M/s K.N.Mathew & Sons, Kottayam V. ACIT, Kottayam

ITA 293/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58256 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 30-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 03-05-2010
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: R KRISHNAN
• Keywords: Gift; Business income; Depreciation
• Section: 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND SANJAY AROR A, AM I.T.A NO. 293/COCH/2010 ASSESSMENT YEAR:2006-07 K.N.MATHEW & SONS, MANORMA JUNCTION, K.K.ROAD, KOTTAYAM. [PAN: AAGFK 3467K] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOTTAYAM. (ASSESSEE-APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI R.KRISHNAN, CA REVENUE BY MS. S. VIJAYAPRABHA, JR.DR DATE OF HEARING 30/11/2011 DATE OF PRONOUNCEMENT 31/01/2012 O R D E R PER SANJAY ARORA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, KOCHI (CIT(A) FOR SHORT) DATED 10-02-2010, DISMISSING ITS APPEAL CONTESTING ITS ASSESSMENT UNDER SECTION 115W F R/W S. 15 WG OF THE INCOME-TAX ACT, 1961 (`THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2006-07 DTD. 22/10/2008. 2. IT WOULD BE RELEVANT TO, BEFORE PROCEEDING TO DE CIDE THE RELEVANT GROUNDS RAISED BY THE ASSESSEE, ADVERT TO THE RELEVANT FACTS OF THE C ASE. THE ASSESSEE, A FIRM IN THE BUSINESS OF WHOLESALE TRADING IN PHARMACEUTICALS, FILED A NI L RETURN OF FRINGE BENEFIT FOR THE RELEVANT YEAR ON 26-10-2006. SUBSEQUENT TO ITS PRO CESSING ON 17-11-2006, IT WAS NOTICED THAT THE TAXABLE FRINGE BENEFIT HAD ESCAPED ASSESSM ENT AND, ACCORDINGLY, NOTICE U/S. 115WH(1) WAS ISSUED ON 01-09-2008 AFTER RECORDING T HE REASONS, ALLOWING THE ASSESSEE A I.T.A. NO. 293/COCH/2010 K.N.MATHEW & SONS VS. ACIT, KOTAYAM 2 PERIOD OF 30 DAYS TO FILE THE RETURN OF FRINGE BENE FITS FOR THE RELEVANT YEAR. IN VIEW OF THE SAME BEING UNRESPONDED, THE ASSESSMENT WAS COMPLETE D ON THE BASIS OF THE INFORMATION ON RECORD, AFTER BEING ISSUED ANOTHER NOTICE ON 15- 10-2008, ALLOWING THE ASSESSEE A FINAL OPPORTUNITY IN THE MATTER IN TERMS OF THE REASON/S RECORDED. EXPENDITURE UNDER THE FOLLOWING ACCOUNT HEADS, AS DEBITED TO P&L ACCOUNT, WAS DEEMED AS FRINGE BENEFITS U/S. 115WB OF THE ACT AND, ACCORDINGLY, THE FRINGE BENEF IT ASSESSED AT ` 1,04,232/-, I.E., AT 20% OF THE AGGREGATE AMOUNT OF THE SAID EXPENDITURE OF ` 05,21,159/-: A) CAR EXPENSES ` 1,22,379 B) DEPRECIATION ON CA RS ` 1,72,320 C) STAFF WELFARE ` 27,318 D) TRAVELLING ALLOWAN CE ` 1,10,263 E) TOURS AND TRAVEL ` 14,897 F) TELEPHONE ` 63,472 G) SALES PROMOTION ` 10,510 THE ASSESSEE CARRIED THE MATTER IN APPEAL, UNSUCC ESSFULLY THOUGH; THE LD. CIT(A) FINDING NO MERIT IN THE ARGUMENT ADVANCED, CLAIMING THAT NO NE OF THE ITEMS QUALIFIED AS A FRINGE BENEFIT. AGGRIEVED, THE ASSESSEE IS IN FURTHER APP EAL. 3.1 THE ASSESSEE IMPUGNS THE CONFIRMATION OF ITS AS SESSMENT, BOTH ON MERITS AS WELL AS FOR NON-GRANT OF PROPER OPPORTUNITY IN PRESENTING I TS CASE. AS REGARDS THE NON-GRANT OF OPPORTUNITY, THE ASSESSEE HAS ADMITTEDLY NOT RESPON DED TO THE NOTICE U/S. 115WH(1). SECONDLY, THE PRIMARY AND BASIC FACTS, ON WHICH THE REVENUES CASE IS FOUNDED, AND WHICH ARE IN THE FULL KNOWLEDGE OF THE ASSESSEE, AR E NEITHER DENIED NOR IN DISPUTE. THE ASSESSEES CONTESTS ITS ASSESSMENT BEFORE THE FIRST APPELLATE AUTHORITY ON A LEGAL BASIS, AND WHICH STANDS ANSWERED BY HIM, AND FORMS THE SUBJECT MATTER OF THE ISSUE BEFORE US. AS SUCH, WE DO NOT CONSIDER, IN THE ABSENCE OF ANY FAC TUAL CONSIDERATION OR DETERMINATION ATTENDING ITS CASE, THE ASSESSEES THIS CLAIM AS OF ANY MOMENT. 3.2 THE BASIS OF THE ASSESSEES CLAIM ON MERITS IS THAT THE IMPUGNED EXPENDITURE HAS NOT BEEN INCURRED FOR AND ON BEHALF OF THE EMPLOYEE S, AND NO BENEFIT STANDS CONFERRED TO I.T.A. NO. 293/COCH/2010 K.N.MATHEW & SONS VS. ACIT, KOTAYAM 3 OR ENJOYED BY THEM IN RESPECT THEREOF. ACCORDINGLY, NO AMOUNT OF SUCH EXPENDITURE THE FRINGE BENEFIT BEING DEEMED AT TWENTY PERCENT THERE OF - COULD BE ASSESSED AS FRINGE BENEFIT. THE SAME DID NOT FIND FAVOUR WITH THE REV ENUE AUTHORITIES IN VIEW OF THE EXPRESS LANGUAGE OF THE PROVISION, WHICH READS AS UNDER:- FRINGE BENEFITS. 115WB(1) FOR THE PURPOSES 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 H IS BUSINESS OR 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) ENTERTAINMENT; (B) PROVISION OF HOSPITALITY OF EVERY KI ND BY EMPLOYER TO ANY PERSON,.; (C) CONFERENCE.; (D) SALES PROMOTION INCLUDING PUBLICITY; PROVIDED (E) EMPLOYEES WELFARE; (F) CONVEYANCE; (G) USE OF HOTEL, BOARDING AND LODGING FACILITIES; (H) REPAIR, RUNNING (INCLUDING FUEL), M AINTENANCE OF MOTOR CARS AND THE AMOUNT OF DEPRECIATION THEREON; (I) REPAIR, RUNNING (INCLUDING FUEL), MAINTENANCE OF AIRCRAFTS AND THE AMOUNT OF DEPRECIATION THEREON; (J) USE OF TELEPHONES.; (K); (L) FESTIVAL CELEBRATIONS; I.T.A. NO. 293/COCH/2010 K.N.MATHEW & SONS VS. ACIT, KOTAYAM 4 (M) USE OF HEALTH CLUB AND SIMILAR FAC ILITIES; (N) USE OF ANY OTHER CLUB FACILITIES; (O) GIFTS; AND (P) SCHOLARSHIPS; (Q ) TOUR AND TRAVEL (INCLUDING FOREIGN TRAVEL); [EMPHASIS OURS] CLEARLY, THEREFORE, AN EXPENDITURE, TO BE DEEMED AS A `FRINGE BENEFIT PROVIDED BY AN EMPLOYER TO HIS EMPLOYEES UNDER SECTION 115WB(2) OF THE ACT, DOES NOT NECESSARILY REQUIRE BEING SHOWN TO HAVE BEEN EXPENDED FOR AND O N BEHALF OF THE EMPLOYEES. IN THE PRESENT CASE, THE INCURRING OF THE EXPENDITURE IS N OT DENIED; THE ASSESSEE ITSELF CLAIMING THE SAME TO HAVE BEEN NOT EXPENDED FOR THE DIRECT O R INDIRECT BENEFIT OF ITS EMPLOYEES. TWO, THE SAME IS ONLY IN THE COURSE OF AND FOR THE PURPOSES OF ITS BUSINESS, AS APPARENT FROM ITS DEBIT TO THE OPERATING STATEMENT FOR THE Y EAR, AS ALSO ITS CLAIM AS DEDUCTION IN THE COMPUTATION OF THE ASSESSEES BUSINESS INCOME. THE TWO CONDITIONS, SATISFIED THUS, THE DEEMING FICTION OF S. 115WB(2) STANDS ATTRACTED, LE ADING TO A CHARGE OF A DEEMED FRINGE BENEFIT U/S. 115WA. A STATUTORY FICTION HAS TO BE G IVEN EFFECT TO. AS EXPLAINED BY THE APEX COURT IN THE CASE OF TARULATA SHYAM V. CIT (1977) 108 ITR 345 (SC), THAT ONCE IT IS SHOWN THAT THE ASSESSEE COMES WITHIN THE LETTER OF LAW, HE MUST BE TAXED, HOWEVER GREAT THE HARDSHIP MAY APPEAR TO THE JUDICIAL MIND. THE ASSESSEES CLAIM THAT THE IMPUGNED EXPENDITURE DOES NOT QUALIFY TO BE A FRINGE BENEFIT AS IT HAS NOT BEEN INCURRED BY IT FOR AND ON BEHALF OF ITS EMPLOYEES, AND NO BENEFIT IN ITS R ESPECT STANDS ENJOYED BY THEM, IS THUS OF NO CONSEQUENCE. WE DECIDE ACCORDINGLY. 4. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. SD/- SD/- (N.R.S.GANESAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 31ST JANUARY, 2012 GJ I.T.A. NO. 293/COCH/2010 K.N.MATHEW & SONS VS. ACIT, KOTAYAM 5 COPY TO: 1. M/S. K.N.MATHEW & SONS, MANORMA JUNCTION, K.K..R OAD, KOTTAYAM. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1, KOTTAYAM. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, KOC HI. 4. THE COMMISSIONER OF INCOME-TAX, KOTTAYAM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) ITAT, COCHIN BENCH