Asman Investment Ltd., Ahmedabad V. The Dy.CIT,Range-1, Ahmedabad

ITA 3507/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73059 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 17-02-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 31-12-2010
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: V R CHOKSI
• Keywords: Gift; Depreciation; Business expenditure

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD , ,, , . .. . . . . . , , , , !' ! # !' ! # !' ! # !' ! # BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SH. N.S. SAINI, ACCOUNTANT MEMBER ./ ././ ./ ITA NO. 3507/AHD/2010 % &% % &% % &% % &% / // / ASSESSMENT YEAR 2006-07 ASMAN INVESTMENT LTD. AHMEDABAD. PAN: AABCA5968R VS DCIT, RANGE-1, AHMEDABAD. '(/ APPELLANT )*'( / RESPONDENT REVENUE BY : SH. O.P. BATHEJA, SR. D.R. ASSESSEE(S) BY : SH. V.R. CHOKSI, AR + , -'/ // / DATE OF HEARING : 17/02/2014 ./& , -' / DATE OF PRONOUNCEMENT: 26/02/2014 !0 !0 !0 !0/ // / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A)-VI, AHMEDABAD, DATED 18.10.2010. 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT T HE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS 34,321/- IN THE VALUE OF FRINGE BENEFIT EVEN THOUGH IT WAS NOT INCURRED ON THE EMPLOYEES OF THE ASSESSEE COMPANY. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED FRINGE BENEFIT TAX RETURN DECLARING RS 77,741/- AS VALUE OF FRINGE BENEFIT. THE ASSESSING OFFICER FOUND THAT SALES PROMOTION AND PUBLICITY, C ONVEYANCE, TOURS AND TRAVELLING EXPENSES, TELEPHONE AND OTHER ALLOWANCES AND MOTOR CAR EXPENSES ARE SPECIFICALLY INCLUDED FOR THE PURPOSES OF FRING E BENEFIT AND SPECIFIC ITA NO.3507/AHD/2010 ASMAN INVESTMENT LTD. VS. DCIT, R-1, AHD. FOR A.Y. 2006-07 - 2 - PERCENTAGE IS TREATED AS THE VALUE OF FRINGE BENEFI T. SINCE THE VALUE WAS TO BE DEEMED AS PER THE PROVISIONS OF THE ACT, THE ASS ESSING OFFICER ADDED THE VALUE OF FRINGE BENEFIT TAX NOT INCLUDED BY THE ASS ESSEE AND THEREBY ADDITION OF RS 64,516/- WAS MADE ON ACCOUNT OF THES E EXPENSES. 4. THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) TH AT CHARGE OF FRINGE BENEFIT TAX WAS LEVIED ON THE EMPLOYER IN RESPECT O F FRINGE BENEFIT PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES. THUS, ANY EXPENS ES WHICH HAD NOT DIRECTLY OR INDIRECTLY RESULTED INTO THE BENEFIT TO HIS EMPLOYEES WILL NOT BE COVERED BY THE PROVISIONS. THE ASSESSING OFFICER H AS TAXED THE EXPENSES WHICH HAVE NO NEXUS WITH EMPLOYEE. SINCE THE EXPEN SES INCURRED ARE NOT FOR THE BENEFIT OF EMPLOYEES, THERE SHOULD NOT BE A NY FRINGE BENEFIT TAX ON SUCH EXPENSES. IT WAS SUBMITTED THAT IN THE ACCOUN TS, THE EXPENSES MAY HAVE NOMENCLATURE OF EXPENSES SIMILAR TO THE ONE ME NTIONED FOR THE PURPOSE OF FRINGE BENEFIT TAX, BUT ONE HAS TO SEE W HETHER THERE IS ANY BENEFIT TO THE EMPLOYEE FROM SUCH EXPENSES. IT WAS MENTIONED THAT JURISDICTIONAL HIGH COURT HAS STAYED THE LEGALITY A ND VALIDITY OF CIRCULAR NO. 8/2005 ON FRINGE BENEFIT TAX ISSUED BY CBDT. THE H ONBLE HIGH COURT HAS DIRECTED THE PETITIONER AND OTHER SIMILAR ASSESSEES TO DEPOSIT THE DISPUTED FRINGE BENEFIT TAX LIABILITY IN A SEPARATE BANK ACC OUNT TO BE OPENED IN THE EMPLOYERS NAME. 5. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE OBSERVED THAT IT IS NOT IN DISPUTE THAT THE ASSESSE E IS COVERED BY THE PROVISIONS OF FRINGE BENEFIT TAX. HE OBSERVED THAT IT IS LEVIED IN RESPECT OF FRINGE BENEFIT PROVIDED OR DEEMED TO HAVE BEEN PROV IDED BY AN EMPLOYER TO HIS EMPLOYEES. HE OBSERVED THAT AS PER SECTION 115 WB(2), FRINGE BENEFIT IS DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES IF THE EMPLOYER HAD INCURRED ANY EXPENSES OR MADE ANY PAYM ENT FOR THE PURPOSES MENTIONED IN CLAUSE-A TO CLAUSE-Q. THE VALUE OF FR INGE BENEFIT IS TO BE ITA NO.3507/AHD/2010 ASMAN INVESTMENT LTD. VS. DCIT, R-1, AHD. FOR A.Y. 2006-07 - 3 - WORKED OUT BY APPLYING A PERCENTAGE GIVEN IN SECTIO N 115WC. THESE TWO SECTIONS DID NOT GIVE ANY DISCRETION OR COMPUTATION METHODOLOGY THROUGH WHICH THE BENEFITS ACCRUED ONLY TO EMPLOYEES ARE TO BE TAKEN. SINCE IT IS A DEEMING PROVISION AND VALUE OF FRINGE BENEFIT ARE A LSO DEEMED AT A PARTICULAR PERCENTAGE, THERE IS HARDLY ANY DISCRETI ON EITHER WITH THE ASSESSEE OR WITH THE INCOME TAX DEPARTMENT TO REDUCE THE LEV Y OF FRINGE BENEFIT TAX. SINCE THE PROVISION AND SECTIONS ARE VERY CLEAR AND THERE IS NO ROOM FOR ANY CONFUSION, THE LINKING OF EXPENSES TO THE BENEFIT O F EMPLOYEE IS NOT NECESSARY. ANY EXPENSE WHICH IS DIRECTLY INCURRED FOR THE PURPOSE OF EMPLOYEE IS FULLY TAKEN FOR THE PURPOSES OF FRINGE BENEFIT TAX. IN CASE OF OTHER EXPENSES IN THE NATURE OF ENTERTAINMENT, SALE S PROMOTION, CONVEYANCE, TRAVELLING, GIFTS ETC. WHICH MAY HAVE P ARTIAL BENEFIT TO THE EMPLOYEES, ONLY A PART IS TREATED AS FRINGE BENEFIT . SINCE THE SECTION CLEARLY DEFINED THE VALUE OF FRINGE BENEFIT, NO FURTHER ADJ USTMENT TO THE ITEMS OF EXPENSES DEBITED IN PROFIT AND LOSS ACCOUNT IS PERM ITTED AND ACCORDINGLY, THE ASSESSING OFFICER IS JUSTIFIED IN APPLYING RATES GI VEN IN THE ACT TO ARRIVE AT THE VALUE OF FRINGE BENEFIT. THE LD. CIT(A) HOWEVE R OBSERVED THAT THE ORDER OF THE HONBLE GUJARAT HIGH COURT DOES NOT PUT ANY STAY ON THE ASSESSMENT OR APPEAL PROCEEDING IN THIS MATTER. IT ONLY PRESC RIBES MODE OF PAYMENT OF FRINGE BENEFIT TAX TILL THE APPEAL IS DISPOSED OFF. SINCE THERE IS NO ORDER EITHER OF JURISDICTIONAL HIGH COURT OR OTHER COURT WHEREIN IT IS HELD THAT FRINGE BENEFIT TAX IS NOT PAYABLE IN RESPECT OF EXPENSES N OT INCURRED FOR THE PURPOSE OF EMPLOYEES BENEFIT, THEREFORE THE LD. CIT (A) OPINED THAT HE DID NOT FIND ANY LEGAL SUPPORT FOR THE ASSESSEES CONTE NTION AND CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 6. THE LD. AR OF THE ASSESSEE FILED DECISION OF THI S BENCH OF THE TRIBUNAL IN THE CASE OF ARVIND LIMITED VS. DCIT IN ITA NO. 3 148/AHD/2010 PASSED IN THE ASSESSMENT YEAR 2006-07 ORDER DATED 28.01.2014 AND SUBMITTED THAT THE TRIBUNAL HELD THAT THE HONBLE GUJARAT HIGH COU RT IN THE CASE OF GUJARAT ITA NO.3507/AHD/2010 ASMAN INVESTMENT LTD. VS. DCIT, R-1, AHD. FOR A.Y. 2006-07 - 4 - CHAMBER OF COMMERCE & INDUSTRY VS. UOI 148 TAXMANN 3 (GUJ.) HAS HELD THAT WHERE THE ASSESSEE ITSELF HAS DEPOSITED THE AM OUNT OF FRINGE BENEFIT TAX IN ESCROW ACCOUNT IN PURSUANCE OF THE DIRECTION OF THE HONBLE GUJARAT HIGH COURT, THE ASSESSING OFFICER IS DIRECTED TO VE RIFY WHETHER THE ASSESSEE DEPOSITED THE AMOUNT AS SUBMITTED AND DELETE THE AD DITION. IT WAS HIS SUBMISSION THAT IN THE PRESENT APPEAL ALSO, FACTS A RE IDENTICAL TO THAT IN THE CASE OF ARVIND LIMITED AND THEREFORE, FOLLOWING THE SAME, THE APPEAL OF THE ASSESSEE SHOULD BE ALLOWED. 7. LD. DR ON THE OTHER HAND RELIED ON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ICICI PRUDENTIAL LIF E INSURANCE COMPANY LTD. VS. ACIT (2013) 37 TAXMANN.COM 222 (MUM.) AND THE D ECISION OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF MAHIND RA HOLIDAYS AND RESORTS INDIA LIMITED VS. ACIT (2012) 25 TAXMANN.COM 147 (C HENNAI) AND SUBMITTED THAT THE TRIBUNAL HAS HELD THAT WHERE ASSESSEE-LIFE INSURANCE COMPANY INCURRED EXPENDITURE ON SALES PROMOTION, IN CENTIVES, CONFERENCE, TRAINING, RETRAINING AND SALES MATERIAL FOR AGENTS, WHO WERE NOT EMPLOYEES OF ASSESSEE, FRINGE BENEFIT TAX WAS PAYABLE ON SAME , EXCEPT ON PART INCURRED AS ORDINARY BUSINESS EXPENSES. 8. IN THE REJOINDER, THE LD. AR OF THE ASSESSEE SUB MITTED THAT THIS BENCH OF THE TRIBUNAL IN THE CASE OF ARVIND LIMITED (SUPR A) AFTER CONSIDERING THE DECISION IN THE CASE OF ICICI PRUDENTIAL LIFE INSUR ANCE CO. LTD. VS. ACIT (2013) 37 TAXMANN.COM 222 (ITAT-MUMBAI) D.O.J. 15.0 2.2013, MAHABIR JUTE MILLS LTD. VS. JCIT (2013) 36 TAXMANN.COM 587 (ITAT-ALLAHABAD) D.O.J. 12.04.2013, MAHINDRA HOLIDAYS AND RESORTS INDIA LTD . VS. ACIT (2012) 25 TAXMANN.COM 147 (ITAT-CHENNAI) AND BIRLA CORPORATIO N LTD. VS. DCIT (2012) 134 ITD 142 (ITAT-KOLKATA) D.O.J. 21.10.2011 , HAS HELD THAT NO ADDITION FOR VALUE OF FRINGE BENEFIT CAN BE MADE IF THE ASSESSEE HAS DEPOSITED THE AMOUNT OF FRINGE BENEFIT TAX IN ESCRO W ACCOUNT PURSUANT TO ITA NO.3507/AHD/2010 ASMAN INVESTMENT LTD. VS. DCIT, R-1, AHD. FOR A.Y. 2006-07 - 5 - THE DIRECTION OF THE HONBLE GUJARAT HIGH COURT. H ENCE, IT WAS HIS SUBMISSION THAT THE ISSUE WAS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF ARVIND LIMITED (SUPRA). HE ALSO RELIED ON THE DECISION OF THE HONBLE KARNA TAKA HIGH COURT IN THE CASE OF CIT VS. KARNATAKA POWER TRANSMISSION CORPOR ATION LIMITED ITA NO. 368/2011 ORDER DATED 07.02.2012 AND SUBMITTED THAT THE HONBLE HIGH COURT HAS HELD THAT THE CHARGE UNDER CHAPTER XII-H OF THE ACT IS ON THE VALUE OF THE FRINGE BENEFIT EXTENDED BY AN EMPLOYER TO ITS EMPLOYEES, UNLESS SUCH FRINGE BENEFITS ENJOYED IN THE HANDS OF THE EM PLOYEE IS QUANTIFIED, THERE IS NO QUESTION OF LEVYING FRINGE BENEFIT TAX ON THE EMPLOYER AT THE RATE OF 30% OF THE TAX LEVIED AND ENJOYED BY THE EM PLOYER. HE SUBMITTED THAT IN THE CASE OF THE ASSESSEE ALSO, THE FRINGE B ENEFIT ENJOYED IN THE HANDS OF THE EMPLOYEES WAS NOT QUANTIFIED IN RESPECT OF T HE EXPENSES INCURRED ON SALES PROMOTION AND PUBLICITY, CONVEYANCE, TOOLS AN D TRAVELLING EXPENSES, TELEPHONE AND OTHER ALLOWANCES AND MOTOR CAR EXPENS ES, AND THEREFORE, THERE WAS NO QUESTION OF LEVYING FRINGE BENEFIT TAX ON THE EMPLOYER. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER INCLUDED RS 64, 516/- IN THE FRINGE BENEFIT VALUE BEING EXPENDITURE INCURRED BY THE ASSESSEE ON DIWALI GIFTS RS 34,320/, TELEPHONE EXPENSE RS 25,016/- AND DEPRECIATION OF V EHICLES RS 5,180/-. 10. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 11. THE ASSESSEE DISPUTED THE ABOVE ADDITIONAL LEVY OF FRINGE BENEFIT TAX ON FRINGE BENEFITS OF RS 64,516/- ON THE GROUND THA T NO BENEFIT WAS CONFERRED UPON THE EMPLOYEES BY INCLUDING THE RELEV ANT BUSINESS EXPENDITURE. THE LD. AR POINTED OUT THAT THE SIMIL AR ISSUE WAS CHALLENGED ITA NO.3507/AHD/2010 ASMAN INVESTMENT LTD. VS. DCIT, R-1, AHD. FOR A.Y. 2006-07 - 6 - BEFORE THE HONBLE GUJARAT HIGH COURT IN THE CASE O F GUJARAT CHAMBER OF COMMERCE AND INDUSTRY VS. UOI (SUPRA) WHEREIN HONB LE HIGH COURT VIDE ITS INTERIM ORDER DATED 10.10.2005 HAS HELD AS UNDER: 2. FOR THE PURPOSES OF AD INTERIM RELIEF, THE LEA RNED COUNSEL HAS INVITED THE ATTENTION OF THE COURT TO THE SPEECHES MADE BY THE FINANCE MINISTER OF UNION OF INDIA AT VARIOUS STAGES. THEY HAVE ALSO SUBMITTED THAT, AS SUCH, THERE WOULD BE THREE CATEGORIES IN W HICH THE ASSESSEES WOULD BROADLY FALL; THE FIRST CATEGORY WHERE THEY A RE COVERED BY THE PROVISIONS OF THE FRINGE BENEFIT TAX, THE SECOND CA TEGORY WHERE THE CASE MAY BE GOVERNED PARTIALLY, AND THE THIRD CATEG ORY WHEREIN THE CIRCULAR SEEKS TO LEVY FRINGE BENEFIT TAX DESPITE T HE FACT THAT THE EMPLOYER IS NOT MAKING ANY PAYMENT TO ANY EMPLOYEE OR NOT INCURRING ANY EXPENDITURE FOR ANY EMPLOYEE SO AS TO ATTRACT F RINGE BENEFIT TAX. IT WAS, THEREFORE, SUBMITTED THAT SO FAR AS THE CAT EGORY NOS. 2 AND 3 ARE CONCERNED, THE ASSESSEES MUST BE PROTECTED, AND IN THE ALTERNATIVE, INSOFAR AS THE THIRD CATEGORY IS CONCE RNED, THERE SHOULD BE ABSOLUTE PROTECTION AND QUA THE SECOND CATEGORY, IF THE PETITIONERS, AND SIMILARLY SITUATED ASSESSEES ARE REQUIRED TO MA KE ANY PAYMENT, EACH INDIVIDUAL ASSESSEE MUST BE PERMITTED TO COMPU TE THE TAX ON ITS OWN IN LIGHT OF THE PRINCIPAL STATUTE AND NOT BE CO MPELLED TO PAY TAX AS STIPULATED BY THE IMPUGNED CIRCULAR BEING CIRCULAR NO. 8/2005, DATED 29-8-2005. 3. AT THIS JUNCTURE, IT IS NOT POSSIBLE TO PERMIT A NY SUCH SEGREGATION AS PROPOSED BY THE LEARNED COUNSEL. HOWEVER, IT WOU LD BE IN THE FITNESS OF THINGS IF THE PETITIONER AND SIMILARLY S ITUATED ASSESSEES ARE DIRECTED TO DEPOSIT THE AMOUNT OF FRINGE BENEFIT TA X AS PER INSTALLMENT DUE ON 15-1-2006 IN A SEPARATE ACCOUNT TO BE OPENED AND MAINTAINED WITH A SCHEDULED NATIONALIZED BANK, SUBJECT TO THE CONDITION THAT THE AMOUNT SO DEPOSITED SHALL NOT BE UTILIZED BY THE AS SESSEE IN ANY MANNER WHATSOEVER FOR ANY PURPOSE, NO CHARGE SHALL BE CREATED NOR SHALL THE SAID ACCOUNT BE USED OR PERMITTED TO BE U SED AS A COLLATERAL FOR OBTAINING ANY LOAN AGAINST THE SAME. UPON SUCH DEPOSIT BEING MADE IN SEPARATE BANK ACCOUNT AND PRODUCTION OF THE NECESSARY PROOF OF SUCH DEPOSIT BEFORE THE INCOME-TAX DEPARTMENT, I T SHALL AMOUNT TO SUFFICIENT COMPLIANCE QUA THE PROVISIONS OF THE ACT LEVYING FRINGE BENEFIT TAX. THE AFORESAID DEPOSIT SHALL BE ONLY IN CASE WHERE THE ASSESSEE DISPUTES THE LIABILITY TO THE EXTENT OF BE ING COVERED BY CATEGORY NO. 2 OR 3 AS PER THE SAY OF THE PETITIONE R. INSOFAR AS THE ASSESSEES WHO ARE COVERED AND FALL UNDER CATEGORY N O. 1 AND ARE NOT DISPUTING THEIR LIABILITY, THEY SHALL MAKE THE PAYM ENT OF THE FRINGE BENEFIT TAX WITH THE EXCHEQUER AS REQUIRED IN ACCOR DANCE WITH LAW. ITA NO.3507/AHD/2010 ASMAN INVESTMENT LTD. VS. DCIT, R-1, AHD. FOR A.Y. 2006-07 - 7 - THE LD. AR FURTHER CONTENDED THAT IN COMPLIANCE WIT H THE ABOVE DECISION OF THE HONBLE GUJARAT HIGH COURT, THE ASSESSEE HAS DE POSITED THE AMOUNT OF FRINGE BENEFIT TAX IN THE ESCROW ACCOUNT AS DIRECTE D BY THE HONBLE HIGH COURT. HE, THEREFORE, SUBMITTED THAT THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE ABOVE CASE SHOULD BE FOLLOWED IN THE INSTANT CASE ALSO. 12. THE LD. DR COULD NOT OBJECT TO FOLLOWING OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT ALSO IN THE CASE OF THE ASSESSEE . 13. THEREFORE, IN OUR CONSIDERED VIEW, THE ISSUE SH OULD BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTIO N TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE FINAL DECISION OF THE HONBLE G UJARAT HIGH COURT IN THE ABOVE CITED CASE. WE, THEREFORE, SET ASIDE THE ORD ERS OF THE LOWER AUTHORITIES AND RESTORE THE ISSUE BACK TO THE FILE OF THE HONBLE GUJARAT HIGH COURT IN THE ABOVE CITED CASE. 14. SINCE THE FINAL DECISION OF THE HONBLE GUJARAT HIGH COURT IS TO BE FOLLOWED IN THE INSTANT CASE, THE DECISIONS OF THE OTHER HIGH COURTS AND TRIBUNAL RELIED UPON BY BOTH THE PARTIES ARE NOT TO BE DISCUSSED HERE. THEREFORE, THIS GROUND OF APPEAL OF ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON WEDNESDAY THE 26 TH OF FEBRUARY, 2014 AT AHMEDABAD. SD/- SD/- (MUKUL KR. SHRAWAT) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 26/02/2014 GHANSHYAM MAURYA, SR. P.S.