Arvind Brands Ltd., Ahmedabad V. The Dy.CIT.,Circle-1, Ahmedabad

ITA 3249/AHD/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5981 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 21-04-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 08-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Keywords: Gift

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO. 3249 /AHD/2010 (ASSESSMENT YEAR: 2006-07) ARVIND BRANDS LTD. ARVIND MILLS COMPUND, NAROAD ROAD, AHMEDABAD V/S DCIT CIRCLE-1, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACE 4173 D APPELLANT BY : SHRI VARTIK CHOKSI RESPONDENT BY : SHRI O.P. MEENA, SR. D.R. ( )/ ORDER DATE OF HEARING : 21-04-201 4 DATE OF PRONOUNCEMENT : 02 -05-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF CIT(A)-VI, AHMEDABAD DATED 03.09.2010 FOR A.Y. 2006-07. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE B USINESS OF MANUFACTURING AND MARKETING OF READYMADE GARMENTS. ASSESSEE FILED ITS RETURN OF FRINGE BENEFIT ON 26.12.2006 DECLARIN G VALUE OF FRINGE BENEFIT OF RS. 2,00,64,157/-. THE CASE WAS SELECTED FOR SCRUTINY AND ITA NO 3 249/AHD/2010 . A.Y. 2006-0 7 2 THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 115WB OF THE ACT VIDE ORDER DATED 31.12.2008 AND THE TOTAL FRINGE BE NEFIT VALUE WAS ASSESSED AT RS. 2,49,41,619/-. AGGRIEVED BY THE OR DER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 03.09.2010 DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE US AND THE CON CISE GROUNDS OF APPEAL RAISED READS AS UNDER. 1. IN LAW AND IN THE FACTS AND IN CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS. 10, 61,668/- EVEN THOUGH THEY HAVE NOT BEEN INCURRED FOR THE EMPLOYEES OF THE APPELLANT COMPANY . 2. IN LAW AND IN THE FACTS AND IN CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT FRINGE BENEFIT TAX IS NOT LIABLE TO BE PAID BY THE APPELLANT IN RESPECT OF THE FOLLOWING ITEMS OF EXPENDITURE AS THEY HAVE BEEN INCURRED ONLY WITH RE LATION TO NON-EMPLOYEES AND ARE BEING PURELY FOR THE BUSINESS PURPOSES OF THE APPELLANT SR. FBT (NON-EMPLOYEES) NO. PARTICULARS EXPENDITURE 1 PROVISION OF HOSPITALITY OF EVERY KIND TO (OTHER THAN EMPLOYEES) 1 1 ,664 2 GIFTS (OUT OF SALES PROMOTION) 2,87,253 3 SALES PROMOTION INCLUDING PUBLICITY 44,16,883 4 CONVEYANCE, TOUR AND TRAVELS (INCLUDING FOREIGN TRAVEL) 1,61,662 4. THOUGH THE ASSESSEE HAS RAISED 2 GROUNDS BUT THE IS SUE IN BOTH THE GROUNDS IS WITH RESPECT TO LEVY OF FRINGE BENEFIT T AX (FBT). 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAD NOT PAID FBT ON FRINGE BENEFIT VALUE OF RS. 48, 77,462 RELATED TO THE EXPENSES INCURRED ON THE PERSONS WHO WERE NOT THE E MPLOYEES OF THE ASSESSEE BUT HOWEVER THE ASSESSEE, AS PER THE DIREC TION OF GUJARAT HIGH ITA NO 3 249/AHD/2010 . A.Y. 2006-0 7 3 COURT DEPOSITED RS. 13,99,435/- IN A SEPARATE CURRE NT ACCOUNT OPENED WITH STATE BANK OF SAURASHTRA. A.O. WAS OF THE VIEW THAT IN VIEW OF SUB- SECTION(2) OF SECTION 115WB OF THE ACT, WHICH WAS A DEEMING PROVISION, THE ASSESSEE WAS LIABLE TO TAX EVEN ON THE EXPENSES INCURRED ON PERSONS WHO WERE NOT THE EMPLOYEES OF THE ASSESSEE . AGGRIE VED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT (A) DISMISSED THE APPEAL OF THE ASSESSEE BY HOLDING AS UNDER:- 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSES SMENT ORDER AD APPELLANT'S SUBMISSION. IT IS NOT IN DISPUTE THAT APPELLANT IS COVERED BY THE PROVISIONS OF FRINGE BENEFIT TAX. IT IS LEVIED IN RESPECT OF FRINGE BENEFIT PROVIDED OR DEEMED TO HAVE BEEN PROV IDED BY AN EMPLOYER TO HIS EMPLOYEES. AS PER SECTION 115WB(2) FRINGE BENEFIT IS DEEMED TO HAVE B EEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES IF EMPLOYER HAS INCURRED ANY EXPENSES OR MADE ANY PAYMENT FOR THE PURPOSES MENTIONED IN CLAUSE-A TO CLAUSE-Q. THE VALUE OF THE FRINGE BENE FIT IS TO BE WORKED OUT BY APPLYING A PERCENTAGE GIVEN IN SECTION 115WC. THESE TWO SECTIONS DO NOT GIVES ANY DISCRETION OR COMPUTATIO N METHOLOGY THROUGH WHICH THE BENEFIT ACCRUED ONLY TO EMPLOYEES ARE TO BE TAKEN. SINCE THIS IS A DEEMING PROVISION AND VALUE OF FRINGE BENEFIT ARE ALSO DEEMED AT A PARTICULAR PERCENTAGE, THERE IS HARDLY ANY DISCRETION EITHER WITH APPELLANT OR W ITH THE TAX DEPARTMENT TO REDUCE THE LEVY OF FRINGE BENEFIT TAX. SINCE, THE PROVISION AND SECTIONS ARE VERY CLEAR AND THERE IS NO ROOM FOR ANY CONFUSION, THE LINKING OF THE EXPENSES TO THE BENEFIT OF EMPLO YEE IS NOT NECESSARY. ANY EXPENSES WHICH IS DIREC TLY INCURRED FOR THE PURPOSE OF EMPLOYEE, IS FULLY TAKE N FOR THE PURPOSE OF FRINGE BENEFIT TAX. HOWEV ER, OTHER EXPENSES IN THE NATURE OF ENTERTAINMENT, SALE PROMOTION, CONVEYANCE , TRAVELLING, GIFTS ETC. MAY HAVE PARTIAL BENEFIT TO THE EMPLOYEES AND THEREFORE , ONLY A PART IS TREATED AS FRINGE BENEFIT. SIN CE, SECTION CLEARLY DEFINED THE VALUE OF FRINGE BENEFIT , NO FURTHER ADJUSTMENT TO THE ITEMS OF EXPENSES DEBITED IN PROFIT AND LOSS ACCOUNT IS PERMIT TED AND ACCORDINGLY ASSESSING OFFICER IS JUSTIFI ED IN APPLYING THE RATES APPLICABLE TO THE PARTICULAR EXPENSE GIVEN IN THE ACT TO ARRIVE AT THE VALUE OF FRINGE BENEFIT. THE DECISION IN THE ORDER OF HON'BLE GUJARAT HIGH C OURT DOES NOT PUT ANY STAY ON THE ASSESSMENT OR APPEAL PROCEEDING IN THIS MATTER. IT ONLY PRESCRIBE S THE MODE OF PAYMENT OF FRINGE BENEFIT TAX TILL APPEAL IS DISPOSED OFF. SINCE THERE IS NO ORDER EIT HER OF JURISDICTIONAL HIGH COURT OR OTHER COURT, WHEREIN IT IS HELD THAT FRINGE BENEFIT TAX IS NOT P AYABLE IN RESPECT OF EXPENSES NOT INCURRED FOR THE PURPOSE OF EMPLOYEES' BENEFIT, THEREFORE, I DO NOT FIND ANY LEGAL SUPPORT FOR THE APPELLANT'S CONTENTI ON. IN VIEW OF THIS, THE ADDITION TO THE VALUE OF FRING E BENEFIT MADE BY THE ASSESSING OFFICER IS CONFIRME D. IN THE FINAL RESULT, APPEAL IS DISMISSED. ITA NO 3 249/AHD/2010 . A.Y. 2006-0 7 4 6. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS N OW IN APPEAL BEFORE US. 7. BEFORE US, AT THE OUTSET THE LD. A.R. SUBMITTED TH AT THE BASIC CONDITION FOR LEVY OF FBT IS THAT THE EXPENSES SHOULD BE INCURRED ON THE EMPLOYEES AND IT CANNOT BE INVOKED ON EXPENSES WHICH ARE INCURRED ON THE NON- EMPLOYEES AND ARE FOR BUSINESS PURPOSE. HE FURTHER SUBMITTED THAT ON IDENTICAL FACTS IN THE CASE OF INTAS PHARMACEUTICAL S LTD. ITA NO. 3086, 3087 AND 3088/AHD/2010 ORDER DATED 03.03.2014, THE HONBLE TRIBUNAL HAS REMITTED THE MATTER BACK TO THE A.O. AND DIRECT ED THE A.O TO GIVE A CLEAR FINDING AS TO WHETHER THE EXPENSES WERE INCUR RED IN RELATION TO NON- EMPLOYEE FOR BUSINESS PURPOSES. HE THEREFORE SUBMIT TED THAT FOLLOWING THE AFORESAID DECISION OF THE HONBLE TRIBUNAL, IN THE PRESENT CASE, THE MATTER MAY ALSO BE REMANDED WITH SIMILAR DIRECTIONS TO A.O. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O A ND CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE DISPUTE IN THE PRESENT CASE IS WITH RESPECT TO CHARGING OF FBT ON SALES PROMOTION EXPENSES WHICH THE ASSESSEE CLAIMS TO HAVE INCURRED IN RELATION TO NON-EMPLOYEE AND WERE PURELY FOR THE PU RPOSE OF BUSINESS. IN THE PRESENT CASE, THERE IS NO FINDING OF A.O OR CIT (A) AS TO WHETHER THE EXPENSES WHICH HAVE BEEN INCURRED WERE FOR EMPLOYEE S OR NON- EMPLOYEES AND WHETHER THE EXPENSES WERE FOR THE PUR POSE OF BUSINESS. WE FURTHER FIND THAT IN THE CASE OF INTAS PHARMACEU TICALS LTD. (SUPRA), THE CO-ORDINATE BENCH OF TRIBUNAL, RELYING ON THE DECI SION IN THE CASE OF ARVIND FASHIONS LTD. VS. DCIT, REMITTED THE MATTER TO THE FILE OF A.O BY HOLDING AS UNDER:- ITA NO 3 249/AHD/2010 . A.Y. 2006-0 7 5 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE ORDER OF THE TRIBUNAL IN ARVIND FASHIONS LTD. VS. D CIT (SUPRA). WE FIND THAT THE DECISION OF THE ITAT, AHMEDABAD BENCH IN ARVIND FASHIONS LTD. VS. DCIT (S UPRA) HAS HELD THAT THE PROVISION OF 'FBT' COULD NOT BE INVOKED IN RESPECT OF THE EXPENSES WHI CH WERE NOT INCURRED ON EMPLOYEES OR THEIR FAMILY MEMBERS. THE TRIBUNAL IN THIS CASE HAS REFERRED TO THE DECISIONS OF THE CO-ORDINATE BENCH OF THE ITAT, AHMEDABAD, PUNE AND BANGALORE, WHICH HAVE SIMILARLY HELD THAT THE 'FBT' COULD NOT BE INVOKED ON EXPENSES WHICH WERE NOT INCURRED ON THE EMPLOYEES O R THEIR FAMILY MEMBERS. HOWEVER, WE FIND THAT THERE IS NO CLEAR CUT FINDING RECORDED BY THE AO OR THE CIT(A) IN THEIR ORDER THAT WHETHER THE ADDITIO N MADE WERE RELATING TO THE EXPENDITURE IN RELATION T O NON-EMPLOYEES AND FOR THE BUSINESS PURPOSE OF THE ASSESSEE. THE CLAIM OF THE ASSESSEE WAS THAT THE EX PENSES WERE NOT RELATED TO ITS EMPLOYEES AND WERE INCURRED ONLY IN RELATION TO NON-EMPLOYEES AND FOR BUSINESS PURPOSE OF THE ASSESSEE COMPANY. IN THESE FACTS, WE ARE OF THE VIEW THAT IT SHALL BE IN THE I NTEREST OF JUSTICE TO RESTORE THE ISSUE IN THE GROU NDS OF THE APPEAL OF THE ASSESSEE FOR ALL THREE YEARS TO T HE FILE OF THE AO WITH DIRECTION TO DECIDE THE SAME DE NOVO IN ACCORDANCE WITH LAW AFTER PROVIDING REASONA BLE OPPORTUNITY OF HEARING TO THE ASSESSEE IN THE LIGHT OF DECISIONS OF THE ITAT, AHMEDABAD BENCH IN ARVIND FASHIONS LTD. VS. DCIT (SUPRA). THE AO IS FURTHER DIRECTED TO RECORD A CLEAR FINDING THAT WHE THER THE EXPENSES IN QUESTION WERE INCURRED WITH RELATION TO NON-EMPLOYEES FOR THE BUSINESS PURPOSE OF THE ASSESSEE AS CLAIMED BY THE ASSESSEE- COMPANY. IN CASE THE EXPENSES ARE FOUND TO HAVE BEE N INCURRED BY THE ASSESSEE WITH RELATION TO NON- EMPLOYEES AND FOR THE BUSINESS PURPOSE OF THE ASSES SEE, THE DECISION IN ARVIND FASHIONS LTD. VS. DCIT (SUPRA) SHALL APPLY TO THE CASE OF THE ASSESSEE. NE EDLESS TO SAY THAT ANY DECISION OF THE HON'BLE GUJA RAT HIGH COURT IN THE WRIT PETITION PENDING BEFORE THE HON'BLE HIGH COURT, AS MENTIONED BY THE CIT(A) IN ITS APPELLATE ORDER, SHALL BE BINDING ON THE AUTHOR ITIES. WE DIRECT ACCORDINGLY. 9. IN THE PRESENT CASE AS NOTED ABOVE, SINCE THERE IS NO FINDING AS TO WHETHER THE EXPENSES WERE INCURRED FOR THE BENEFIT OF EMPLO YEES OR NON- EMPLOYEES AND WHETHER THE EXPENSES WERE FOR THE PUR POSE OF BUSINESS AND SINCE THE ISSUE IN THE PRESENT APPEAL IS IDENTI CAL TO ISSUE BEFORE TRIBUNAL IN THE CASE OF INTAS PHARMA (SUPRA), WE FO LLOWING THE ORDER OF THE CO-ORDINATE BENCH IN THE CASE OF INTAS PHARMA ( SUPRA) AND FOR THE SIMILAR REASONS GIVEN THEREIN, ALSO REMIT THE ISSUE TO THE FILE OF A.O TO DECIDE THE ISSUE AFRESH AFTER RECORDING A CLEAR FIN DING AND AFTER GIVING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. WE THUS DIRECT ACCORDINGLY. ITA NO 3 249/AHD/2010 . A.Y. 2006-0 7 6 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 02 - 05 - 2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,A HMEDABAD