Addl.CIT, Bangalore V. M/s Vijaya Bank, Bangalore

ITA 223/BANG/2012

• Counselvise Citation: 22321114 RSA 2012
• Duration Of Justice: 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 15-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K AMBASTHA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SHRI N. BARAT H VAJA SANKAR, VICE - PRESIDENT A ND SHRI N.V.VASUDEVAN , JUDICIAL MEMBER ITA NO.223/BANG/2012 (ASSESSMENT YEAR: 2008-09) ADDL. COMMISSIONER OF INCOME - TAX (LTU), BANGALOR E. APPELLANT VS. M/S.VIJAYA BANK, NO.41/2, M.G. ROAD, BANGALORE - 560001. RESPONDENT PAN: AAACV 4791 J A PPELLANT BY: SHR I S.K.AMBASTHA, CIT. RESPONDENT BY : SHRI S.ANANTHAN, C.A. DATE OF HEARING: 01 - 10 - 2012. DATE OF PRONOUNCEMENT: 01 - 10 - 2012. O R D E R PER N. BARATHVAJA SANKAR, VP: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-LTU, BANGALORE, DATED 9-12-2011 IN THE C ASE OF M/S.VIJAYA BANK, BANGALORE. 2. TWO ISSUES ARE BROUGHT BEFORE US FOR ADJUDICATIO N BY THE REVENUE. THEY ARE (I) THE LD.CIT(A) ERRED IN DELETI NG THE ADDITION MADE BY THE AO ON MEDICAL AID OF ` 4,53,67,636/- AS TAXABLE FRINGE BENEFIT AND (II) THE LD.CIT(A) ERRED IN DELE TING THE ADDITION ITA 223/BANG/2012 PAGE 2 OF 5 MADE BY THE AO ENTERTAINMENT EXPENSES AMOUNTING TO ` 1,05,30,554/- AS TAXABLE FRINGE BENEFIT. 3. THE ASSESSEE IS A BANKING COMPANY. IN SO FAR AS THE FIRST ISSUE VIZ. MEDICAL AID OF ` 4,53,67,636/- AS TAXABLE FRINGE BENEFIT IS CONCERNED, BRIEF FACTS OF THE CASE ARE T HAT THE ASSESSEE HAD CLAIMED MEDICAL AID EXPENSES OF ` 7,51,47,516/- WHICH COMPRISED FIXED MEDICAL ALLOWANCE PAID TO EMPLOYEES OF ` 2,97,79,880/- AND REIMBURSEMENT OF HOSPITALIZATION EXPENDITURE OF ` 4,53,67,636/-. THE AO TREATED THE HOSPITALIZATION E XPENDITURE OF ` 4,53,67,636/- AS A FRINGE BENEFIT U/S 115WB(2)(E) O F THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'T HE ACT']. ON APPEAL, THE CIT(A) DELETED THE ADDITION FOLLOWING T HE TRIBUNAL ORDER IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YE AR 2007-08. THE REVENUE IS ON APPEAL BEFORE THIS TRIBUNAL. 3.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSID ERED THE FACTS AND CIRCUMSTANCES OF THE CASE AND MATERIA L ON RECORD. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVO UR OF THE ASSESSEE BY THE TRIBUNAL ORDER DATED 26-8-2011 IN I TA NO.1066/BANG/2010 IN THE CASE OF THE ASSESSEE FOR T HE ASSESSMENT YEAR 2007-08 WHEREIN AFTER ELABORATE REA SONING, HELD AS UNDER: 3.9 IN SUB-SECTION (3) OF SECTION 115WB, IT IS MADE CLEAR THAT SECTION 115WB(1)(A) DOES NOT INCLUD E SUCH PERQUISITE IN RESPECT OF WHICH TAX IS PAID OR PAYABLE BY THE EMPLOYEES. IN THE INSTANT CASE, THE MEDICAL REIMBURSEMENT IS TAXABLE BUT FOR THE EXEMPTION PROVIDED IN THE PROVISO (V) TO SECTION 17 (2) UP TO AN AMOUNT OF ` 15,000/-. MERELY BY GRANT OF EXEMPTION, IT CANNOT BE SAID THAT THE TAX IS NOT PAYABLE. THEREFORE, A SPECIFIC ITEM OF PERQUISITE, ITA 223/BANG/2012 PAGE 3 OF 5 WHICH IS NORMALLY TAXABLE IN THE HANDS OF INDIVIDUA L EMPLOYEE, CANNOT BE SUBJECTED TO FBT, ONLY FOR THE REASON THAT THE SAME IS EXEMPT IN THE HANDS OF THE EMPLOYEES. IF THE ABOVE PROPOSITION IS NOT ACCEP TED, IT LEADS TO AN ANOMALOUS SITUATION. FOR EXAMPLE, WHEN THE MEDICAL EXPENDITURE IS ABOVE ` 15,000/- AND THE OVERALL INCOME OF THE INDIVIDUAL EMPLOYEE IS LE SS THAN THE MINIMUM AMOUNT NOT CHARGEABLE TO TAX; WHETHER THE MEDICAL EXPENSES IN EXCESS OF ` 15,000/- COULD BE SUBJECTED TO FBT, ONLY ON ACCOUNT OF THE F ACT THAT NO INCOME TAX WAS PAID BY THE EMPLOYEE. THE ANSWER TO THE ABOVE QUERY, IN OUR VIEW, WOULD BE IN THE NEGATIVE. LIKEWISE, WHEN AN ITEM WHICH IS TO B E TREATED AS A PERQUISITE IS EXEMPT IN THE HANDS OF T HE INDIVIDUAL EMPLOYEE, THE SAME, ACCORDING TO US, COU LD NOT BE SUBJECTED TO FBT. IN TAKING THE ABOVE VIEW, WE ARE ALSO FORTIFIED BY THE ORDER OF THE MUMBAI TRIBU NAL IN THE CASE OF GODREJ PROPERTIES LTD., WHICH HAS DECIDED AN IDENTICAL ISSUE. 3.10 IN THE RESULT, GROUND NOS.2 TO 4 ARE ALLOWED . 3.2 THE FACTS AND CIRCUMSTANCES IN THE INSTANT CASE ARE IDENTICAL TO THE ONE DECIDED BY THE TRIBUNAL. THERE FORE, FOLLOWING THE TRIBUNAL ORDER (SUPRA), WE REJECT THE GROUND OF APPEAL RAISED BY THE REVENUE. 4. INSOFAR AS THE SECOND ISSUE VIZ., TREATMENT OF ENTERTAINMENT EXPENSES AS TAXABLE FRINGE BENEFIT, B RIEF FACTS OF THE CASE ARE THAT THE AO NOTICED THAT THE ASSESSEE HAD DEBITED A SUM OF ` 1,05,30,554/- AS ENTERTAINMENT EXPENSES INSIDE O FFICE PREMISES. THE ASSESSEES EXPLANATION THAT THE AMO UNT REPRESENTED EXPENDITURE INCURRED FOR PROVIDING SNACKS/REFRESHMENTS TO CUSTOMERS WITHIN THE OFFICE PREMISES AND THEREFORE TO BE EXCLUDED FROM FRINGE BENEFIT AS PER SEC.115WB(2)(B)(I) WAS REJECTED BY THE AO ON THE GR OUND THAT THE EXEMPTION WAS PROVIDED ONLY FOR EXPENDITURE INC URRED ON ITA 223/BANG/2012 PAGE 4 OF 5 EMPLOYEES WHEREAS THE ASSESSEE HAD PROVIDED SNACKS/REFRESHMENTS TO ITS CUSTOMERS. ACCORDINGLY THE SUM OF ` 1,05,30,554/- WAS TREATED AS FRINGE BENEFIT BY THE AO. ON APPEAL, THE CIT(A) DELETED THE ADDITION MADE BY THE AO FOLLOWING THE TRIBUNAL ORDER IN THE CASE OF THE ASSESSEE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR VIZ., 2007-08 . THE REVENUE IS ON APPEAL BEFORE THIS TRIBUNAL. 4.1 WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE AND MATERIAL ON RECORD. WE FIND THAT THIS ISSUE IS ALSO SQUARELY COVERED IN FA VOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER (SUPRA) WHEREIN IT H AS BEEN HELD AS UNDER: 4.4 AS PER SECTION 115WB(2)(B)(I), THE EXPENDITURE INCURRED FOR PROVIDING SNACKS AND REFRESHMENTS HAVE TO BE EXCLUDED FROM THE FRINGE BENEFITS. IN OTHER WORDS, THE ACT EXCLUDES CERTAIN SPECIES OF EXPENDITURE FROM THE PURVIEW OF FRINGE BENEFITS. THE REASON STATED BY THE AUTHORITIES FOR DENYING THE CLAIM OF THE ASSESSEE IS THAT THIS EXPENDITURE ARE INCURRED FOR PROVIDING FOOD/BEVERAG ES TO ITS CUSTOMERS AND NOT TO ITS EMPLOYEES. THE SAI D REASON, ACCORDING TO US, IS WITHOUT SUBSTANCE, SINC E THE BASIS OF FICTION CONTAINED IN SEC.115WB(2) IS THAT CERTAIN EXPENSES, IF INCURRED, SHALL BE DEEMED TO H AVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES. THEREFORE, IF CERTAIN SPECIES OF EXPENDITURE INCURR ED ON THE EMPLOYEES ARE EXCLUDED FROM THE PURVIEW OF FBT, THE SAME EXCLUSION WILL ALSO HOLD GOOD FOR OTHER PERSONS. IN VIEW OF THE ABOVE REASONING, GROUND NO S. 5 TO 7 ARE ALLOWED. 4.2 THE FACTS AND CIRCUMSTANCES IN THE INSTANT CASE ARE IDENTICAL TO THE ONE DECIDED BY THE TRIBUNAL. THERE FORE, FOLLOWING THE TRIBUNAL ORDER (SUPRA), WE REJECT THE GROUND OF APPEAL RAISED BY THE REVENUE. ITA 223/BANG/2012 PAGE 5 OF 5 5. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 1ST OCTOBER, 2012 . SD/- SD/- (N.V.VASUDEVAN ) JUDICIAL MEMBER (N.BARATHVAJA SANKAR) VICE-PRESIDENT EKS COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) CONCERNED 4. CIT 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME-TAX APPELLATE TRIBU NAL, BANGALORE