Mamta Machinery Pvt. Ltd., Ahmedabad V. The ACIT.,(OSD)-I, Ahmedabad

ITA 2247/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6393 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 07-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 21-07-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G S SOURYAVANSHI
• Assessee Lawyers: J P SHAH

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C.AGRAWAL, A M MAMATA MACHINERY (P) LTD., 5/1/1-A, PHASE-1, GIDC, VATVA, AHMEDABAD. VS. ASSTT. CIT, RANGE-4, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI J.P. SHAH, AR RESPONDENT BY:- SHRI G. S. SOURYAVANSHI, SR.DR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS :- (1) YOUR APPELLANT BEING AGGRIEVED BY THE ORDER PASSED BY LD. CIT(A) VIII, AHMEDABAD PRESENTS THIS APPEAL ON FOLLOWING G ROUNDS : (2) THE LD. CIT(A) VIII, AHMEDABAD, HAS ERRED IN ADDING RS.22,81,766/- IN THE VALUE OF FBT TOWARDS CONVEYAN CE, TOUR AND TRAVEL EXPENSES THOUGH FULLY EXPLAINED. THE ADDITIO N MADE BE DELETED. (3) THE LD. CIT(A)VIII, AHMEDABAD HAS ERRED IN ADDING RS.2,50,133/- IN THE VALUE OF FBT TOWARDS SALES PROMOTION THOUGH EXPLAINED. THE ADDITION MADE BE DELETED. 2. THUS THE ONLY ISSUE INVOLVED IN THIS APPEAL IS A BOUT INCLUSION OF EXPENDITURE ON CONVEYANCE, TOUR AND TRAVEL AND SALE S PROMOTION IN THE ITA NO.2247/AHD/2009 ASST. YEAR 2006-07 ITA NO.2247/AHD/2009 ASST. YEAR 2006-07 2 COMPUTATION FOR FRINGE BENEFIT TAX (FBT). DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, U/S 115 WE(3) OF THE IT ACT , 1961, THE AO FOUND THAT THERE IS A DIFFERENCE IN THE AMOUNT OF E XPENDITURE DEBITED IN THE PROFIT AND LOSS AND THAT SHOWN IN THE FBT RETUR N UNDER THE HEAD CONVEYANCE, TOUR AND TRAVEL. THE DIFFERENCE WAS W ORKED OUT BY THE AO AS UNDER :- HEAD (IN P & L A/C) AMOUNT (IN P & L A/C) HEAD (IN FBT RETURN) AMOUNT (IN FBT RETURN) DIFFERENCE VALUE (AT 20%) DIRECTORS TRAVELING EXPENSES RS.36,77,087/- CONVEYAN CE, TOUR AND TRAVEL RS.1,58,89,358 RS.1,14,08,831 RS.22,81,766 CONVEYANCE AND VEHICLE EXPENSES RS.16,69,154/- TRAVELING EXPENSES RS.2,19,51,948/- TOTAL RS.2,72,98,189/- RS.1,58,89,358 IT WAS EXPLAINED TO THE AO THAT OUT OF TOTAL TRAVEL ING EXPENSES OF RS.2,58,55,393/- EXPENDITURE INCURRED ON AIR FARE/T RAIN FARE HAS BEEN REDUCED AS IT WILL NOT PROVIDE ANY BENEFIT TO THE EMPLOYEES. THE ASSESSEE HAS PAID FBT ON SUM OF RS.1,58,58,465/- AFTER EXCLU DING EXPENDITURE ON AIR FARE, TRAIN FAIR AT RS.99,96,928/-. THE AO WAS OF THE VIEW THAT EXPENDITURE ON AIR FARE/ON TRAIN FARE IS ALSO THE E XPENDITURE FOR THE PURPOSE OF CONVEYANCE, TOUR AND TRAVEL AS MENTIONED IN CLAUSE (F) OF SUB- SECTION (2) OF SECTION 115WB. IN THIS REGARD HE OBS ERVED AS UNDER :- THE SCHEME OF CHARGE AND LEVY OF FRINGE BENEFIT TA X IS ELABORATELY LAID DOWN IN CHAPTER XII-H OF THE ACT. SECTION 115WA IS CHARGING SECTION. ITA NO.2247/AHD/2009 ASST. YEAR 2006-07 3 SECTION 115WB DEFINES FRING BENEFITS. SECTION 115WC LAYS DOWN THE METHOD OF COMPUTATION OF VALUE OF FRINGE BENEFITS. THE PROVISIONS OF SUB-SECTION 2 OF SECTION 115WB MA KE IT AMPLY CLEAR THAT THE EXPENDITURE NEED NOT BE INCURRED FOR THE P URPOSE OF BENEFITS OF EMPLOYEES FOR THE SAME TO BE COVERED IN THE PURVIEW OF FRINGE BENEFITS. PROVISIONS OF SUB-SECTION 2 OF SECTION 115WB CREATE A LEGAL FICTION ACCORDING TO WHICH FRINGE BENEFIT IS DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES IF EXPENDITURE IS INCURRE D FOR ANY OF THE PURPOSES ENUMERATED IN CLAUSE A TO CLAUSE P OF SUB- SECTION 2 OF SECTION 115WB. THE CONTENTION OF THE ASSESSEE THAT THE ASSE SSEE COMPANY HAS NOT PAID FBT ON THE AIR FARE/TRAIN FARE PORTION, SINCE THERE ARE NO BENEFITS TO EMPLOYEE ON SUCH EXPENDITURE IS NOT AT ALL ACCEPTAB LE IN VIEW OF LEGAL FICTION CREATED BY THE PROVISION OF SUB-SECTION 2 O F SECTION 115WB. THE AO ACCORDINGLY TREATED THE AMOUNT DEBITED IN TH E PROFIT AND LOSS ACCOUNT UNDER THE HEAD, EXCLUDED THE AMOUNT ON WHIC H FBT WAS PAID AND WORKED OUT THE DIFFERENCE OF RS.1,14,08,831/- REFER RED TO ABOVE IN THE CHART. HE ACCORDINGLY LEVIED 20% FBT THEREON. 3. IN RESPECT OF SALES PROMOTION THE AO NOTICED THA T ASSESSEE HAS INCURRED AN EXPENDITURE OF RS.12,50,665/- BUT IT WA S NOT CONSIDERED BY IT FOR THE PURPOSE OF FBT. THE REASONS ADVANCED BY THE ASSESSEE WERE THAT THEY ARE PROXIMATE OF EXHIBITION EXPENSES. THE AO R EJECTED THE EXPLANATION AND TREATED A SUM OF RS.12,50,665/- ON WHICH FBT IS REQUIRED TO BE PAID. HE ACCORDINGLY CALCULATED 20% THEREOF AS FBT. 4. THE LD. CIT(A) CONFIRMED THE ADDITION IN RESPECT OF TRAIN FAIR/AIR FARE BY OBSERVING AS UNDER :- ITA NO.2247/AHD/2009 ASST. YEAR 2006-07 4 5.4 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS OF THE LD. AR CAREFULLY. SUB-SEC.(2) OF SEC.115WB LAYS THA T FRINGE BENEFITS DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES IF EXPENDITURE IS INCURRED FOR ANY OF THE PURPOSES ENU MERATED IN CLAUSE (K) TO (P) OF SUB-SEC.(2) OF SEC.115WB. CLAUSE (F) OF S UB-SECTION (2) SPECIFIES CONVEYANCE, TOUR AND TRAVEL (INCLUDING FOREIGN TRAV EL) AS ONE OF THE PURPOSES FOR WHICH EXPENSES HAVE BEEN INCURRED BY A N ASSESSEE. THE PROVISIONS OF SECTION 115WB(2) ARE AS UNDER :- THE FRINGE BENEFITS SHALL BE DEEMED TO HAVE BEEN P ROVIDED BY THE EMPLOYER TO HIS EMPLOYEES IF THE EMPLOYER HAS, IN T HE COURSE OF HIS BUSINESS OR PROFESSION (INCLUDING ANY ACTIVITY WHET HER OR NOT SUCH ACTIVITY IS CARRIED ON WITH THE OBJECT OF DERIVING INCOME, PROFITS OR GAINS) INCURRED AND EXPENSES ON, OR MADE ANY PAYMEN T FOR, THE FOLLOWING PURPOSES, NAMELY: (A) ENTERTAINMENT; (F) CONVEYANCE, TOUR AND TRAVEL (INCLUDING FOREIGN TRAVEL) . (P) SCHOLARSHIPS 5.5 THERE IS NO DISPUTE ABOUT THE FACT THAT APPELLA NT HAS INCURRED RS.2,72,98,189/- ON THE TRAVELING, CONVEYANCE AND V EHICLES AND FOREIGN TRAVELING OF ITS DIRECTORS DURING THE RELEVANT PERI OD. THE APPELLANT HAS PAID FBT ON THE AMOUNT OF RS.1,58,58,465/- STATING THAT THE REMAINING AMOUNT RELATES TO EXPENSES INCURRED ON PURCHASE OF TICKETS FOR FOREIGN AND INLAND TRAVELS OF THE DIRECTORS. 5.6 THE ARGUMENTS PUT FORTH BY THE LD. AR ARE BREFT OF REASONING IN THE SENSE THAT THE PROVISIONS OF SEC.115WB(2) DO NOT EX CLUDE THE AMOUNT SPENT ON PURCHASE OF TICKETS ETC. THE SUB-SECTION C OVERS THE ENTIRE EXPENSES INCURRED ON CONVEYANCE, TOUR AND TRAVEL IN ITS AMBIT. THEREFORE, THE EXCLUSION MADE BY THE APPELLANT ON TICKETS OF I NLAND AND FOREIGN TRAVELS OF THE DIRECTORS WHILE WORKING OUT THE QUAN TUM OF FRINGE BENEFITS, DOES NOT APPEARED TO BE JUSTIFIED. THE AO HAS RIGHT LY INCLUDED THE SAID AMOUNT AT RS.2,72,98,189/- WHILE WORKING THE LIABIL ITY OF THE APPELLANT FOR THE RELEVANT PERIOD FOR FBT. IN VIEW OF THIS THE GR OUND TAKEN BY THE APPELLANT IS HEREBY REJECTED. ITA NO.2247/AHD/2009 ASST. YEAR 2006-07 5 5. IN RESPECT OF SALES PROMOTION EXPENSES, LD. CIT( A) CONFIRMED THE ADDITION ON THE GROUND THAT NO EVIDENCE WAS SUBMITT ED THAT EXPENDITURE SO INCURRED WAS PROXIMATE TO EXHIBITION EXPENSES. I N THIS REGARD HE OBSERVED AS UNDER :- 6.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS OF THE LD. AR CAREFULLY. THE AO WHILE DISALLOWING THE APPE LLANTS CLAIM IN THIS REGARD HAVE OBSERVED THAT IT HAS CLAIMED EXHIBITION EXPENSES SEPARATELY AT RS.2,22,26,481/-. DURING THE ASSESSMENT PROCEEDI NGS, THE APPELLANT COULD NOT PROVE WITH THE HELP OF SUFFICIENT DETAILS THAT THE CLAIM FOR SALES PROMOTION EXPENSES AMOUNTING TO RS.12,50,665/- WAS PROXIMATE TO EXHIBITION EXPENSES. 6. THE LD. AR SUBMITTED THAT NONE OF THE EMPLOYEES INCLUDING THE DIRECTORS HAS DERIVED ANY BENEFIT FROM THE AIR FARE OR TRAIN FARE. THEY WERE INCURRED FOR BUSINESS PURPOSES FOR ATTENDING THE SE MINAR/EXHIBITION ABROAD. 7. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE NATURE OF EXPENDITURE ON WHICH THE ASSESSEE HAS PAID FBT IS T HE SAME AS ONE OF WHICH FBT WAS NOT PAID. THEREFORE, NO DISTINCTION C AN BE MADE IN RESPECT OF SUM OF RS.1,14,08,831/- AND ON WHICH FBT WAS NOT PAID AND RS.1,58,55,465/- ON WHICH FBT WAS PAID. THE NATURE BEING THE SAME, SAME TREATMENT SHOULD BE GIVEN. IN RESPECT OF SALES PROMOTION EXPENSES, THE LD. DR SUBMITTED THAT ASSESSEE FAILED TO SUBMIT EVIDENCE AS TO HOW THESE EXPENSES WERE RELATED OR HAD PROXIMITY TO EXH IBITION. ITA NO.2247/AHD/2009 ASST. YEAR 2006-07 6 8. AFTER HEARING THE PARTIES WE DECLINE TO INTERFER E. THE NATURE OF EXPENDITURE OF RS.1,14,08,831/- IS THE SAME AS THAT OF RS.1,58,55,465/- ON WHICH FBT WAS PAID BY THE ASSESSEE. THERE IS NO REA SON TO EXCLUDE THE OTHER SUM OF RS.1,14,08,831/- INCURRED ON TRAIN/AIR FARE OF THE DIRECTORS/EMPLOYEES. SECTION 115WB(2) CLEARLY DOES NOT SPECIFY ANY DISTINCTION WHETHER EXPENDITURE WAS INCURRED ON AN ACTIVITY CARRIED OUT WITH THE OBJECT OF DERIVING INCOME, PROFIT OR GAINS . THEREFORE, THE AO WAS JUSTIFIED IN LEVYING FBT ON A SUM OF RS.1,14,08,831 /-. SIMILARLY, HE WAS JUSTIFIED IN LEVYING FBT ON SALES PROMOTION EXPENSE S AS NO DETAILS OF SUCH EXPENSES WERE SUBMITTED AS TO WHETHER THEY HAD ANY PROXIMATE RELATIONSHIP WITH THE EXHIBITION CLAIMED TO BE ORGA NIZED BY THE ASSESSEE AND ON WHICH SUCH EXPENDITURE WAS ALLEGEDLY INCURRE D. AS A RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 17.06.2011. SD/- SD/- (BHAVNESH SAINI) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 17.06.2011. MAHATA/- ITA NO.2247/AHD/2009 ASST. YEAR 2006-07 7 COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 13/6/11. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 15/6/11. /OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..