.10.2006 DECLARING TOTAL VALUE OF THE FRINGE BENE FIT AT PAGE 3 OF 8 ITA NO.21 9/BANG/2011 3 RS.7,25,065/- AND PAID FRINGE BENEFIT TAX (INCLUDIN G INTEREST) OF RS.2,68,994/-. THE APPELLANTS CASE WAS TAKEN UP F OR SCRUTINY BY ISSUANCE OF NOTICE UNDER SECTION 115WE(2) AND THE S CRUTINY ASSESSMENT WAS COMPLETED VIDE ORDER DATED 12/12/200 8. THE ASSESSING OFFICER BY APPLYING THE PROVISIONS OF SECT ION 115WB(2)(H) RWS 115W C(E) ADDED A SUM OF RS.11,04,687/- AS DEEMED FRINGE BENEFITS. THE ASSESSING OFFICER TREATED 5% OF THE FUEL EXPENSES, INSURANCE AND TAX, REPAIRS AND MAINTENANCE CHARGES INCURRED ON VEHICLES GIVEN ON HIRE AS DEEMED FRINGE BENEFIT; WH EREAS ON VEHICLES, WHICH ARE USED EXCLUSIVELY BY THE APPELLANT COMPANY, 2 0% OF SUCH EXPENSES WERE TREATED AS DEEMED FRINGE BENEFITS. T HIS HAS RESULTED IN INCREASE IN TAX LIABILITY UNDER SECTION 115WA AND INTEREST UNDER SECTION 115WJ AMOUNTING TO RS.3,74,539/-. 4. AGGRIEVED, THE APPELLANT FILED APPEAL BEFORE TH E FIRST APPELLATE AUTHORITY. 5. THE CIT(A) DISMISSED THE APPEAL OF THE APPELLAN T. THE RELEVANT FINDING OF THE CIT(A) IS REPRODUCED BELOW FOR READY REFERENCE:- ON LAW I AM NOT ONE WITH THE AR WHEN HE PLEADS THAT THE PROVISIONS OF S.2(26) OF MOTOR VEHICLES ACT 1988 ON THE PLEA THAT THE ACT DOES NOT DEFINE THE WORD MOTOR VEHICLE. CIRCULAR NIO.8/2005 DATED 29.08.2005 FAQ NO.85 SPECIFIES THAT DELIVERY/DISPLAY VANS, TRUCKS/LORRIES AMBULANCE AND TRACTORS ARE NOT MOTOR CARDS. IT MAY MEAN THAT VEHICLES OTHER THAN THE ABOVE MAY BE PAGE 4 OF 8 ITA NO.21 9/BANG/2011 4 CONSIDERED AS MOTOR CAR UNLESS EXCLUDED SPECIFICALLY BY ANY JUDICIAL PRECEDENT AS FOR EXAMPLE IN THE CASE OF CIT V MAHAVEER POLYMERS (2002) 256 ITR 598 (RAJ) AND UNITED INDIA INSURANCE CO. LTD. V IA C (1989) 31 ITD 215 (MAD) IT HAD BEEN HELD THAT MOTOR CAR EXCLUDES TWO WHEELERS. THUS TATA SUMO, QUALIS AND SCORPIO ARE NOT TO BE CONSIDERED AS EXCLUDED FROM THE CATEGORY OF VEHICLES CATEGORIZED AS MOTOR CARS. NO DOUBT THESE VEHICLES DO NOT POSSESS THE ROUNDISH LONGISH SHAPE OF THE NORMAL CARS LIKE AMBASSADOR OR FIAT OR MARUTI CARS BUT IT CAN BE SAFELY ASCRIBED THE CATEGORY OF JEEPS BECAUSE OF THEIR BOXLIKE RECTANGULAR SHAPE AND IN THE CASES OF- (I) E.I.D. PARRY (INDIA) LTD. V CIT (2000) 243 ITR 116 (MAD.) (II) BALANOOR TEA AND RUBBER CO. LTD. V STATE OF KERALA (1994) 207 ITR 501 (KER) (III) CROMPTON ENGG. CO. (MADRAS) LTD. V CIT (1992) 193 ITR 483 (MAD) AND (IV) CIT V GOOD HOPE PLANTATION (1988) 170 ITR 173 (KER.) IT HAD BEEN HELD THAT MOTOR CAR INCLUDES JEEPS. IF SUCH IS THE INTERPRETATION AND THESE VEHICLES ARE EVEN CONSIDERED AS JEEPS THEN ALSO THEY ARE INCLUDIBLE IN THE DEFINITION OF MOTOR CAR. SO WITHOUT THE FEAR OF ANY CONTROVERSY ON THE LEGAL POINT I HOLD THAT THE ASSESSING OFFICER IS JUSTIFIE D TO INCLUDE THE TATA SUMO, QUALIS AND SCORPIO IN THE CATEGORY OF MOTOR CAR TO COMPUTE THE FRINGE PAGE 5 OF 8 ITA NO.21 9/BANG/2011 5 BENEFIT THEREFROM AT RS.11,04,687/- LIABLE FOR F.B.T. THUS CONSIDERING ON BOTH FACTS AND LAW I HOLD THE ADDITION CORRECT AND JUSTIFIED AND DISMISS THE APPEAL. 6. THE APPELLANT BEING AGGRIEVED IS IN APPEAL BEFO RE US. 7. THE LEARNED AR PLACED FAITH ON THE GROUNDS RAIS ED BEFORE THE CIT(A), WHICH WERE NARRATIVE AND ARGUMEN TATIVE. 8. PER CONTRA, THE LEARNED DR RELIED ON THE FINDIN G OF THE ORDERS OF THE INCOME TAX AUTHORITIES. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. THE SOLITARY ISSUE THAT ARISE FOR OUR CONSIDERATION IS WHETHER THE EXPENSES INCURRED ON R EPAIRS, RUNNING, (INCLUDING FUEL) MAINTENANCE OF MOTOR CARS THAT ARE LET OUT BY APPELLANT ON HIRE IS LIABLE TO BE TREATED (5%) AS D EEMED FRINGE BENEFIT UNDER SECTION 115WB(2)(H) OF THE ACT. FOR BETTER U NDERSTANDING OF THE ISSUE, THE RELEVANT PROVISION IS REPRODUCED AS BELOW:- 115WB (1) FOR THE PURPOSE OF THIS CHAPTER, FRINGE BENEFITS MEANS ANY CONSIDERATION FOR EMPLOYMENT PROVIDED BY WAY OF (A) . (B) (C) (D) . (2) THE FRINGE BENEFITS SHALL BE DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES, IF THE EMPLOYER HAS, IN THE COURSE OF HIS BUSINESS OR PAGE 6 OF 8 ITA NO.21 9/BANG/2011 6 PROFESSION (INCLUDING ANY ACTIVITY WHETHER OR NOT SUCH ACTIVITY IS CARRIED ON WITH THE OBJECT OF DERIVING INCOME, PROFITS OR GAINS) INCURRED ANY EXPENSE ON, OR MADE ANY PAYMENT FOR, THE FOLLOWING PURPOSES, NAMELY - (A) (B) .. (C) .. (D) .. (E) .. (F) .. (G) .. (H) REPAIR, RUNNING (INCLUDING FUEL), MAINTENANCE OF MOTOR CARS AND THE AMOUNT OF DEPRECIATION THEREON; 9.1 THE APPELLANTS CONTENTION IS THAT THE TERM M OTOR VEHICLE IS NOT DEFINED IN THE I T ACT. HENCE, TAK ING A CLUE FROM THE DEFINITION OF MOTOR VEHICLE FROM THE MOTOR VEHICL ES ACT, 1988, [SECTION 2(26)], THE APPELLANTS VEHICLES THAT ARE LET OUT ON HIRE, NAMELY, TATA SUMO, QUALIS AND SCORPIO ARE TRANSPORT VEHICLES, WHICH ARE SPECIFICALLY EXCLUDED FROM THE TERM MOTOR CAR AS PER THE MOTOR VEHICLES ACT, 1988. THE APPELLANT ALSO REFERS TO T HE DEFINITION OF OMNIBUS [2(29)], TRANSPORT VEHICLE [2(47)], PUBLI C SERVICE VEHICLE [2(35)] AND PRIVATE SERVICE VEHICLE [2(33)] UNDER T HE MOTOR VEHICLES ACT, 1988 AND CONTENDED THAT THE ABOVE DEFINITION I NDICATE THAT A MOTOR CAR IS A MOTOR VEHICLE ADOPTED TO CARRY SIX OR LESS PAS SENGERS AND WHICH IS NOT USED FOR THE CARRIAGE OF PASSENGER S FOR HIRE. (EMPHASIS SUPPLIED). PAGE 7 OF 8 ITA NO.21 9/BANG/2011 7 9.2 IF WE ADOPT THE DEFINITION OF MOTOR CAR UNDE R THE MOTOR VEHICLES ACT, 1988, CERTAINLY, THE APPELLANTS VEHICLES THAT ARE LET OUT ON HIRE WOULD NOT COME WITHIN THE TERM MOT OR CAR, SINCE IT IS CLEARLY A TRANSPORT VEHICLE, WHICH IS SPECIFICALLY EX CLUDED FROM THE DEFINITION OF MOTOR CAR UNDER THE MOTOR VEHICLES AC T, 1988. THOUGH THE APPELLANT HAD STATED THAT THE CBDT HAS REFERRED TO THE MOTOR VEHICLES ACT, 1988 IN THE CLARIFICATION ISSUED BY IT , THE APPELLANT HAS NEITHER PRODUCED NOR PLACED RELIANCE ON CBDTS CIRC ULAR/CLARIFICATION DURING THE COURSE OF HEARING. THE CIT(A) AT PARA 5 OF THE IMPUGNED ORDER HAS STATED THAT I FIND THE AR HAS RIGHTLY COMPREHENDED THE DEFINITION OF MOTOR CAR TO MEAN A MOTOR VEHICLE ADO PTED TO CARRY SIX OR LESS PASSENGERS AND WHICH IS NOT USED FOR THE CA RRIAGE OF PASSENGERS FOR HIRE. THE CIT(A) HAS ALSO REFERRED TO THE CBDT CIRCULAR. HOWEVER, HE HAS NOT DELIBERATED AND THER E IS NO CLARITY WHETHER THE DEFINITION OF THE MOTOR VEHICLES ACT, 1 988 CAN BE ADOPTED FOR INTERPRETING THE PROVISIONS OF INCOME T AX ACT, 1961. 9.3 IN THE INTEREST OF JUSTICE AND FOR A PROPER APPRECIATION/INVESTIGATION OF THE FACTS, WE ARE OF THE VIEW THAT THE MATTER NEEDS RE-CONSIDERATION BY THE ASSESSING OFFIC ER. THEREFORE, WE REMIT THIS ISSUE TO THE FILE OF THE ASSESSING OF FICER FOR DENOVO CONSIDERATION. NEEDLESS TO STATE, THE APPELLANT SH ALL BE AFFORDED A REASONABLE OPPORTUNITY OF BEING HEARD BEFORE THE ISS UE IS DECIDED. IT IS ORDERED ACCORDINGLY. PAGE 8 OF 8 ITA NO.21 9/BANG/2011 8 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DAY OF MARCH, 2012. SD/- SD/- (N K SAINI) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO:- 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONC ERNED 4. THE CIT(A) CONCERNED 5. THE DR 6. GF MSP/- BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.