DMI INDIA PVT. LTD., Kolkata V. Income Tax Officer, Ward-12(1), Kolkata, Kolkata

ITA 2798/KOL/2013

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1578 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-06-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 16-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S ALLONG YADEN CIT LD
• Assessee Lawyers: A K SAHU LD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : A B ENCH, KOLKATA BEFORE : SHRI M. BALAGANESH,ACCOUNTANT MEM BER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO. 2798/KOL/2013 A.Y : 2007-08 DMI INDIA PVT. LTD VS. I.T.O., WARD 12(1),KOLKAT A PAN: AABCD 0859L [APPELLANT-ASSESSEE ] [DEPARTMENT-RESPONDE NT ] APPELLANT BY : SHRI A.K. SAHU, LD.AR RESPONDENT BY : SHRI SALLONG YADEN, ADDL, CIT , LD.DR DATE OF HEARING : 16-11-2017 DATE OF PRONOUNCEMENT : 31-01-2018 ORDER SHRI S.S. VISWANETHRA RAVI, JM: THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DT: 26-12- 2012 PASSED BY THE CIT-A, XII, KOLKATA FOR THE A.Y 2007-08. 2. THE ONLY ISSUE IS TO BE DECIDED AS TO WHETHER TH E CIT-A WAS JUSTIFIED IN CONFIRMING THE CHARGING OF FRINGE BENE FIT TAX HEREINAFTER IN SHORT AS FBT BY THE AO U/S. 115WE(3) OF THE ACT IN THE FACT AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMPANY AND ENGAGED IN THE BUSINESS OF EXPORT AND MANUFACTU RING OF CLOTH ITEMS. THE ASSESSEE FILED ITS E-RETURN FOR THE A.Y UNDER CONSIDERATION ON 22-03-08 DECLARING FBT AT RS. NIL. UNDER SCRUTIN Y, NOTICE U/S. 115WE(2) OF THE ACT WAS ISSUED. IN RESPONSE TO WHIC H, THE AR OF THE ASSESSEE APPEARED AND STATED THAT NO FBT WAS PAID I N THIS CASE. ON PERUSAL OF THE PROFIT & LOSS A/C & AUDIT REPORT, TH E AO FOUND THAT THE ASSESSEE COMPANY HAS DEBITED EXPENSES UNDER THE HEA DS : SALES PROMOTION, FOREIGN TOUR, TELEPHONE & TRAVELLING & C ONVEYANCE. THE AO ASKED THE ASSESSEE VIDE HIS OFFICE LETTER DT. 13 -10-2009 THAT WHY THE FBT SHOULD NOT BE CHARGED ON SUCH EXPENSES. IN REPLY, THE ITA NO. 2798/KOL/2013 M/S DMI INDIA PVT. LTD.. 2 ASSESSEE STATED THAT THE ASSESSEE IS FINANCIALLY SI CK, LOSS MAKING COMPANY AND SURVIVING BY REDUCING ITS OVERHEAD EXPE NSES INCLUDING STAFF SALARY. THE ASSESSEE DID NOT PROVIDE ANY FRIN GE BENEFIT TO ANY EMPLOYEE OR DIRECTOR OF THE ASSESSEE AND THE LIABIL ITY OF FRINGE BENEFIT TAX DOES NOT ARISE. 4. ACCORDING TO AO, THE ASSESSEE HAS BEEN PAYING SA LARY, BONUS, EXGRATIA AND PF TO ITS EMPLOYEES. THE AUDITOR HAS ALSO POINTED OUT AND ADMITTED THE LEVIABILITY OF FBT. ACCORDINGLY, THE AO COMPUTED THE TOTAL TAXABLE FBT -FRINGE BENEFITS OF RS.2,14,569/- ON THE VARIOUS HEADS: SALES PROMOTION, FOREIGN TOUR, TELEPHONE, TRAVELLIN G & CONVEYANCE & CLUBB BILLS AND RAISED A DEMAND OF RS.2,14,569/- VI DE HIS ORDER DT. 30- 10-09 PASSED U/S. 115WE(3) OF THE ACT BY STATING AS UNDER:- FRINGE BENEFITS ON THE FOLLOWING EXPENDITURE ARE AS UNDER RS. (1) SALES PROMOTION OF RS.16,71,621 @ 20% 3,34,324/- (2) FOREIGN TOURS OF RS. 5,36,188/- @ 5% 26,810/- (3) TELEPHONE OF RS.72,260/- @ 20% 14,452/- (4) TRAVELLING & CONVEYANCE OF RS.82,028/- @ 20% 16,406/- (5) CLUBB BILLS OF RS.1,17,109/- @ 50% 58,555/- TOTAL FRINGE BENEFITS 4,50,547/- CALCULATION OF FRINGE BENEFIT TAX FRINGE BENEFIT TAX @ 30% ON RS.4,50,547/- 1,35,164/- SURCHARGE @ 10% 13,516/- 1,48,680/- ADD: EDUCATION CESS @ 2% 2,974/- TOTAL FRINGE BENEFIT TAX 1,51,654/- ADD: INTEREST U/S. 115WJ(3) RS. 8,339 INTEREST U/S. 115WJ(5) RS. 46,996/- INTEREST U/S.115WK RS. 7,580/- TOTAL INTEREST 62,915/ TAX + INTEREST 2,14,569/- LESS: TAX PAID NIL PAYABLE 2,14,569/- 5. AGGRIEVED, THE ASSESSEE CHALLENGED THE ABOVE ACT ION OF THE AO IN CHARGING FBT BEFORE THE CIT-A AND CONTENDED THAT THE AO WITHOUT GOING THROUGH THE DETAILS OF EXPENDITURE IN RESPECT OF SALES PROMOTION ARBITRARILY CHARGED THE FBT. THE ASSESSEE INCURRED FOREIGN TOUR EXPENDITURE RELATING TO VISIT OF DIRECTOR FOR OBTA INING EXPORT ORDER. THE SAID FOREIGN TOUR WAS CAUSED EFFECT WITH THE PE RMISSION OF RBI. THE FBT CANNOT BE CHARGED ON FOREIGN TOUR EXPENSES AS THERE WAS NO ITA NO. 2798/KOL/2013 M/S DMI INDIA PVT. LTD.. 3 BENEFIT OF THE DIRECTOR AND THE AO WAS WRONG IN CHA RGING THE FBT OF CLUB BILLS AND THE SAID EXPENDITURE INCURRED TO ENT ERTAIN THE FOREIGN BUYERS IN A REPUTED CLUB. 6. THE CIT-A CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE CONFIRMED THE ORDER OF AO IN CHARGING FBT BY THE AO . RELEVANT PORTION OF ORDER OF THE CIT-A IS REPRODUCED HEREIN BELOW:- 4. I HAVE CONSIDERED THE FINDING OF THE AO IN HIS O RDER DT. 30-10-2009 AND THE WRITTEN SUBMISSION MADE BY THE AR DURING THE APPELL ATE PROCEEDING. THE MAIN GROUND OF APPEAL IN THIS CASE IS AGAINST THE ADDITION ON T HE GROUND OF FBT ON EXPENSES UNDER HEADS SALES PROMOTION, FOREIGN TOUR, TELEPHONE, TRA VELLING AND CONVEYANCE. THE AO HAS GIVEN HIS FINDING THAT THE ASSESSEE WAS REQUIRED TO PAY FBT ON EXPENSES ON ABOVE MENTIONED ITEMS. THE AO HAS ALSO BROUGHT ON RECORD THE FINDINGS OF THE AUDITORS IN THIS CASE WHERE THE AUDITOR HAS ALSO POINTED OUT TH E LEVIABILITY OF FBT TO BE CHARGED ON EXPENSES ON ALL THE ABOVE HEADS, ACCORDINGLY, TH E AO MADE ADDITION FOR FBT. THE ASSESSEE IN ITS GROUND NO. 1 HAS OBJECTED TO THE TA KING OF THE ENTIRE AMOUNT OF SALE PROMOTION OF RS.1,67,621/- FOR FBT. SIMILARLY, ON G ROUND NO. 2 THE ASSESSEE HAS OBJECTED TO TAKING OF THE ENTIRE EXPENSES OF RS.5 ,36,188/- ON FOREIGN TOUR. ON GROUND NO. 3 THE ASSESSEE HAS OBJECTED TAKING OF THE ENTIR E TELEPHONE EXPENDITURE OF RS.72,260/- FOR FBT. SIMILARLY, ON GROUND NO. 4 THE ASSESSEE HAS RAISED OBJECTION FOR TAKING THE ENTIRE TRAVELING EXPENSES OF RS.82,028/- FOR CALCULATING FBT AND LASTLY ON GROUND NO. 5 THE ASSESSEE HAS APPEALED AGAINST TAKI NG OF THE ENTIRE CLUB BILLS EXPENDITURE OF RS. 1,17,100/- FOR CALCULATING FBT. THE AO HAS APPLIED DIFFERENT RATES ON EXPENDITURE UNDER DIFFERENT HEADS AS APPLICABLE IN THE FBT AND CALCULATED THE FBT ACCORDINGLY. ALTHOUGH, THE AR HAS FILED APPEAL ON F IVE GROUNDS CHALLENGING EACH ITEM OF EXPENDITURE BUT DURING THE APPELLATE PROCEEDING BUT DURING THE APPELLATE PROCEEDING THE AR DID NOT BRING ANYTHING ON RECORD TO CONTRADI CT THE FINDING OF THE AO. SINCE, NOTHING HAS BEEN BROUGHT ON RECORD TO SUBSTANTIATE THE CLAIM OF THE ASSESSEE MENTIONED IN DIFFERENT GROUNDS OF APPEAL FOR EXPEND ITURE UNDER DIFFERENT HEADS, THEREFORE, ASSESSEES APPEAL AGAINST FBT ON GROUND NO. 1,2,3,4 AND 5 ARE DISMISSED. 7. BEFORE US THE APPEAL WAS LISTED FOR HEARING ON 0 6-11-2017. AT THE TIME OF HEARING, IT WAS NOTED THAT NO SUCH DETA ILS WERE FILED BY THE ASSESSEE BEFORE THE AO & CIT-A. THE FACT OF WHI CH WAS NOT CONTROVERTED BY THE LD.AR. THEREFORE, WE DIRECTED THE LD.AR TO FILE THE DETAILS OF EXPENDITURE VIDE ORDER SHEET DT. 06- 11-2017 AND POSTED THE APPEAL FOR HEARING ON 16-11-2017. IN RES PONSE TO OUR SAID DIRECTION, THE AR OF THE ASSESSEE FILED A COPY OF DOCUMENT STATING IT TO BE TREATED AS DETAILS OF EXPENDITURE. HE ALSO SU BMITS THAT THE ASSESSEE HAS NO OTHER DETAILS EXCEPT THE DETAILS AS REFLECTED IN THE SAID COPY OF DOCUMENT. FURTHER, HE SUBMITS THAT THE ASSESSEE IS IN LOSS AND TAX (FBT) CANNOT BE RECOVERED FROM THESE E MPLOYEES. IN SUPPORT OF THE CONTENTION, HE ARGUED THAT THE AO AR BITRARILY CHARGED THE FBT ON VARIOUS HEADS OF EXPENDITURE, WHICH WAS CONFIRMED BY THE CIT-A WITHOUT CONSIDERING THE SUBMISSIONS OF THE AS SESSEE. ITA NO. 2798/KOL/2013 M/S DMI INDIA PVT. LTD.. 4 8. THE LD.DR SUBMITS THAT THE ASSESSEE DID NOT PROD UCE ANY DETAILS FOR HIS VERIFICATION BEFORE THE AO. THE AO EXAMINE D THE P & L ACCOUNT & AUDIT REPORT AND FOUND THEREIN THAT THE A SSESSEE DEBITED THE AMOUNTS ON DIFFERENT HEADS, ON WHICH FBT WAS RE QUIRED TO BE PAID BY THE ASSESSEE. ON BEING ASKED BY THE AO, THE ASSESSEE CONTENDED THAT NO FBT IS CHARGEABLE TO SAID EXPENDI TURE. THE AO ALSO FOUND THAT THE AUDIT REPORT HAS RIGHTLY BEEN MENTIO NED THE CHARGING OF THE FBT ON SAID EXPENDITURE AND, THEREFORE, THE AO CHARGED THE FBT ON DIFFERENT EXPENDITURE AND IT IS JUSTIFIED. T HE LD.DR REFERRED TO PARA 4 OF THE ORDER OF THE CIT-A AND ARGUED THAT TH E ASSESSEE FAILED TO PRODUCE ANY DETAILS OF EXPENDITURE BEFORE THE CI T-A, WHICH SUPPORTS THE VIEW OF THE AO IN CHARGING THE SAME. H E RELIED ON THE ORDERS OF THE AO & CIT-A. 9. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIA L ON RECORD. IT IS APPARENT ON RECORD THAT NON SUBMISSION OF SUCH D ETAILS OF EXPENDITURE, THE AO CHARGED THE FBT. FROM THE ORDER OF THE CIT-A, IT IS CLEAR THAT THE ASSESSEE DID NOT BRING ANYTHING O N RECORD TO CONTRADICT THE FINDING OF THE AO IN CHARGING THE SA ID FBT. ON PERUSAL OF ORDER SHEET, WE FIND THAT THE TRIBUNAL HAS GIVEN AN OPPORTUNITY TO FILE THE DETAILS OF EXPENDITURE, WHICH SAID TO HAVE BEEN INCURRED BY THE ASSESSEE. WE FIND THAT THE DETAILS AS SOUGHT BY THE TRIBUNAL AND FILED BY THE ASSESSEE BEFORE US, WHICH IS ONLY A CO PY OF DOCUMENT, DOES NOT CONTAIN ANY DETAILS EXCEPT THE SUBMISSION IN SUPPORT OF THE ASSESSEES CONTENTION. FOR READY REFERENCE THE SAID DOCUMENT IS REPRODUCED HEREIN BELOW:- DML LNDIA TO ME, SUKUMAR 1. SALES PROMOTION - IN THIS CASE SALES PROMOTION INCLUDES SELLING EXPEN SES AND AFTER SALES SERVICE EXPENDITURE RELATING TO SALES AND POST-SALES ACTIVI TIES IS TREATED AS SELLING EXPENSE (NOT LIABLE TO THE FBT) IN THIS YEAR MAJORITY OF EXPORT SALES WAS RETAIL EX PORT ORDERS RECEIVED THROUGH WEB SITE WWW.DMI-INDIA.COM ITA NO. 2798/KOL/2013 M/S DMI INDIA PVT. LTD.. 5 AS A RESULT THE NUMBER OF BUYERS INCREASED BY 100 F OLDS AROUND EUROPE, USA AND OTHER PARTS OF THE WORLD. SINCE THE PRODUCTS EXPORTED WERE MOSTLY HIGH FASHIO N GARMENTS, THERE WAS MANY COMPLAINTS RECEIVED FROM THE OVERSEAS BUYERS AND TH EREFORE, SEVERAL AFTER SALES FOREIGN TRIPS WERE REQUIRED TO SETTLE THE COMPLAINTS AND DI SCUSSING OVER SAMPLES. AS SUCH THE ENTIRE AMOUNT OF SALES PROMOTION TO BE TREATED AS SELLING EXPENSES AND AFTER SALES SERVICE WHICH ARE NOT LIABLE TO FBT. 2. FOREIGN TOUR IS INTEGRATED TO DIRECT SELLING EXP ENSES, COLLECTION OF PAYMENTS AND AFTER SALES SERVICE SINCE THE ENTIRE SALES WAS EXPORT TO OTHER COUNTRIES. 3. CLUB BILLS ARE FOR ENTERTAINING FOREIGN BUYERS DURING THE YEAR ARAN SWEATER MARKET CO. OF IRELAND AND LYNX CORPORATION OF USA VISITED KOLKATA A COUPLE OF TIMES. THE FOREIGN BUYERS WERE PUT UP AND ENTERTAINED IN CLUBS 4. TELEPHONE EXPENSES WERE STRICTLY FOR BUSINESS AN D NOT SPENT ON EMPLOYEES. 10. ON PERUSAL OF THE ABOVE DOCUMENT, WE FIND THAT NO SUCH DETAILS WERE PRODUCED BEFORE THIS TRIBUNAL FOR ADJUDICATING THE GROUNDS RAISED BY THE ASSESSEE QUESTIONING THE CHARGING OF FBT. THE ASSESSEE WAS SO CASUAL TO FILE THE SAID DOCUMENTS STATING IT TO BE CONTAINING THE DETAILS OF EXPENDITURE INCURRED UNDER VARIOUS H EADS. THUS, THE LD.DR HAS RIGHTLY POINTED OUT BEFORE US THAT THE AS SESSEE HAS FAILED TO PRODUCE ANYTHING ON RECORD BEFORE THE AO, CIT-A AND EVEN BEFORE US. WE FIND THAT THE DETAILS AS ABOVE, IS ONLY A SIMPLE PRINTED STATEMENT, NOT SHOWING ANY OF THE DETAILS OF VARIOUS EXPENDITU RE STATED TO HAVE BEEN INCURRED BY THE ASSESSEE. FOR BETTER UNDERSTAN DING, WE MAY REFER TO THE SECTION 115-WA OF THE ACT, WHICH IS AS UNDER:- SECTION - 115WA, INCOME-TAX ACT, 1961 -2006 B.-BASIS OF CHARGE CHARGE OF FRINGE BENEFIT TAX. 115WA.(1) IN ADDITION TO THE INCOME-TAX CHARGED UND ER THIS ACT, THERE SHALL BE CHARGED FOR EVERY ASSESSMENT YEAR COMMENCING ON OR AFTER TH E 1ST DAY OF APRIL, 2006, ADDITIONAL INCOME-TAX (IN THIS ACT REFERRED TO AS FRINGE BENEF IT TAX) IN RESPECT OF THE FRINGE BENEFITS PROVIDED OR DEEMED TO HAVE BEEN PROVIDED BY AN EMPL OYER TO HIS EMPLOYEES DURING THE PREVIOUS YEAR AT THE RATE OF THIRTY PER CENT ON THE VALUE OF SUCH FRINGE BENEFITS. (2) NOTWITHSTANDING THAT NO INCOME-TAX IS PAYABLE B Y AN EMPLOYER ON HIS TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT, THE TAX ON FRINGE BENEFITS SHALL BE PAYABLE BY SUCH EMPLOYER. 11. ON PLAIN READING OF ABOVE CITED SECTION, IT EXP LAINS THAT THE CHARGING OF 30% VALUE OF FRINGE BENEFITS PROVIDED OR DEEMED TO HAVE BEEN PROVIDED BY AN EMPLOYER TO HIS EMPLOYEES. SUB- SECTION (2) EXPLAINS THE TAX ON FRINGE BENEFITS ARE CHARGEABLE BY AN EMPLOYER IRRESPECTIVE OF THE FACT THAT NO TAX IS PAYABLE ON HIS TOTAL INCOME ITA NO. 2798/KOL/2013 M/S DMI INDIA PVT. LTD.. 6 COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT. THE ARGUMENTS OF THE ASSESSEE ARE THAT THE ASSESSEE COM PANY IS IN LOSS AND TAX/FBT ON SUCH EXPENDITURE INCURRED CANNOT BE RECOVERED FROM THOSE EMPLOYEES, WHICH ARE NOT ACCEPTABLE IN THE FA CTS AND CIRCUMSTANCES OF THE CASE. NOTHING HAS BEEN BROUGHT ON RECORD TO SUBSTANTIATE THE CLAIM OF ASSESSEE. WE FIND FORCE I N THE SUBMISSIONS OF THE LD. DR IN POINTING OUT THE SAME BEFORE US. A CCORDINGLY, WE UPHOLD THE IMPUGNED ORDER OF THE CIT-A IN CONFIRMIN G THE ORDER OF THE AO ON THIS ISSUE. THEREFORE, THE GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE ITA N O. 2798/KOL/2013 FOR THE A.Y 2007-08 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 -01-2018 SD/- SD/- M. BALAGANESH S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31-01-2018 PP(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT/ASSESSEE : M/S.DMI INDIA (P) LTD SHIVAM C HAMBERS, 53 SYED AKMIR ALI AVENUE, KOLKATA-19. 2 . RESPONDENT/REVENUE : THE ITO, WARD 12(1),KOLKATA 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER SR.P.S, HEAD OF OFFICE ITAT KOLKATA