Asst.C.I.T., Mangalore V. M/s Mangalore Electricity Supply Company Ltd., Mangalore

ITA 311/BANG/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0473 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 06-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: OMAR ABDULLAH S M

Judgement Text

ITA.311/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'B', BANGALORE BEFORE SHRI. VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI. INTURI RAMA RAO, ACCOUNTANT MEMBER I.T.A NO.311/BANG/2015 (ASSESSMENT YEAR : 2008-09) ASST. COMMISSIONER OF INCOME-TAX, CIRCLE -2(1), BANGALORE .. APPELLANT V. M/S. MANGALORE ELECTRICITY SUPPLY CO. LTD, PARADIGM PLAZA, PANDESHWAR, MANGALORE 575 001 .. RESPONDENT PAN : AADCM7029H ASSESSEE BY : SHRI. OMAR ABDULLAH S. M, CA REVENUE BY : SHRI.P. DHIVAHAR, JCIT HEARD ON : 04.04.2016 PRONOUNCED ON : 20.04.2016 O R D E R PER VIJAY PAL RAO, JUDICIAL MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DT.14.11.2014, OF THE CIT (A), MYSURU, ARISING FROM FRINGE BENEFIT TAX ITA.311/BANG/2015 PAGE - 2 (FBT IN SHORT) ASSESSMENT U/S.115WG OF THE INCOM E-TAX ACT, 1961 (THE ACT IN SHORT), FOR THE ASSESSMENT YEAR 2008-09. 02. REVENUE HAS RAISED THE FOLLOWING GROUNDS : 03. AO WHILE PASSING THE ASSESSMENT ORDER U/S.115WG OF THE ACT, DT.28.03.2013, COMPUTED THE VALUE OF FRINGE BENEFIT BY MAKING AN ADDITION OF RS.3,01,65,235/-. ITA.311/BANG/2015 PAGE - 3 04. ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT (A) AND CONTENDED THAT THE EXPENDITURE ON VEHICLES HIRED BY THE ASSESSEE ARE BEING USED EXCLUSIVELY FOR OFFICIAL PURPOSE AND THEREFORE IT DOES NOT FALL U/S.115WBF OF THE ACT, TO ATTRACT LEVY OF FBT. CIT (A) GRANTED PART RELIEF TO THE ASSESSEE BY FOLLOWING THE DECISION OF THIS T RIBUNAL IN ASSESSEES OWN CASE FOR A. Y. 2006-07 AND CONSEQUENTLY CONFIRMED T HE FBT ON THE EXPENDITURE INCURRED FOR HIRING OF MOTOR CAR FOR EM PLOYEES OF THE ASSESSEE. 05. BEFORE US, LD. DR HAS SUBMITTED THAT THE CIT (A ) IN PARA 7 OF THE IMPUGNED ORDER HAS STATED THAT HE HAS VERIFIED THE DOCUMENT FURNISHED BY THE ASSESSEE WITHOUT GIVING THE DETAILS OF SUCH DOC UMENTS AND FURTHER WITHOUT GIVING AN OPPORTUNITY TO THE AO TO REBUT SU CH DOCUMENTS. THEREFORE THE CIT (A) HAS VIOLATED RULE 46A OF THE INCOME-TAX RULES. LD. DR HAS PLEADED THAT THE MATTER MAY BE REMITTED TO T HE RECORD OF THE AO FOR VERIFICATION OF THE RELEVANT MATERIALS IN THIS REGA RD. 06. ON THE OTHER HAND, LD. AR HAS SUBMITTED THAT NO FRESH EVIDENCE OR ANY DOCUMENT WAS FILED BEFORE THE CIT (A). HE HAS REFERRED TO THE DETAILS OF EXPENDITURE ON HIRING OF THE VEHICLES GIVEN IN P ARA 3 OF THE IMPUGNED ORDER AND FURTHER AT PAGE 3 OF THE ASSESSMENT ORDER AND SUBMITTED THAT ALL THESE DETAILS WERE AVAILABLE BEFORE THE AO. LD. AR HAS SUBMITTED THAT CIT ITA.311/BANG/2015 PAGE - 4 (A) HAS CONFIRMED THE ADDITION MADE IN THE FRINGE B ENEFIT VALUATION BY FOLLOWING THE DECISION OF THIS TRIBUNAL IN ASSESSEE S OWN CASE FOR A. Y. 2006-07. THEREFORE ISSUE RAISED BY THE REVENUE IS COVERED BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE. 07. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE CHALL ENGED THE ACTION OF THE AO BEFORE THE CIT (A) IN RESPECT OF THE FOLLOWING E XPENSES WHICH WERE BROUGHT TO FBT : 08. CIT (A) HAS CONSIDERED THE EXPENDITURE WHICH WE RE INCURRED IN RESPECT OF THE ASSESSEES OWN VEHICLE USED FOR TRAN SPORTATION OF STORAGE AND OTHER PURPOSES AS UNDER : ITA.311/BANG/2015 PAGE - 5 I. TRUCKS & LORRIES USED FOR STORES TRANSPORTATION .. RS.64,27,392 II. MOTOR JEEPS USED FOR OFFICIAL PURPOSES .. RS.19,41,599 III.MOTOR CAR EXPENSES AT CORPORATE OFFICE .. RS. 5,86,625 TOTAL (B) .. RS.89,55,546 09. OUT OF THE TOTAL ADDITION MADE BY THE AO, CIT ( A) FOUND THAT THE EXPENDITURE ON HIRING OF MOTOR-CAR FOR MEETINGS, IN SPECTION ETC., AS WELL AS EXPENSES ON OWNED MOTOR CAR AT CORPORATE OFFICE ARE SUBJECTED TO FBT IN VIEW OF THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A. Y. 2006- 07. ACCORDINGLY THE CIT (A) HAS CONFIRMED THE ADDI TION IN THE VALUE OF FRINGE BENEFIT IN PARA 7, AS UNDER : 1) HIRING FOR MEETINGS, INSPECTION, ETC., ..RS.1,03,19,767/- 2) OWN EXPENSES MOTOR CAR EXPENSES AT CORPORATE O FFICE .. RS.5,86,625/- 10. THUS IT IS CLEAR THAT THE CIT (A) HAS CONFIRMED THE ACTION OF THE AO IN RESPECT OF THE EXPENDITURE INCURRED BY THE ASSES SEE ON HIRING OF THE MOTOR CAR FOR THE PURPOSE OF MEETINGS, INSPECTION ETC., B Y THE EMPLOYEES AS WELL AS THE EXPENDITURE ON THE MOTOR-CARS OWNED BY THE A SSESSEE AT CORPORATE OFFICE, WHEREAS THE EXPENDITURE INCURRED ON TRUCKS AND LORRIES USED FOR TRANSPORTATION PURPOSE AND OTHER OFFICIAL PURPOSE W ERE FOUND TO BE BEYOND ITA.311/BANG/2015 PAGE - 6 THE PURVIEW OF SECTION 115WBF OF THE ACT. COORDINA TE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A. Y. 2006-07, IN ITA NO.1178/BANG/2009, VIDE ORDER DT.19.05.2010 HAS DEA LT WITH AN IDENTICAL ISSUE IN PARAS 9.3 TO 9.5 AS UNDER : 9.3 AS SEEN FROM THE ABOVE PROVISIONS, ANY FORM OF CONVEYANCE PROVIDED BY THE EMPLOYER TO THE EMPLOYEES WOULD BE FRINGE BENEFITS, TAXABLE IN THE HANDS OF THE EMPLOYER. DUR ING THE PREVIOUS YEAR RELEVANT TO ASST. YEAR 2006-07, THE CLAUSE (F) INCLUDED THE WORDS CONVEYANCE, TOUR AND TRAVEL (INCLUDING FOREI GN TRAVEL), WHILE THE WORDS TOUR AND TRAVEL (INCLUDING FOREIGN TRAVEL) WERE OMITTED BY FINANCE ACT OF 2006 W.E.F. 1/4/2007 AND HAS BEEN INSERTED INTO CLAUSE (Q) W.E.F. 1/4/2007; THEREFORE , IN THE RELEVANT ASST. YEAR, THE WORDS CONVEYANCE, TOUR AND TRAVEL (INCLUDING FOREIGN TRAVEL) HAVE TO BE READ TOGETHER. TO UNDER STAND THE MEANING OF THESE WORDS AND WHETHER THEY INCLUDED AN Y TYPE OF EXPENDITURE BY THE EMPLOYER ON CONVEYANCE, TOUR AND TRAVELS ETC. UNDER THE PROVISION OF FRINGE BENEFITS, IT IS NECES SARY TO GO THROUGH THE EXPLANATORY MEMORANDUM OF THE FINANCE BILL OF 2 005, WHICH HAS BEEN REPRODUCED IN 273 ITR (ST.) 196 & 197, WHE REIN IT IS EXPLAINED AS UNDER:- THAT THE TAXATION OF PERQUISITES OR FRINGE BENEFIT S PROVIDED BY AN EMPLOYER TO HIS EMPLOYEES, IN ADDITION TO THE CASH SALARY OR WAGES PAID, IS SUBJECT TO VARYING TREATME NT IN DIFFERENT COUNTRIES AND THESE BENEFITS ARE EITHER T AXED IN THE HANDS OF THE EMPLOYEES THEMSELVES OR THE VALUE OF S UCH BENEFITS IS SUBJECT TO A FRINGE BENEFIT TAX IN TH E HANDS OF THE EMPLOYER. THE RATIONALE FOR LEVYING A FRINGE BENEFI T TAX ON THE EMPLOYER LIES IN THE INHERENT DIFFICULTY IN ISOLATI NG THE PERSONAL ELEMENT WHERE THERE IS COLLECTIVE ENJOYM ENT OF SUCH BENEFITS AND ATTRIBUTING THE SAME DIRECTLY TO THE EMPLOYEE. THIS IS SO ESPECIALLY WHERE THE EXPENDITU RE INCURRED BY THE EMPLOYER IS OSTENSIBLY FOR PURPOSES OF THE BUSINESS BUT INCLUDES, IN PARTIAL MEASURE, A BENEFI T OF A PERSONAL NATURE. MOREOVER, IN CASES WHERE THE EMPLO YER ITA.311/BANG/2015 PAGE - 7 DIRECTLY REIMBURSES THE EMPLOYEE FOR EXPENSES INCUR RED, IT BECOMES DIFFICULT TO EFFECTIVELY CAPTURE THE TRUE E XTENT OF THE PERQUISITE PROVIDED BECAUSE OF THE PROBLEM OF CASH FLOW IN THE HANDS OF THE EMPLOYER. 9.4 IN ORDER TO UNDERSTAND THE ABOVE EXPLANATORY ME MORANDUM ON FRINGE BENEFIT TAX AND ALSO THE INTENTION OF THE LE GISLATURE, IT IS ALSO NECESSARY TO LOOK INTO THE FINANCE MINISTERS SPEEC H, WHICH IS REPRODUCED IN 276 ITR PAGE 3 (STATUTES), IS REPRODU CED AS UNDER:- I HAVE LOOKED INTO THE PRESENT SYSTEM OF TAXING PE RQUISITES AND I HAVE FOUND THAT MANY PERQUISITES ARE DISGUISE D AS FRINGE BENEFITS AND ESCAPE TAX. NEITHER THE EMPLOYE R NOR THE EMPLOYEE PAYS ANY TAX ON THESE BENEFITS WHICH A RE CERTAINLY OF CONSIDERABLE MATERIAL VALUE. AT PRESEN T, WHERE THE BENEFITS ARE FULLY ATTRIBUTABLE TO THE EMPLOYEE , THEY ARE TAXED IN THE HANDS OF THE EMPLOYEE; THAT POSITION W ILL CONTINUE. IN ADDITION, I NOW PROPOSE THAT WHERE THE BENEFITS ARE USUALLY ENJOYED COLLECTIVELY BY THE EM PLOYEES AND CANNOT BE ATTRIBUTED TO INDIVIDUAL EMPLOYEES, T HEY SHALL BE TAXED IN THE HANDS OF THE EMPLOYER. HOWEVE R, TRANSPORT SERVICES FOR WORKERS AND STAFF AND CANTEE N SERVICES IN AN OFFICE OR FACTORY WILL BE OUTSIDE TH E TAX NET. THE TAX IS NOT A NEW TAX, ALTHOUGH I AM OBLIGED TO CALL IT BY A NEW NAME, NAMELY, FRINGE BENEFIT TAX. THE RATE WI LL BE 30 PER CENT ON AN APPROXIMATELY DEFINED BASE (2005) 27 3 ITR (ST.) 56). 9.5 THUS, IT CAN BE SEEN THAT WHAT IS INTENDED TO B E TAXED IS A BENEFIT ATTRIBUTABLE TO EMPLOYEES COLLECTIVELY BUT THE TRANSPORT SERVICES FOR WORKERS AND STAFF ARE TO BE OUTSIDE TH E TAX NET. IN THE CASE BEFORE US, ITEMS 1, 2 AND 3 CONSIDERED BY THE CIT(A) ARE FOR THE PURPOSES OF CARRYING ON THE BUSINESS ACTIVITIES OF THE ASSESSEE COMPANY BY THE AGENCIES OF THE ASSESSEE COMPANY AND IT IS ONLY ITEM 4, WHICH IS SPENT ON THE EMPLOYEES FOR ATTENDI NG THE MEETINGS, INSPECTIONS AND OTHER OFFICIAL FUNCTIONS. FROM THE READING OF THE PROVISIONS OF SECTION 115WB(2), IT IS CLEAR THAT TH E BENEFITS GIVEN TO AN EMPLOYEE DIRECTLY OR INDIRECTLY ONLY WOULD BE TAXABLE UNDER CHAPTER XII-H. AS RIGHTLY POINTED OUT BY THE CIT(A) , THE OTHER EXPENDITURE IS INCURRED FOR AGENCIES OTHER THAN THE EMPLOYEES, ITA.311/BANG/2015 PAGE - 8 WHO ARE OUTSIDE THE SCOPE OF THE PROVISIONS OF SECT ION 115WB(2). THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE WI TH THE ORDER OF THE CIT(A). THUS IT IS CLEAR THAT AS PER THE PROVISIONS OF SECT ION 115WB(2) OF THE ACT, WHAT IS TO BE CONSIDERED AS FRINGE BENEFIT IS THE B ENEFIT GIVEN TO THE EMPLOYEE DIRECTLY OR INDIRECTLY. 12. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND BY FOLLOWING THE EARLIER DECISION OF THIS TRIBUNAL WE DO NOT FIND ANY ERROR OR ANY IRREGULARITY IN THE IMPUGNED ORDER OF THE CIT ( A). WE FIND THAT THERE IS NOTHING ON RECORD TO INDICATE THAT THE ASSESSEE HAD FILED ANY ADDITIONAL OR FRESH EVIDENCE BEFORE THE CIT (A). THEREFORE WE DO NOT FIND ANY MERITS IN THE GROUNDS RAISED BY THE REVENUE. THE IMPUGNED OR DER OF CIT (A) IS UPHELD. 13. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DAY OF APRIL, 2016. SD/- SD/- (INTURI RAMA RAO) (VIJAY PAL R AO) ACCOUNTANT MEMBER JUDICIA L MEMBER