Municipal Corporation (Nagar Nigam), Jodhpur, JODHPUR V. DCIT, JODHPUR

ITA 327/JODH/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1605 (ITAT-JODHPUR)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-02-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 28-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G R KOKANI
• Assessee Lawyers: S M JAIN
• Keywords: Opportunity of being heard
• Section: 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NOS. 327 TO 330/JU/2012 ASSESSMENT YEARS: 2006-07 TO 2009-10 MUNICIPAL CORPORATION [NAGAR NIGAM] VS. D.C.I. T INSIDE SOJATI GATE CIRCLE - 2 JODHPUR JODHPUR PAN NO. AAALM 0194 R (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.M. JAIN DEPARTMENT BY : SHRI G.R. KOKANI DATE OF HEARING : 07.02.2013 DATE OF PRONOUNCEMENT : 11.02.2013 ORDER PER BENCH :- THESE FOUR APPEALS FILED BY THE ASSESSEE ARE DIRECT ED AGAINST THE COMMON ORDER OF THE CIT(A), JODHPUR, DA TED 20.6.2012 FOR A.YS. 2006-07 TO 2009-10. IN ALL THES E APPEALS, COMMON ISSUES ARE INVOLVED AND THE APPEALS WERE 2 HEARD TOGETHER, SO THESE ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE WILL DEAL WITH ITA NO. 327/JU/2012 FOR A.Y. 2006-07. THE ASSESSEE HAS RAISED THE FOLLOWING GRO UNDS IN THIS APPEAL: 1. THE ASSESSMENT ORDER PASSED U/S 115WE(3) OF THE I.T. ACT, 1961 BY THE DCIT, CIRCLE -2, JODHPUR AND SUSTAINED BY THE LD. CIT(A), JODHPUR IS BAD IN LAW AND BAD IN FACTS. THE MUNICIPAL CORPORATION, JODHPUR I S NOT DOING THE BUSINESS, HENCE FBT IS NOT APPLICABLE AT ALL. 2. THE LD. DCIT, CIRCLE 2, JODHPUR HAS ESTIMATED THE VALUE OF FRINGE BENEFITS ASSESSED U/S 115WE(3) OF THE ACT AMOUNTING TO RS. 5 LAKHS ON ESTIMATED BASIS AND SUSTAINED BY THE LD. CIT(A), JODHPUR ERRED IN L AW AND IN FACTS OF THE CASE. THE VALUE OF FRINGE BENE FITS ARE ALWAYS CALCULATED ON ACTUAL EXPENSES INCURRED B Y THE ASSESSEE ON QUARTERLY BASIS AS PER SECTION 115WB((1) AND 115WB(2) ITEM A TO P. 3 3. THE LD. DCIT, CIRCLE 2, JODHPUR HAS ERRED IN CALCULATING THE FBT AMOUNTING TO RS. 2,47,860/- WHICH INCLUDES TOTAL TAX AND INTEREST ALSO AND SUSTAINED BY THE LD. CIT(A), JODHPUR WRONGLY. 4. THE LD. DCIT, CIRCLE 2, JODHPUR HAD DIRECTED THE A.O. TO CHARGE INTEREST U/S 115WK AND INTEREST U/S 115WJ(3) AS PER LAW. BUT THE APPEAL WAS DISMISSED. 5. THE A.O. AND LD. CIT(A), JODHPUR HAS WRONGLY CHARGED FBT WRONGLY. FBT CANNOT BE LEVIED UNLESS TH E BENEFITS ARE COLLECTIVE IN NATURE. KINDLY SEE THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN GODREJ PROPERTIES LTD. VS. DY. CIT [2011] 135 TTJ [MUM] 426. 6. THE HON'BLE ITAT MAY VERY KINDLY CANCEL THE IMPUGNED ASSESSMENT ORDER ERRONEOUSLY UPHELD BY THE LD. CIT(A). JODHPUR. 3. FROM THE ABOVE GROUNDS, IT IS GATHERED THAT ALL THE GROUNDS OF THE ASSESSEE IN THIS APPEAL RELATE TO TH E VALUE OF FRINGE BENEFIT ASSESSED U/S 115WE(3) OF THE INCO ME-TAX 4 ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT', FO R SHORT] AND INTEREST CHARGED U/S 115WK AND 115WJ(3) OF THE ACT. 4. FACTS OF THE CASE, IN BRIEF, ARE THAT A NOTICE U /S 115 WH OF THE ACT WAS ISSUED TO THE ASSESSEE ON 15-3-20 10. IN RESPONSE TO THAT, RETURN OF FRINGE BENEFIT WAS FILE D ON 30-8- 2010 SHOWING NIL VALUE. DURING THE COURSE OF ASSESS MENT PROCEEDINGS, THE ASSESSEE SUBMITTED TO THE A.O. THA T IT WAS NOT LIABLE TO THE FRINGE BENEFIT TAX [FBT]. IT WAS STA TED THAT THE ASSESSEE WAS NOT CARRYING ON BUSINESS OR PROFESSION THEREFORE, IT WAS NOT LIABLE FOR FBT. HOWEVER, THE A.O. GATHERED INFORMATION FROM THE LOCAL FUND AUDIT DEPARTMENT AND THAT DEPAR TMENT VIDE LETTER DATED 12.8.2010 INFORMED THAT THE ASSESSEE HAD NOT GOT ITS ACCOUNT AUDITED FOR A.Y. 2008-09 AND FOR F.Y. 2 005-06 TO 2007-08 IT HAD PROVIDED ANNUAL ACCOUNTS. THE A.O. OBSERVED THAT THE ASSESSEE INCURRED DIESEL EXPENDITURE AND R EPAIR EXPENDITURE AT RS. 88.14 LAKHS AND RS. 17.65 LAKHS RESPECTIVELY FOR RUNNING OF THE VEHICLES AND THOSE VEHICLES WERE ALSO USED BY THE EMPLOYEES OF THE ASSESSEE. HE WAS OF THE VIE W THAT AS PER PROVISIONS OF THE FBT, THE ASSESSEE WAS LIABLE TO PAY FBT ON 5 THIS ACCOUNT. THE A.O. FURTHER OBSERVED THAT THE AS SESSEE IN THE FBT RETURN INDICATED MOTOR-CARS AND INCLUSIVE FUEL EXPENSES AT NIL. HE ALSO OBSERVED THAT THE ASSESSEE WAS PROVID ING TELEPHONE FACILITY TO THE EMPLOYEE'S CHAIR PERSON ETC. HE EST IMATED THE FBT AT RS. 5 LAKHS. 5. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A ) AND SUBMITTED THAT THE ASSESSEE IS A LOCAL AUTHORITY AN D ITS INCOME, EXCEPT INCOME DERIVED FROM THE SUPPLY OF A COMMODIT Y OR SERVICES [OTHER THAN WATER AND ELECTRICITY] IS EXEM PT U/S 10(20) OF THE ACT. IT WAS FURTHER STATED THAT THE EXPRESS ION LOCAL AUTHORITY MEANS PANCHAYAT AND MUNICIPALITIES AS RE FERRED TO ARTICLE 234(D) AND 243P(E) OF THE CONSTITUTION OF I NDIA AND THAT MUNICIPAL COMMITTEES AND DISTRICT BOARD ARE LEGALLY ENTITLED TO OR ENTRUSTED BY THE GOVERNMENT WITH THE CONTROL OR MAN AGEMENT OF A MUNICIPAL OR A LOCAL FUND CANTONMENT BOARD AS DEFIN ED U/S 3 OF CANTONMENTS ACT, 1924. IT WAS CONTENDED THAT THE AS SESSEE WAS NOT CARRYING ON BUSINESS OR PROFESSION, HENCE FBT W AS NOT APPLICABLE. REFERENCE WAS MADE TO CIRCULAR NO. 8 / 2005 DATED 29- 8-2005 WHEREIN 107 QUESTIONS WERE CONTAINED. THE AS SESSEE RELIED 6 ON QUESTION NO. 43 WHICH STATES THAT 'WHETHER AN EM PLOYER IS LIABLE TO FBT ONLY IF IT IS ENGAGED IN BUSINESS AND PROFESSION?' IN ANSWER TO THE SAID QUESTION NO. 43, IT WAS STATED T HAT AN EMPLOYER IS LIABLE TO FBT ONLY IF IT IS ENGAGED IN BUSINESS OR PROFESSION OR ANY ACTIVITY, WHETHER OR NOT SUCH ACT IVITY IS CARRIED ON WITH THE OBJECT OF EARNING INCOME, PROFIT OR GAI NS. IT WAS FURTHER CONTENDED THAT FBT WAS ATTRACTED ONLY WHERE ANY BUSINESS OR PROFESSION IS CARRIED ON OR ANY ACTIVIT Y AKIN TO BUSINESS IS CARRIED OUT BY THE EMPLOYER. IT WAS ALSO STATED THAT ALTHOUGH THE LOCAL AUTHORITY COMES WITHIN THE MEANING OF EM PLOYER BUT IT DOES NOT CARRY ON ANY BUSINESS OR PROFESSION AND ON LY FULFILLED THE OBJECTS AND AIM LAID DOWN IN MUNICIPAL ACT AND THE EXPENDITURE INCURRED DURING THE FULFILLMENT OF THE OBJECTS DOES NOT CONSTITUTE BUSINESS OR PROFESSION, HENCE FRINGE BENEFIT WAS NO T LIABLE ON THE ASSESSEE. IT WAS ALSO STATED THAT ASSESSING OFFICER HAD NOT CALCULATED THE VALUE OF THE FRINGE BENEFIT ON ACTUA L BASIS. RELIANCE WAS PLACED ON THE DECISION OF THE MUMBAI BENCH OF T HE TRIBUNAL IN THE CASE OF GODREJ PROPERTIES LTD. VS. DCIT REPORTE D IN 135 TTJ [MUM] 426. 7 6. THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE OBSERVED THAT THE PROVISIONS CONTAINED IN SECTION 115W OF THE ACT PROVIDES THAT MUNICIPAL CORPORATION IS A LOCAL AUTHORITY AND FALLS UNDER TH E DEFINITION OF EMPLOYER WHO IS LIABLE FOR FBT. HE FU RTHER OBSERVED THAT IN SECTION 10(23C) OF THE ACT IT IS N OWHERE MENTIONED THAT A MUNICIPAL CORPORATION FALLS IN THE SECTION FOR THE PURPOSE OF EXEMPTION. ACCORDING TO THE LD. CIT(A), MUNICIPAL CORPORATION, ALTHOUGH IS EXEMPT U/S 10(20 ) OF THE ACT FOR THE PURPOSES OF INCOME-TAX BUT NOWHERE IN THE ACT IT IS MENTIONED THAT A MUNICIPAL CORPORATION IS EXEMPT FROM FBT. THE LD. CIT(A) OBSERVED THAT EVEN IF INCO ME IS EXEMPT AS PER INCOME-TAX PROVISIONS THE FBT IS LEVI ABLE UNLESS AND UNTIL IT IS SPECIFICALLY EXEMPTED IN FBT PROVISIONS AND THAT IT IS NOT EXEMPT U/S 10(23C) AN D 12AA OF THE ACT AS PROVIDED IN SECTION 115W OF THE ACT F OR THE PURPOSES OF EXEMPTION. HE ALSO POINTED OUT THAT NO WHERE IN THE ACT IT WAS SPECIFICALLY MENTIONED THAT MUNIC IPAL CORPORATION IS EXEMPT FROM FBT PROVISIONS. THE LD. CIT(A) ACCORDINGLY HELD THAT THE ASSESSEE WAS A LOCAL AUT HORITY 8 AND SO THE A.O. RIGHTLY ESTIMATED THE VALUE OF FRIN GE BENEFITS U/S 115WE(3) OF RS. 5 LAKHS AND IN CALCULA TING THE FBT AMOUNTING TO RS. 2,47,860/-. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND F URTHER SUBMITTED THAT THE ASSESSEE IS NOT DOING ANY BUSINE SS HENCE FBT WAS NOT APPLICABLE AT ALL. IT WAS CONTEN DED THAT THE ASSESSEE IS A LOCAL AUTHORITY AND WORKING FOR THE BENEFIT OF THE GENERAL PUBLIC AS PER THE DIRECTION OF THE GOVERNMENT WHICH STATED THAT IT MUST FUNCTION IN A DEFINED AREA AND PERFORM GOVERNMENTAL FUNCTIONS SUC H AS RUNNING MARKETS, PROVIDING CIVIL AMENITIES, ETC. IT WAS CONTENDED THAT SINCE THE ASSESSEE WAS NOT CARRYING ON BUSINESS OR PROFESSION OR ACTIVITIES IN THE NATURE OF BUSINESS, THEREFORE, IT WAS NOT LIABLE FOR FBT. IT WAS FURTHER CONTENDED THAT THE VALUE OF FRINGE BENEFIT WAS ESTIMATED BY THE DCIT, CIRCLE 2 [A.O.] AND HE DID NOT INCLUDE ACTUAL EXPENDITURE. IT WAS STATED THAT THE A.O. DID NOT CALCULATE THE VALUE OF FRINGE BENEFIT QUART ERLY ON 9 ACTUAL BASIS. IT WAS FURTHER STATED THAT THOSE EXP ENSES WERE INCURRED DURING THE COURSE OF PROVIDING SERVIC ES AND FACILITIES TO THE GENERAL PUBLIC AS PER MUNICIPAL A CT. IT WAS CONTENDED THAT THE VALUE OF FRINGE BENEFITS WAS ALWAYS CALCULATED ACCORDING TO SPECIFIC RATES. IN THE PRESENT CASE, THE VALUE OF FRINGE BENEFIT WAS ESTIM ATED ON ALL ITEMS COLLECTIVELY. THEREFORE, THE SAME WAS BA D IN LAW AND BAD ON FACTS. IT WAS STATED THAT FOR ATTRACTIN G TAX ON FRINGE BENEFITS, IT WAS NECESSARY THAT AN EMPLOYER SHOULD HAVE PROVIDED ANY OF THE PERQUISITES SPECIFIED THER EIN AND SUCH BENEFITS ARE PROVIDED IN THE COURSE OF BUSINES S OR PROFESSION CARRIED ON BY AN EMPLOYER. THE CHARGE H ERE APPLIES WHERE AN EMPLOYER IN THE COURSE OF BUSINESS OR PROFESSION INCURS ANY EXPENDITURE IN THE NATURE OF FRINGE BENEFITS. RELIANCE WAS PLACED ON THE DECISION OF T HE ITAT MUMBAI BENCH IN THE CASE OF GODREJ PROPERTIES LTD. [SUPRA]. IT WAS ALSO STATED THAT THE FBT CANNOT BE LEVIED IN RESPECT OF EXPENDITURE INCURRED IN CONNECTION WITH PERSONS WHO ARE NOT THE EMPLOYEES OF THE ASSESSEE AND WERE NOT GETTING ANY BENEFIT. RELIANCE WAS PLACED ON THE DE CISION 10 OF ITAT MUMBAI BENCH IN THE CASE OF DCIT VS KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LTD. REPORTED IN [2012] 134 ITD 388 [MUM]. 8. IN HIS RIVAL SUBMISSIONS, THE LD. D.R. STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD, IN THE PRESENT CASE I T IS NOTICED THAT THE A.O. ESTIMATED THE VALUE OF FBT. HOWEVER, NO BASIS HAS BEEN GIVEN FOR THE SAID ESTIM ATION. IN THE INSTANT CASE, IT IS NOT CLEAR AS TO WHETHER THE ASSESSEE INCURRED THE EXPENDITURE IN QUESTION ON TH E EMPLOYEES OR PERQUISITES WERE PROVIDED TO THE EMPLO YEES. FROM THE DEFINITION OF EMPLOYER IN SECTION 115W, IT IS CLEAR THAT LOCAL AUTHORITY IS AN EMPLOYER AND T HE ASSESSEE BEING A MUNICIPAL CORPORATION, IS A LOCAL AUTHORITY, SO IT CANNOT BE SAID THAT THE ASSESSEE IS NOT AN EMPLOYER. HOWEVER, IT IS NOT CLEAR AS TO WHETHER THE ASSESSEE INCURRED ANY EXPENDITURE ON ITS EMPLOYEES TO THE 11 EXTENT OF RS. 5 LAKHS ESTIMATED BY THE A.O. THEREF ORE, WE ARE OF THE VIEW THAT RELEVANT MATERIAL IS NOT BROUG HT ON RECORD. IT IS ALSO NOT BROUGHT ON RECORD AS TO WHE THER THE ASSESSEE IS REGISTERED U/S 12AA OF THE ACT OR NOT. THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AN D CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT SINCE THE FACTS ARE NOT CLEAR, THIS CA SE DESERVES TO BE SET ASIDE TO THE FILE OF THE A.O. FO R FRESH ADJUDICATION IN ACCORDANCE WITH LAW AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE AS SESSEE. 10. IN ALL OTHER APPEALS I.E. ITA NOS. 328 TO 330/J U/2012, FACTS ARE IDENTICAL. THE ONLY DIFFERENCE IS IN THE VALUE OF FRINGE BENEFIT ESTIMATED BY THE A.O. AND FBT. OTHE RWISE, ALL OTHER FACTS ARE IDENTICAL AS WERE IN ITA NO. 327/JU/2012. THEREFORE, OUR FINDINGS GIVEN IN RESP ECT OF A.Y. 2006-07 IN ITA NO. 327/JU/2012 IN THE FORMER P ART OF THIS ORDER SHALL APPLY MUTATIS MUTANDIS FOR THE APP EALS ITA NOS. 328 TO 330/JU/2012 FOR A.YS. 2007-08 TO 2009-1 0. 12 11. IN THE RESULT, ALL THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. [ORDER PRONOUNCED IN THE COURT ON 11.02.2013] SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMER DATED : FEBRUARY, 2013 VL/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR ITAT, JODHPUR