ABC BEARINGS LTD, MUMBAI V. ADDL CIT RG 6(2), MUMBAI

ITA 3251/MUM/2010

• Counselvise Citation: 325119914 RSA 2010
• Duration Of Justice: 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2006-2007
• Appeal Filed On: 26-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI D.K. AGARWAL (J.M.) AND SHRI R.K. PANDA (A.M.) ITA NO. 3251/MUM /2010 ASSESSMENT YEAR 2006-07 M/S ABC BEARINGS LTD., 402-B, POONAM CHAMBERS, DR. ANNIE BESANT ROAD, WORLI, MUMBAI 400 018. PAN : AAACT5018Q VS. ADDL. COMMISSIONER OF INCOME - TAX, RANGE 6(1), ROOM NO. 511, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400020. (APPELLANT) (RESPONDENT) APPELLANT BY : MS. AARTI VISSANJI RESPONDENT BY : SHRI A.K. NAYAK O R D E R PER D.K. AGARWAL, J.M. THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 25.01.2010 PASSED BY THE LD. CIT (A) FOR THE A.Y. 2006-07. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF BALL, TRUST, AND ROL LER BEARINGS FILED ITS RETURN OF FRINGE BENEFIT TAX (FBT) ON 25.11.2006 DE CLARING VALUE OF FRINGE BENEFITS OF ` 5,82,892/-. DURING THE COURSE OF ASSESSMENT, THE A.O. OBSERVED THAT THE ASSESSEE HAS DEBITED VARIOUS EXPE NSES IN THE PROFIT & LOSS ACCOUNT UNDER VARIOUS HEADS FOR WHICH DETAILS HAVE BEEN FURNISHED BY THE ASSESSEE. FROM THE SAID DETAILS, THE A.O. O BSERVED THAT A FEW OF THE EXPENSES HAVE NOT BEEN CONSIDERED FOR THE PURPO SE OF THE VALUATION OF THE FBT, HENCE, HE ADDED THE SAME TO THE FBT VAL UE AS UNDER:- ITA 3251/M/10 M/S ABC BEARINGS LTD. 2 SR. NOS. DESCRIPTION AMOUNT CONSIDER ED FOR FBT BY ASSESSEE FBT RATE FBT VALUE 1 FAX CHARGES (BEING COMMUNICATION EXPENSES LIABLE TO FBT NOT CONSIDERED BY THE ASSESSEE. 11,024 - 11,024 20% 2,205 2 9,725 3 1,206 4 1,595 5 MSR & VAN EXPENSES (BEING COMMUNICATION EXPENSES LIABLE TO FBT NOT CONSIDERED BY THE ASSESSEE PART IS BEING ALLOWED AS THE SAME REPRESENTS SALARY ETC.) 3480811 2209259 1271552 20% 254310 6 1397848 7 76,400 8 58,129 9 16,137 1743290 ACCORDINGLY, HE COMPLETED THE ASSESSMENT AT THE TOT AL FBT VALUE AT ` 7,572,210/- VIDE ORDER DATED 31.12.2008 PASSED U/S 115WE(3) OF THE INCOME TAX ACT, 1961 (THE ACT). ON APPEAL BEFORE T HE LD. CIT(A), THE ASSESSEE, INTER ALIA, FURNISHED MSR VAN EXPENSES AS UNDER:- 1. LOCAL CONVEYANCE/TRAVELLING EXPENSES ` 2,83,301.00. 2. VAN CAMPING CHARGES ` 1,37,248.00 3. OTHER EXPENSES ` 8,51,002.00 TOTAL ` 12,71,552.00 THE LD. CIT(A) WHILE CONFIRMING THE ADDITION OF FAX CHARGES OF ` 11,024/- U/S 115WB(2)(J), LOCAL CONVEYANCE/TRAVELLING EXPENS ES ` 2,83,302/- U/S 115WB(2)(F) AND REIMBURSEMENT EXPENSES OF ` 8,51,003/- U/S 115WB(2)(F) OR 115WB(2)(G), DELETED THE ADDITION OF VAN CAMPING CHARGES OF ` 1,37,249/- BY HOLDING THAT THE SAME IS OUTSIDE TH E SCOPE OF FBT AND ACCORDINGLY PARTLY ALLOWED THE APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS THE SUSTENANCE OF ADDITION IN THE VALUE OF FBT OF FAX CHARGES ` 11,024, MSR VAN EXPENSES:- LOCAL CONVEYANCE/TRAVELLING EXPENSES ` 2,83,302/- AND REIMBURSEMENT OF EXPENSES ` 8,51,003/-. ITA 3251/M/10 M/S ABC BEARINGS LTD. 3 4. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFOR E THE A.O. AND LD. CIT(A) FURTHER SUBMITS THAT ON THE ADDITION OF FAX CHARGES AND MSR VAN EXPENSES, THE PROVISIONS OF FRINGE BENEFIT TAX IS N OT APPLICABLE AS THE ABOVE EXPENSES HAS BEEN INCURRED FOR WHOLLY AND EXC LUSIVELY FOR THE PURPOSE OF BUSINESS. SHE FURTHER SUBMITS THAT FAX CHARGES ARE NOT EQUIVALENT TO THE TELEPHONE INCLUDING MOBILE PHONE, THEREFORE, THE LD. CIT(A) HAS ERRED IN APPLYING THE PROVISIONS OF SECT ION 115WB(2)(J) OF THE ACT. WITH REGARD TO THE MSR VAN EXPENSES, SHE SUBMI TS THAT LOCAL CONVEYANCE/TRAVELLING EXPENSES OF ` 2,83,302/- ARE INCURRED FOR PUTTING ACROSS BANNER ON THE HIRED VAN AND FOR TAKING IT AR OUND THE CITY WITH MARKETING SALE REPRESENTATIVE WEARING T-SHIRTS WHIC H BEAR THE LOGO OF THE COMPANY. THESE EXPENSES ARE NOT FRINGE BENEFIT NOR ARE THEY COVERED UNDER THE PURVIEW OF FRINGE BENEFIT TAX. WITH REGA RD TO REIMBURSEMENT OF EXPENSES OF ` 8,51,003/-, SHE SUBMITS THAT THE SAID EXPENSES HAV E BEEN INCURRED AS LOCAL CONVEYANCE, LODGING AND OTHER CHA RGES INCURRED BY MARKETING SALES REPRESENTATIVE. SHE FURTHER SUBMITS THAT THE SAID EXPENSES ARE OUTSIDE THE SCOPE OF FBT AND THEREFORE , THE SAME BE DELETED. 5. THE LD. D.R. ON THE OTHER HAND, WHILE RELYING ON THE ORDER OF A.O. AND LD. CIT(A), FURTHER SUBMITS THAT IN VIEW OF THE PROVISIONS OF SECTION 115WB(3), THE ASSESSEE IS LIABLE TO FBT AND THEREFO RE, THE LD. CIT(A) WAS FULLY JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE A.O. 6. WE HAVE CAREFULLY HEARD THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS REGAR DS THE ADDITION OF FAX CHARGES OF ` 11,024/-, WE FIND THAT THE LD. CIT(A) HAS SUSTAINE D THE ADDITION U/S 115WB (2)(J) OF THE ACT WHEREIN IT HAS BEEN PROVIDED AS UNDER :- ITA 3251/M/10 M/S ABC BEARINGS LTD. 4 (J) USE OF TELEPHONE (INCLUDING MOBILE PHONE) OTHER THAN EXPENDITURE ON LEASED TELEPHONE LINES. FROM THE READING OF THE ABOVE, WE OBSERVE THAT FAX CHARGES HAS NOT BEEN INCLUDED AND ONLY THE TELEPHONE CHARGES INCLUDING M OBILE PHONE CHARGES HAVE BEEN INCLUDED IN THE VALUE FBT, THEREFORE, THE ADDITION SUSTAINED BY THE LD. CIT(A) IS OUTSIDE THE SCOPE OF FBT AND HENC E, WE DELETE THE SAME. 7. AS REGARDS THE ADDITION OF LOCAL CONVEYANCE/TRAV ELLING EXPENSES OF ` 2,83,302/- WE FIND THAT IT HAS BEEN CONTENDED BY T HE ASSESSEE THAT THE SAME HAVE BEEN INCURRED FOR PUTTING ACROSS BANNER O N THE HIRED VAN AND TAKING IT AROUND THE CITY WITH MARKETING SALES REPR ESENTATIVE WEARING T- SHIRTS WHICH BEAR LOGO OF THE COMPANY. THEREFORE, THE SAME FALLS UNDER THE EXCLUSION OF PROVISIONS OF SECTION 115 WB(2)(D) OF THE ACT WHICH SAYS THAT ANY EXPENDITURE ON ADVERTISEMENT BY WAY OF SIG NS, ART WORK, PAINTING, BANNERS, AWNINGS, DIRECT MAIL, ELECTRIC S PECTACULARS, KIOSKS, HOARDINGS, BILL BOARDS [DISPLAY OF PRODUCTS] OR BY WAY OF SUCH OTHER MEDIUM OF ADVERTISEMENT DO NOT INCLUDE UNDER THE DE FINITION OF FRINGE BENEFIT PROVIDED U/S 115 WB(D) OF THE ACT. IN THE A BSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE, WE DELETE THE ADDITION MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) ON THIS ACCOUNT. 8. AS REGARDS REIMBURSEMENT OF EXPENSES ` 8,51,003/- WE FIND THAT THE CLAIM OF THE ASSESSEE IS THAT THESE EXPENSES HA VE BEEN INCURRED ON POST SALES AS LOCAL CONVEYANCE, LODGING, BOARDING E TC. INCURRED BY THE MARKETING SALES REPRESENTATIVE, THEREFORE, ACCORDIN G TO THE ASSESSEE, THE SAME IS OUTSIDE THE SCOPE OF FBT. HOWEVER, WE DO N OT FIND MERIT IN THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE AS THE SAM E IS LIABLE TO BE INCLUDED IN THE VALUE OF FBT IN VIEW OF THE CLEAR P ROVISIONS OF SECTION 115WB(2)(F) CONVEYANCE AND 115WB(2)(G) USE OF HOTE L, BOARDING AND ITA 3251/M/10 M/S ABC BEARINGS LTD. 5 LODGING FACILITIES AND ACCORDINGLY WE SUSTAIN THE D ISALLOWANCE OF ` 8,51,003/- IN THE VALUE OF FBT. THE GROUND TAKEN B Y THE ASSESSEE IS THEREFORE PARTLY ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08.04.2011 SD/- (R.K. PANDA) ACCOUNTANT MEMBER SD/- (D.K. AGARWAL) JUDICIAL MEMBER MUMBAI, DATED 8 TH APRIL, 2011. RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 14, MUMBA I 4. COMMISSIONER OF INCOME TAX, 6, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH J, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI ITA 3251/M/10 M/S ABC BEARINGS LTD. 6 1 DRAFT DICTATED ON 2 9 .3.11 SR PS 2 DRAFT PLACED BEFORE AUTHOR ON 30 .3.11 SR PS 3 DRAFT PROPOSED & PLACE BEFORE THE 2 ND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY 2 ND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR PS 7 FILE SENT TO THE BENCH CL ERK SR PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE AR 10 DATE OF DESPATCH SR PS