DWARKA CEMENT WORKS LTD, MUMBAI V. ITO 5(1)(3), MUMBAI

ITA 3452/MUM/2010

• Counselvise Citation: 345219914 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 30-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, MUMBAI. BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER I.T.A NO.3452/ MUM/2010 ASSESSMENT YEAR: 2006 07 DWARKA CEMENT WORKS LTD., .. APPELLANT 307, 3 RD FLOOR, A.C.MARKET, TARDEO, MUMBAI 034. PA NO.AAACD 2955 L VS INCOME TAX OFFICER 5(1)(3) ,. RESPONDEN T AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. APPEARANCES: VIJAY MEHTA, FOR THE APPELLANT M.R.KUBAL, FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HAS CHALLENGE D THE CORRECTNESS OF CIT(A)S ORDER DATED 5 TH APRIL,, 2010, IN THE MATTER OF ASSESSMENT UNDER SECTION 115WE(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 200607. 2. ALTHOUGH THE ASSESSEE HAS RAISED THREE GRIEVANCES IN APPEAL DEALING WITH THE MERITS OF ADDITIONS MADE DURING THE COURSE OF IMPUGNED FRINGE B ENEFIT TAX ASSESSMENT, THE SHORT GRIEVANCE PRESSED IN THE COURSE OF HEARIN G BEFORE US, IS FOR CONSEQUENTIAL RELIEF INASMUCH AS TO THE EXTENT OF RELATED EXPEN SES ITSELF HAVING BEEN DISALLOWED IN THE COMPUTATION OF INCOME, CORRESPONDING REDUCTIO N IS SOUGHT IN THE ASSESSMENT OF TAXABLE FRINGE BENEFIT. I .T.A NO.3452/ MUM/2010:ASSESSMENT YEAR: 2006-07 2 3. LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED UPON CIRCULAR NO .8 OF 2005, DATED 29.8.2005 ISSUED BY CBDT (277 ITR (ST) 20) IN SUPPORT OF THE CO NTENTION THAT THE TAXABLE FRINGE BENEFITS ARE CONFINED TO THE RELATED EXPENSES WH ICH HAVE BEEN TAKEN INTO ACCOUNT IN COMPUTATION OF ASSESSEES INCOME. LEARNED COUN SEL REFERS TO THE CLARIFICATION ISSUED, IN RESPONSE TO QUESTION NO.35 (AT PAGE 34 OF THE REPORT OF 277 ITR(ST) BY THE CBDT TO THE EXTENT THAT WHEN EXPENSES ARE DISAL LOWED UNDER SECTION 37 FOR BEING PERSONAL IN NATURE, SUCH ALLOWANCE WOULD NOT BE LI ABLE TO FRINGE BENEFIT TAX. IT IS SUBMITTED THAT FOLLOWING THE SAME PRINCIPLE WHEN THE EXPENSE IS NOT ALLOWED AS DEDUCTION U/S.37, TO THAT EXTENT FRINGE BENEFIT TAX CANNOT B E LEVIED ON THE RELATED EXPENSES. LEARNED COUNSEL SUBMITS THAT TO THE EXTENT EXPENSES H AVE BEEN DISALLOWED IN THE ASSESSMENT PROCEEDINGS AND EVEN SUSTAINED IN APPEAL, COR RESPONDING REDUCTION MAY ALSO BE MADE IN TH E COMPUTATION OF TAXABLE FRINGE BENEFITS. 4. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELI ES UPON THE ORDERS OF THE AUTHORITIES BELOW BUT DOES NOT POINT OUT ANY GOOD REASON AS TO WHY THE AFORESAID CONTENTIONS OF LEARNED COUNSEL NOT BE ACCEPTED. 5. HAVING HEARD THE RIVAL CONTENTIONS, WE SEE SUBSTANCE IN THE SUBMISSION MADE BY LEARNED COUNSEL FOR THE ASSESSEE. AS IS ABUNDANTLY CLEARLY F ROM CBDT CIRCULAR ITSELF THAT WHERE AN EXPENSE IS DISALLOWED UNDER SECTION 37, TO THAT E XTENT EXPENDITURE INCURRED BY THE ASSESSEE CANNOT BE SUBJECTED TO FRINGE BENEFIT TAX. AN EXPENSE NOT ALLOWED IN THE COMPUTATION OF INCOME, THEREFORE, CANNOT BE SUBJ ECTED TO FRINGE BENEFIT TAX. WE, THEREFORE, DIRECT THE AO TO GRANT RELIEF TO T HE ASSESSEE IN COMPUTATION OF TAXABLE FRINGE BENEFIT TO THE EXTENT RELATED TO EXPENSES HAV ING NOT BEEN ALLOWED AS DEDUCTION IN THE COMPUTATION OF INCOME. ACCORDINGLY, THE MATTE R IS REMITTED TO THE FILE OF THE ASSESSING OFFICER FOR THIS LIMITED PURPOSE. 6. IN THE RESULT, APPEAL IS ALLOWED IN THE TERMS INDICATED ABOV E. PRONOUNCED IN THE OPEN COURT ON 17 TH JUNE, 2011 SD/ (VIJAY PAL RAO) JUDICIAL MEMBER SD/ (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATED 17 TH JUNE, 2011 I .T.A NO.3452/ MUM/2010:ASSESSMENT YEAR: 2006-07 3 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),9 MUMBAI 4. COMMISSIONER OF INCOME TAX, 5 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH D, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI