M/s. Alembic Limited, Baroda V. The Dy.CIT.,Circle-1(1), Baroda

ITA 3421/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80489 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 24-09-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 27-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Keywords: Gift
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JU DICIAL MEMBER ALEMBIC LIMITED 5 TH FLOOR, ADMIN BUILDING ALEMBIC ROAD BARODA PAN: AABCA7950P (APPELLANT) VS DCIT, CIRCLE 1(1) BARODA (RESPONDENT) ASSESSEE BY: SRI S.N. SOPARKAR, A.R. REVENUE BY: SRI ROOP CHAND, SR.D.R. DATE OF HEARING : 26-09-2014 DATE OF PRONOUNCEMENT : 31-10-20 14 / ORDER PER : ANIL CHATURVEDI, ACCOUNTANT MEMBER:- THESE ARE THE ASSESSEES APPEALS AGAINST THE ORDER OF LD. CIT(A)-I, BARODA DATED 28-10-2010 FOR A.Y. 2006-07 & 2007-08 RESPECTIVELY. ITA NO. 3421 & 3422/AHD/2010 ASSESSMENT YEAR 2006-07 & 2007-08 I.T.A NOS. 3421 &3422/AHD/2010 A.Y. 2006-07 &2 007-08 PAGE NO ALEMBIC LTD VS. DCIT 2 2. BEFORE US BOTH THE PARTIES SUBMITTED THAT THOUGH THE ISSUE RELATES TO 2 DIFFERENT YEARS BUT THE FACTS AND ISSUE INVOLVED IN BOTH THE YEARS ARE IDENTICAL EXCEPT FOR THE ASSESSMENT YEAR INVOLVED AND THE AMO UNTS. IT WAS THEREFORE SUBMITTED THAT THE SUBMISSION MADE BY THEM IN CASE OF ONE ASSESSMENT YEAR WOULD BE EQUALLY APPLICABLE TO THE OTHER. WE THEREF ORE PROCEED TO DISPOSE OF BOTH THE APPEALS BY WAY OF A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND THUS PROCEED WITH THE FACTS FOR AY 06-07 IN ITA NO. 3421 /AHD/2010. 3. THE FACTS AS CULLED OUT FROM THE MATERIAL ON REC ORD ARE AS UNDER. 4. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN TH E BUSINESS OF MANUFACTURING AND TRADING OF PHARMACEUTICAL PRODUCT S. ASSESSEE ELECTRONICALLY FILED RETURN OF FRINGE BENEFIT TAX (FBT) FOR AY 06- 07 ON 19.12.2006 DECLARING TOTAL FBT LIABLE FOR TAX AT RS 1,29,94,355/-, THE C ASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 115WE(3) V IDE ORDER DATED 14.5.2003 AND THE TOTAL FRINGE BENEFIT VALUE WAS ASSESSED AT RS 3,37,03,809/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A). LD. CLT(A) VIDE ORDER DATED 28.10.2010 GRANTED PARTIAL RELIEF TO TH E ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CLT(A), ASSESSEE IS NOW IN APPEAL BE FORE US AND HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER PASSED BY THE LEARNED CIT (A) IS BAD IN LAW AND ON FACTS. 2. ADDITION OF VARIOUS EXPENSES NOT INCURRE D FOR COLLECTIVE BENEFIT OF EMPLOYEES TO VALUE OF FRINGE BENEFITS U/S 115 WB (2 ): 2.1 ON THE FACTS AND THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) (HEREINAFTER REFERRED TO AS LEARNED CIT(A)) GROSSLY ERRED IN UPHOLDING CONTENTI ON OF THE ASSESSING OFFICER BY NOT EXCLUDING THE EXPENDITURE INCURRED W HOLLY FOR BUSINESS PURPOSES, WHICH DID NOT RESULT IN ANY BENEFIT, COLL ECTIVE OR OTHERWISE, TO THE EMPLOYEE WITHIN THE SCOPE OF FRINGE BENEFITS U/S 11 5WB(2). 3. ADDITION OF PUBLICITY EXPENSES TO VALUE OF FRINGE BENEFITS U/S 115 WB (2) RS. 3,69,000/-: 3.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT (A) ERRED IN CONSIDERING PUBLICITY EXPE NSES OF RS 4.71 LAKHS I.T.A NOS. 3421 &3422/AHD/2010 A.Y. 2006-07 &2 007-08 PAGE NO ALEMBIC LTD VS. DCIT 3 AND RS 13.74 LAKHS RELATING TO PUBLICITY EXPENSES A ND DEALER'S MEETING / DEALER'S & DOCTOR'S INCENTIVES AS EXPENSES LIABLE T O FBT U/S. 115WB(2)(C) WITHOUT APPRECIATING THAT THE ABOVE EXPENSES WERE I NCURRED FOR SALES PROMOTION AND FOR DISTRIBUTION OF PRODUCTS TO DOCTO R'S AND DEALER'S ON WHICH LOGO OF THE ASSESSEE COMPANY WAS EMBOSSED AND HENCE EXPENSES WERE IN NATURE OF ADVERTISEMENT EXPENSES. 4. ADDITION OF SALES PROMOTION EXPENSES TO VALUE OF FRINGE BENEFITS U/S 115 WB (2) RS. 55,09,615/- 4.1 ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT (A) GROSSLY ERRED IN CONSIDERING EXPEND ITURE OF RS 165.02 LAKHS ON DOCTORS MEET AND SALES PROMOTION EXPENSES OF RS . 110.46 LACS FOR THE PURPOSE OF FBT IN TERMS OF S. 115 WB (2) WI THOUT APPRECIATING THAT THESE EXPENSES WERE INCURRED FOR PURPOSE OF IMPARTI NG GUIDANCE REGARDING VARIOUS PRODUCTS/BRANDS OF THE APPELLANT & THEIR MARKETING AND HENCE ARE COVERED BY EXCEPTION TO SALES PROMOTION E XPENSES. 4.2 WITHOUT PREJUDICE TO THE ABOVE, THE LEAR NED CIT (A) OUGHT TO HAVE ALLOWED THE EXPENDITURE INCLUDED IN ABOVE FOR LODGI NG & BOARDING, WHICH ARE LIABLE TO FBT AT CONCESSIONAL RATE OF 5% U/S 11 5WC(2)(C). 5. ADDITION OF SAMPLE EXPENSES TO VALUE OF FRINGE B ENEFITS U/S 115WB (2) RS. 44,43,762/-: 5.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) OUGHT TO HAVE CONSIDERED THAT AMENDMENT TO S.115WB(2)(D)(VII) W.E.F . 1.4.2007 IS TO REMOVE TO HARDSHIP CAUSED TO THE ASSESSEE AND THUS IS CLARIFICATORY IN NATURE AND OUGHT TO BE CONSIDER ED AS RETROSPECTIVE IN NATURE. 6. ADDITION OF OTHER SALES PROMOTION EXPENS ES TO VALUE OF FRINGE BENEFITS U/S 115 WB (2) RS. 18.40 LACS/-: 6.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) GROSSLY ERRED IN CONSIDERING EXPENDITURE OF RS. 39.67 LAKHS ON DOCTORS MEET, RS. 50.84 LAKHS ON OTHER SALES PROMOT ION EXPENDITURE THROUGH C& F AGENTS, RS. 1.51 LAKHS ON CORPORATE GI FTS TO CUSTOMERS AND DOCTORS AS LIABLE TO FBT. 7. ADDITION OF TELEPHONE EXPENSES TO VALUE OF FRING E BENEFITS U/S. 115 WB (2) RS. 43,45,988/-: 7.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) GROSSLY ERRED IN CONSIDERING TELEPHONE EXPEN SES OF RS. 217.30 LAKHS AS LIABLE TO FBT. I.T.A NOS. 3421 &3422/AHD/2010 A.Y. 2006-07 &2 007-08 PAGE NO ALEMBIC LTD VS. DCIT 4 8. ADDITION OF GUESTHOUSE EXPENSES TO VALUE OF FRIN GE BENEFITS U/S. 115 WB (2) RS. 83,251/-: 8.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) GROSSLY ERRED IN CONSIDERING GUEST HOUSE EXP ENSES OF RS. 4.16 LAKHS AS LIABLE TO FBT. 9. ADDITION OF GIFT EXPENSES TO VALUE OF FRINGE BEN EFITS U/S 115 WB (2) RS. 9,69,044/- 9.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) GROSSLY ERRED IN CONSIDERING EXPENSES ON GIF T OF RS. 19.38 LAKHS AS LIABLE TO FBT. 5. BEFORE US , ID AR SUBMITTED THAT THOUGH VARIOUS GROUNDS HAVE B EEN RAISED BUT ALL THE GROUNDS ARE INTERCONNECTED AND THEREFOR E ALL CAN BE CONSIDERED TOGETHER. HE FURTHER SUBMITTED THAT IF GROUND NO 2 OF ASSESSEE IS DECIDED IN ASSESSEES FAVOUR THEN ALL OTHER GROUNDS BECOME RED UNDANT. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO ON PERUSING THE TAX AUDIT REPORT NOTICED THAT TOTAL AMOUNT OF EXPENSES RELATABLE TO FRINGE BENEFIT TAX (FBT) DEBITED IN THE BOOKS OF ACCOUNTS WAS RS 29,21 ,10,346/- OF WHICH ASSESSEE HAD CONSIDERED EXPENSES RELATABLE TO FRING E BENEFIT AGGREGATING TO RS 16,33,90,327/- AND OFFERED IT IN THE RETURN AND THE AGGREGATE EXPENSES OF RS 12,87,20,019/- WERE CONSIDERED TO BE NOT RELATABLE TO FRINGE BENEFIT AND THEREFORE NOT OFFERED IN THE RETURN.(THE TABLE OF THE BREAKU P OF THE EXPENSES IS REPRODUCED BY AO AT PAGE 4 OF THE ORDER). THE ASSESSEE WAS THE REAFTER ASKED TO CLARIFY AS TO WHY FBT WAS NOT PAYABLE IN RESPECT OF EXPENSES OF R S 12,87,20,019/- TO WHICH ASSESSEE INTER ALIA SUBMITTED THAT FBT IS PAYABLE O NLY ON THOSE ITEMS WHICH PROVIDE COLLECTIVE BENEFIT TO THE EMPLOYEES AND FBT WAS NOT PAYABLE ON THOSE EXPENSES WHICH WERE SPECIFICALLY INCURRED FOR THE P URPOSE OF BUSINESS AND MORE SO THAT THE DEEMING PROVISIONS OF S. 115WB(2) ARE N OT APPLICABLE TO IT AS ALL THE EXPENSES HAVE BEEN INCURRED FOR THE PURPOSE OF BUSI NESS AND WERE HAVING NO COLLECTIVE BENEFIT TO THE EMPLOYEES. THE SUBMISSION S OF THE ASSESSEE WAS NOT I.T.A NOS. 3421 &3422/AHD/2010 A.Y. 2006-07 &2 007-08 PAGE NO ALEMBIC LTD VS. DCIT 5 FOUND ACCEPTABLE TO THE AO AS ACCORDING TO HIM THE PROVISIONS OF S. 115WB(2) WERE VERY SPECIFIC AND IT BEING DEEMING PROVISION D ID NOT APPROVE THE CONCEPT OF COLLECTIVE BENEFIT TO THE EMPLOYEES AS CONTENDED BY THE ASSESSEE. AO THEREAFTER WORKED OUT THE FBT IN RESPECT OF THE VARIOUS EXPENS ES (AS LISTED AT PAGE 19 OF THE ORDER) AND REWORKED THE FRINGE BENEFIT VALUE. A GGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO V IDE ORDER DATED 28/10/2010 GRANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING A S UNDER: 7.3 A CONJOINT READING OF THE RATIONALE BEHIND THE LEVY, THE PROVISIONS OF THE ACT AND THE QUESTIONS AND ANSWERS DETAILED IN T HE CIRCULAR ELABORATE THE SCOPE OF FRINGE BENEFITS PROVIDED AND DEEMED TO HAVE BEEN PROVIDED AS DEFINED IN SECTION 115WB. SUB-SECTION (1) OF THE SAID SECTION DEFINES THE SCOPE OF FRINGE BENEFITS PROVIDED BY THE EMPLOY ER TO HIS EMPLOYEES. SIMILARLY, SUB-SECTION (2) OF THE SAID SECTION DEFI NES THE SCOPE OF FRINGE BENEFITS DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOY ER TO HIS EMPLOYEES. THEREFORE, SUB-SECTION (2) EXPANDS THE S COPE OF SUB-SECTION (1) THROUGH A DEEMING PROVISION. THE PROVISION RELA TING TO THE COMPUTATION OF THE VALUE OF THE FRINGE BENEFITS IS CONTAINED IN SECTION 115WC. I AM IN PARTIAL AGREEMENT WITH THE APPELLANT THAT FRINGE BE NEFIT TAX PAYABLE BY THE EMPLOYER WAS DUE TO INHERENT DIFFICULTY IN ISOLATIN G THE PERSONAL ELEMENT WHEREVER THERE IS COLLECTIVE ENJOYMENT OF SUCH BENE FITS DIRECTLY OR INDIRECTLY BY THE EMPLOYEES. I AM NOT IN AGREEMENT WITH THE APPELLANT THAT IF THE EXPENDITURE IS WHOLLY AND EXCLUSIVELY INCURR ED FOR BUSINESS PURPOSES AND IF NO DIRECT OR INDIRECT BENEFITS ACCRUE TO THE EMPLOYEES THEN IT WOULD BE OUTSIDE THE PURVIEW OF FBT. IN FACT PROVISION OF FBT IS A LIABILITY QUA EMPLOYER AND IS IN RELATION TO EXPENDITURE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PRO FESSION OF THE EMPLOYER. IN TERMS OF QUES. NO.35 & 36 THE EXPENDITURE OF PER SONAL NATURE AND BOGUS EXPENDITURE ARE TO BE DEDUCTED FROM THE VARIO US CATEGORIES OF EXPENDITURE FOR CALCULATING THE FBT. SECONDLY, BEC AUSE OF THE DEEMING FICTION IN SECTION 115WB(2) IF THE EXPENDITURE IS I NCURRED FOR THE STIPULATED PURPOSES THERE IS A PRESUMPTION THAT THE SPECIFIED PROPORTIONS OUT OF THESE EXPENSES ARE FRINGE BENEFITS DEEMED TO HAVE BEEN PR OVIDED BY THE EMPLOYER AND THE PRESUMPTION AND THE PROPORTIONS SP ECIFIED ARE NOT REBUTTABLE. IF THE ARGUMENT OF ID, AR IS ACCEPTED, THE DEEMING PROVISION WOULD BECOME OTIOSE. IT IS FURTHER CLEAR FROM CLAUS ES (A) TO (Q) OF SUB SECTION 2 TO SECTION 115WB. MORE SPECIFICALLY CLAUS E (B) PROVIDES THAT IF ANY EXPENDITURE IS INCURRED ON HOSPITALITY OF EVERY KIND OF THE EMPLOYER TO ANY PERSON BY WAY OF PROVISION OF FOOD OR BEVERAGE OR IN ANY OTHER MANNER EXCLUDING THE EXPENDITURE ON FOOD AND BEVERA GE PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES IN OFFICE OR FACTORY THEN SUCH EXPENDITURE WOULD BE CONSIDERED FOR PURPOSES OF BENEFITS DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES. THE DEE MING FICTION ITSELF I.T.A NOS. 3421 &3422/AHD/2010 A.Y. 2006-07 &2 007-08 PAGE NO ALEMBIC LTD VS. DCIT 6 IMPLIES THAT PRIMA FACIE EVEN IF NO BENEFIT ACCRUES TO THE EMPLOYEE IT WOULD BE DEEMED TO HAVE BEEN PROVIDED. THIS IS THE VERY P URPOSE OF THE DEEMING PROVISION AND SECTION 115WB(2) PROVIDES THE BASE AND THE BASIS WITH INBUILT EXCLUSIONS TO COMPUTE THE BENEFIT DEEM ED TO HAVE BEEN PROVIDED. WHETHER THE PROVISION LEADS TO MANIFESTLY ABSURD RESULTS OR IT IS INEQUITOUS OR CONSTITUTIONALLY INVALID, IS IN MY HU MBLE OPINION FOR LEGISLATURE OR COURTS TO DECIDE. IN APPELLATE FORUM BEFORE ME, WHAT IS TO BE SEEN IS WHETHER THE PROVISIONS ARE CORRECTLY APPLIED BY AO OR NOT. 7.4 IT IS A SETTLED LAW THAT EQUITY AND HARDSHIP A RE HARDLY RELEVANT CONSIDERATIONS FOR INTERPRETING TAX LAWS (KARAMCHAR I UNION VS UNION OF INDIA 243 ITR 143 (SC)]. THE PROVISIONS OF THE ACT ARE UNAMBIGUOUS AND UNEQUIVOCAL AND IT IS TRITE LAW THAT A STATUTORY PR OVISION WHICH IS PLAIN AND UNAMBIGUOUS CANNOT BE THE SUBJECT OF AN INTERPRETAT ION INTERFERING WITH THE PLAIN MEANING [PADMASUNDRARAO V STATE OF TAMIL NADU , 255 ITR 147 (SC)]. ALSO IN THE CASE OF PANDIAN CHEMICALS LTD V S. CIT [2003] 262 ITR 278 (SC) IT IS HELD THAT RULES OF INTERPRETATION WO ULD COME INTO PLAY ONLY IF THERE IS ANY DOUBT WITH REGARD TO THE EXPRESS LANGU AGE USED IN THE PROVISION. WHERE THE WORDS ARE UNEQUIVOCAL, THERE I S NO SCOPE FOR IMPORTING THE RULE OF LIBERAL INTERPRETATION. I COU LD EMPATHIZE WITH LD. AR THAT THE BASIS OF SELECTION OF THE PURPOSES IN SEC. 115WB(2) COULD BE A HOTLY DEBATABLE ISSUE ON GROUNDS OF INEQUITY BUT ON CE THE BASES ARE PROVIDED IN THE ACT PASSED BY THE PARLIAMENT, THE P ROVISIONS ARE TO BE MECHANICALLY FOLLOWED. IN VIEW OF ABOVE, THE LEGAL PLEAS OF THE APPELLANT ARE ONLY PARTIALLY ACCEPTED. 7.5 COMING TO THE MERITS OF SPECIFIC DISALLOWANCES , THE STEPS TO BE FOLLOWED ARE (I) WHETHER EXPENSES FALL UNDER SAC.115WB(1)/1 15WB(2). (II) WHETHER THE EXPENSES ARE COVERED PARTIALLY OR FULLY UNDER EXCLUSION CLAUSES IN SEC. 115WB(2)/1L5WB(3). (III) WHETHER THE FRINGE BENEFIT VALUE QUALIFY FOR LOWER TAXATION IN VIEW OF SECTION 115WC. 7.6 IN THE INSTANT CASE ALL THE ADDITIONS EFFECTED BY THE AO RELATE TO PROVISIONS OF SEC.115WB(2). IT IS SEEN THAT BASED O N THE INFORMATION PROVIDED BY THE APPELLANT THE TAX AUDITOR HAS MENTI ONED THAT EXPENDITURE OF RS.29,21,10,346/- IS RELATEBLE TO FRINGE BENEFIT TAX (ELABORATED IN TABLE-A AT PAGE 3 OF THE ASSESSMENT ORDER). THEREAFTER BY WAY OF A NOTE IN TABLE-B IT IS MENTIONED THAT EXPENSES OF RS.128720019/- HAS NO NEXUS OR COLLECTIVE BENEFIT TO EMPLOYEES AND ARE TH US EXCLUDED IN THE RETURN. THE AO HAD CALLED FOR THE DETAILS OF VARI OUS EXPENSES AND AFTER EXAMINATION PROPOSED CERTAIN ADDITIONS. IN MY OPIN ION THE VERY ASSUMPTION OF NEXUS OF COLLECTIVE BENEFIT TO EM PLOYEES IN RESPECT OF CERTAIN EXPENSES AS PER DEEMING PROVISIONS IS ILL F OUNDED AS DESCRIBED IN PRECEDING PARAS. I.T.A NOS. 3421 &3422/AHD/2010 A.Y. 2006-07 &2 007-08 PAGE NO ALEMBIC LTD VS. DCIT 7 7.7 COMING TO SPECIFICS, THE TELEPHONE EXPENSES OF RS. 217,30 LAKHS, GUEST HOUSE EXPENSES OF RS. 4.16 LAKHS, GIFT OF RS. 19.38 LAKHS AND SAMPLE EXPENSES OF RS.222.19 LAKHS HAVE BEEN CORREC TLY CONSIDERED AS BENEFITS DEEMED TO HAVE BEEN PROVIDED BY THE AO IN VIEW OF Q.NO. 64, 90, 92, 97 & 98. I AM NOT IN AGREEMENT WITH THE APPELLA NT THAT THE AMENDMENT BY FINANCE ACT 2007 IN REGARD TO SAMPLE EXPENSES WA S CLARIFICATORY IN NATURE. 7.8 THE SALES PROMOTION EXPENDITURE OF RS.165.0 2 LAKHS ON DOCTORS MEET AND RS 110,46 LAKHS ON SALES PROMOTION EXPENDI TURE OF OTHER DIVISION ARE IN RESPECT OF MEETINGS OF SALES REPRES ENTATIVES OF THE APPELLANT COMPANY AND BOTH THESE EXPENDITURES ARE C OVERED UNDER CLAUSE (D). THE ALTERNATE PLEA OF THE APPELLANT THAT LOWE R VALUATION TAXATION RATE U/S 115WC(2)(C) BE APPLIED IS NOT ACCEPTED AS THE E XPENDITURE DOES NOT FALL UNDER CLAUSE (F) OR (G) BUT UNDER CLAUSE (D). IN FACT THE AUDITOR HAD ALSO CATEGORIZED THE EXPENSES UNDER PUBLICITY AND S ALES PROMOTION EXPENSES AND NOT AS BOARDING EXPENSES. 7.9 OUT OF PUBLICITY EXPENSES OF RS.124.79 LAKHS, T HE PUBLICITY EXPENSES OF RS. 4,71 LAKHS AND RS. 13.74 LAKHS RELATING TO DEALERS MEETING AND DEALERS AND DOCTOR'S INCENTIVE ARE NET TO BE EXCLUDED IN VIEW OF Q.NO. 56 AND CLAUSE (C) TO SEC. 115WB(2) AND IT S EXPLANATION. HOWEVER THE EXPENDITURE OF RS. 2.55 LAKH ON SPONSORSHIP AND ADVERTISEMENT EXPENSES OF RS. 103.79 LAKHS ARE ALLOWABLE EXCLUSIONS. SIMILARLY PUBLICITY EXPENDITURE OF RS. 39.67 LAKHS ON DOCTORS MEET ; RS.50.84 LAKHS ON OTHER SALES PROMOTION EXPENDITURE THROUGH C&F AGENTS AND CORPORATE GIFT TO CUSTOMERS AND DOCTORS OF RS.1 .51 LAKHS HAVE BEEN RIGHTLY CONSIDERED AS FALLING WITHIN THE PURVIEW OF FBT BY AO. EXPENDITURE OF RS 12.97 LAKHS TOWARDS BANNERS AND ADVERTISEMEN TS AND DISPLAYS AND RS.4 LAKHS ON ADVERTISING CAMPAIGN AND RS.0.1 LAKH ON DIABETIC CAMPS ARE ALLOWABLE EXCLUSIONS UNDER CLAUSE (D). 7.10 IN REGARD TO EXPORT PROMOTION EXPENSES OF RS .33.98 LAKHS I AM IN AGREEMENT WITH THE APPELLANT THAT IN VIEW OF Q. NO. 20 OF THE CIRCULAR IF THE COMPANY MAINTAINS SEPARATE BOOKS OF ACCOUNT FOR IT S INDIAN AND FOREIGN OPERATIONS, FBT WOULD BE PAYABLE ON THE AMOUNT OF E XPENSES REFLECTED IN THE BOOKS OF ACCOUNT RELATING TO THE INDIAN OPERATI ONS. THE APPELLANT IS DIRECTED TO PROVIDE THE NECESSARY DETAILS TO THE AO TO EMPHASIZE THAT IT IS COVERED UNDER THE CIRCULAR. FAILING WHICH, THE IN CENTIVES/SALE COMMISSION EXPENDITURE ON LITERATURE/ADVERTISEMENT/EXHIBITION ARE ALLOWABLE EXCLUSIONS BUT THE EXPENDITURE ON GIFT AND ENTERTAINMENT ARE C OVERED UNDER CLAUSE (A) AND IN TERMS OF Q.NO. 97 & 98 OF THE CIRCULAR. THE GROUND IS ALLOWED SUBJECT TO VERIFICATION BY AO. I.T.A NOS. 3421 &3422/AHD/2010 A.Y. 2006-07 &2 007-08 PAGE NO ALEMBIC LTD VS. DCIT 8 7.11 IN VIEW OF ABOVE GROUND NO. 4, 5, 7, 8 & 9 ARE DISMISSED, GROUNDS NO. 2, 6 ARE PARTLY ALLOWED AND GROUND NO. 3 IS ALL OWED SUBJECT TO VERIFICATION. 7. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NO W IN APPEAL BEFORE US. BEFORE US, LD AR REITERATED THE SUBMISSIONS MADE BE FORE AO AND LD. CIT(A). HE FURTHER SUBMITTED THAT BEFORE AO, IT WAS SUBMITTED THAT ALL THE EXPENSES HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS AND WERE HAVING NO COLLECTIVE BENEFIT TO THE EMPLOYEES. HE FURTHER SUBMITTED THAT THE CON TENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO FOR THE REASON THAT AS PER T HE DEEMING PROVISIONS OF S. 115WB(2), ASSESSEE WAS LIABLE TO PAY FBT ON ALL THE ITEMS OF EXPENDITURE LISTED IN THE ORDER. HE FURTHER SUBMITTED THAT VARIOUS TRI BUNALS LIKE PUNE TRIBUNAL IN THE CASE OF INTERVALVE (INDIA) LTD VS ADDL CIT (2012) 1 49 TTJ (PUNE) 365, BANGLORE TRIBUNAL IN THE CASE OF TOYOTA KIRLOSKAR MOTOR (P) LTD VS ADDL CIT (2012) 54 SOT 70 (BANG) (URO), DCITVS KOTAK MAHINDRA OLD MUTUAL L IFE INSURANCE LTD (2012) 149 TTJ (MUM) 332 HAVE HELD THAT THE DEEMING FICTIO N U/S 115WB(2) IS NOT ATTRACTED IF THE EXPENDITURE DOES NOT RESULT IN ANY BENEFIT TO THE EMPLOYEES. HE ALSO PLACED ON RECORD THE COPIES OF THE AFORESAID D ECISIONS. HE THEREFORE SUBMITTED THAT IN VIEW OF THE VARIOUS DECISIONS CIT ED BY HIM, THE ADDITION MADE BY THE AO BE DELETED. LD DR ON THE OTHER HAND SUPPORTE D THE ORDER OF AO AND LD. CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE WE FIND THAT BEFORE AO AND LD. CIT(A) IT WAS ASSESSEES SUBMISSION THAT ALL THE EXPENSES HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS AND WERE HAVING NO COLLECTIVE BENEFIT TO THE EMPLOY EES BUT HOWEVER THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO AS HE RELIED ON THE DEEMING PROVISIONS OF S. 115WB(2) OF THE ACT. WE F IND THAT IN THE CASE OF TOYOTA KIRLOSKAR MOTOR (SUPRA), CO-ORDINATE BENCH OF THE T RIBUNAL HAS HELD THAT THE DEEMING FICTION U/S 115WB(2) IS NOT ATTRACTED IF TH E EXPENDITURE DOES NOT RESULT IN ANY BENEFIT TO EMPLOYEES. IN THE CASE OF DCITVS KOT AK MAHINDRA OLD MUTUAL (SUPRA) ALSO THE TRIBUNAL HAS HELD THAT DEEMING PRO VISIONS OF SUB SECTION (2) OF S. I.T.A NOS. 3421 &3422/AHD/2010 A.Y. 2006-07 &2 007-08 PAGE NO ALEMBIC LTD VS. DCIT 9 115WB APPLIES ONLY WHEN THE EXPENDITURE IS IN THE N ATURE OF CONSIDERATION FOR EMPLOYMENT. IN THE CASE OF TOYOTA KIRLOSKAR MOTOR (P) LTD (SUPRA) THE TRIBUNAL HAS NOTED AS UNDER: (PARA 8) SUB SECTION 1 OF S. 115WB ITSELF QUALIFIES THAT TH E MEANING OF THE EXPRESSION 'FRINGE BENEFITS' CONTAINED THEREIN IS ' FOR THE PURPOSES OF THIS CHAPTER.... AND, THEREFORE, IT IMPLIES THAT THE OVE RRIDING CONDITION OF THE INCURRENCE OF EXPENDITURE IN CONSIDERATION FOR EMPLOYMENT IS E VEN RELEVANT FOR THE PURPOSES OF ASSESSING OR ASCERTAINING FRINGE BENEFITS, WHICH ARE DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO ITS EMPLOYEES IN TERMS OF SUB SECTION (2) OF S. 115WB OF THE ACT ALSO. THEREFORE EVEN IN THE CIRCUM STANCES PROVIDED IN SUBSECTION (2) OF S. 115WB OF THE ACT 'FRINGE BENEF ITS' CAN BE DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES, ONL Y IN CASES WHERE THE PRESCRIBED EXPENDITURE IS INCURRED IN CONSIDERATION FOR EMPLOYMENT. THEREFORE, ON THIS ASPECT, THERE IS AMPLE FORCE IN THE PLEA SE T UP BY THE ASSESSEE AND ACCORDINGLY, THE ASSESSEE IS LIABLE TO SUCCEED. 9. BEFORE US, REVENUE HAS NOT BROUGHT ANY BINDING C ONTRARY DECISION IN ITS SUPPORT AND FURTHER HAS NOT PLACED ANY MATERIAL ON RECORD TO CONTROVERT THE SUBMISSIONS MADE BY THE ASSESSEE THAT VARIOUS EXPEN SES WERE NOT INCURRED FOR COLLECTIVE BENEFIT OF THE EMPLOYEES. IN VIEW OF THE AFORESAID FACTS, WE ARE OF THE VIEW THAT NO ADDITION ON ACCOUNT OF FBT CAN BE MADE IN THE PRESENT CASE. WE THUS ALLOW GROUND NO 2 OF THE ASSESSEE. SINCE GROUN D NO 2 HAS BEEN ALLOWED THE OTHER GROUNDS RAISED BY THE ASSESSEE DOES NOT SURVI VE. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. NOW WE TAKE UP ITA NO. 3422/AHD/2010 FOR A.Y. 2007- 08 11. BEFORE US, BOTH THE PARTIES HAVE ADMITTED THAT THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE YEAR UNDER APPEAL ARE IDENTICAL TO THAT OF A.Y. 2006-07, WE THEREFORE FOR THE REASONS STATED H EREINABOVE, WHILE DECIDING THE APPEAL FOR A.Y. 2006-07 IN ITA NO. 342 1/AHD/2010 AND FOR SIMILAR REASONS ALLOW THE GROUNDS RAISED IN PRESENT APPEAL. THUS, THE APPEAL OF ASSESSEE IS ALLOWED. I.T.A NOS. 3421 &3422/AHD/2010 A.Y. 2006-07 &2 007-08 PAGE NO ALEMBIC LTD VS. DCIT 10 12. IN THE RESULT, BOTH THE APPEAL OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (KUL BHARAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 31/10/2014 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,