M/s.The Trading Company, Alappuzha V. The DCIT, Alappuzha

ITA 32/COCH/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7313 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-06-2018
• Assessment Year: 2006-2007
• Appeal Filed On: 29-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Keywords: Business expenditure

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI CHANDRA POOJARI , AM & GEORGE GEORGE K., JM I.T.A. NO.32/COCH/2018 ASSESSMENT YEAR : 2006 - 07 M/S. THE TRADING COMPANY, A.S. CANAL ROAD, POONTHOPPU WARD, ALAPPUZHA. [PAN: AABFT 0526H] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, ALAPPUZHA. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) A SSESSEE BY SHRI R. SREENIVASAN, CA REVENUE BY SHRI A. DHANARAJ, SR. DR D ATE OF HEARING 27/06 /2018 DATE OF PRONOUNCEMENT 02 /0 7 /2 018 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER OF THE CIT(A), KOTTAYAM DATED 19/12/2017 FOR THE ASSESSMENT YEAR 2 006-07. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FIR M LIABLE TO FRINGE BENEFIT HAD NOT FILED THE RETURN OF FRINGE BENEFIT ALONG WITH I NCOME TAX RETURN FOR AY 2006- 07. IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED A LETTER ON 19/05/2010 INTIMATING THAT THE FIRM HAD FURNISHED THE RETURN O F FRINGE BENEFITS DISCLOSING VALUE OF FRINGE BENEFITS AT RS.1,53,180/- ON 09/03/ 2007 AND THE SAME MAY BE I.T.A. NO.32/C/2018 2 TREATED AS ONE FILED IN RESPONSE TO NOTICE U/S. 115 WH. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S. 115WE(3) R.W.S. 115WA, DETERMINING VALUE OF FRINGE BENEFITS AT RS.3,30,150/- AFTER INCLUDING TH E ENTIRE SALE PROMOTION EXPENSES OF RS.10,95,721/- FOR ASSESSMENT OF FRINGE BENEFITS. 3. ON APPEAL, THE CIT(A) OBSERVED THAT FOR THE ASS ESSMENT OF FBT, THE ASSESSING OFFICER DID NOT EXCLUDE THE REIMBURSEMEN T EXPENDITURE AMOUNTING TO RS.8,84,837/-. THE CIT(A) HELD THAT IN THE ABSENCE OF ANY EXPRESS PROVISION UNDER THE INCOME TAX ACT, 1961 TO PROVE THAT THE RE IMBURSEMENT AMOUNT IS TO BE EXCLUDED FOR ASSESSMENT OF FBT, THE ACTION OF TH E ASSESSING OFFICER IS UPHELD. 4. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. AR SUBMITTED THAT THE PROVISION OF SECTION 115WB(2) OF THE ACT WAS NO T APPLICABLE IN RESPECT OF EXPENSES WHICH WERE INCURRED FOR SALES PROMOTION BY WAY OF REIMBURSEMENT TOWARDS AGARBATHI, CIGARETTES, FOODS, MATCHES ETC. GIVEN TO THE CUSTOMERS CANNOT BE EQUATED AS GIVEN TO THE EMPLOYEES OR THEIR FAMIL Y MEMBERS. THE IMPUGNED EXPENDITURE WAS PAID TO THE THIRD PARTIES, I.E. CUS TOMERS OF THE ASSESSEE AS REIMBURSEMENT TO THEM AND NOT TO THE EMPLOYEES. IT IS A LEGITIMATE BUSINESS EXPENDITURE INCURRED BY THE ASSESSEE IN THE COURSE OF BUSINESS. ACCORDING TO HIM, THE EXPENDITURE WAS REIMBURSED TO THE CUSTOMER S TO CARRY ON THE BUSINESS OF THE ASSESSEE. HENCE, IT WAS SUBMITTED THAT THE ORDER OF THE LOWER AUTHORITIES IS TO BE REVERSED. I.T.A. NO.32/C/2018 3 4. ON THE OTHER HAND, THE LD. DR RELIED ON THE OR DER OF THE LOWER AUTHORITIES. 5 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER TREATED THE SALES PROMOTION EXPENSES AT RS.10,95,721/- AS LIABLE FOR FRINGE BENEFIT TAX AS AGAINST THE AMOUNT OF RS.2,10,884/- RETURNED BY THE ASSESSEE. THE ASSESSI NG OFFICER INCLUDED VARIOUS EXPENDITURES WHICH ARE REIMBURSED TO THE CUSTOMERS BY THE ASSESSEE TOWARDS SALES PROMOTION EXPENSES. 5.1 IN OUR OPINION, IF THE ASSESSEE HAS INCURRED ANY EXPENDITURE BY WAY OF REIMBURSEMENT HAVING NO ELEMENT OF PROFIT TO THE RE CIPIENTS, BEING IN THE NATURE OF SALES PROMOTION WHICH IS A LEGITIMATE BUSINESS E XPENDITURE FOR THE PURPOSE OF CARRYING ON THE BUSINESS OF THE ASSESSEE, SUCH EXPE NDITURE CANNOT BE LIABLE TO FRINGE BENEFIT TAX U/S. 115WB(2) OF THE I.T. ACT. IN VIEW OF THIS, IT IS APPROPRIATE TO REMIT THIS ISSUE TO THE FILE OF THE ASSESSING OF FICER TO VERIFY WHETHER IT IS A REIMBURSEMENT OF EXPENDITURE AND DECIDE THEREUPON. ACCORDINGLY, WE REMIT THE ISSUE IN DISPUTE TO THE FILE OF THE ASSESSING OFFIC ER FOR FRESH CONSIDERATION AS DIRECTED ABOVE. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO.32/C/2018 4 ORDER PRONOUNCED IN THE OPEN COURT ON THI S 2 ND JULY 2018. SD/- SD/- ( GEORGE GEORGE K.) (CHAN DRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: DATED: 2 ND JULY, 2018 GJ COPY TO: 1. M/S. THE TRADING COMPANY, A.S. CANAL ROAD, POONT HOPPU WARD, ALAPPUZHA. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, ALAPPUZHA. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), KOTTAYA M. 4. THE PR. COMMISSIONER OF INCOME-TAX, KOTTAYAM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRA R) I.T.A.T. , COCHIN