LUPIN LTD, MUMBAI V. ASST CIT (LTU), MUMBAI

ITA 3568/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88306 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 28-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 07-05-2013
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Gift; Business expenditure
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO.6439/MUM/2011 ASSESSMENT YEAR: -2006-07 ITA NO.6440/MUM/2011 ASSESSMENT YEAR: -2007-08 LUPIN LIMITED 159, C.S.T. ROAD, KALINA SANTACRUZ (EAST), MUMBAI 400098. VS.` ASSISTANT COMMISSIONER OF INCOME TAX- LTU, CENTER NO. 1, WORLD TRADE CENTRE, 28 TH FLOOR, CUFFE PARADE, MUMBAI 400 005. PAN:-AAACL1069K APPELLANT RESPONDENT ITA NO.7104/MUM/2011 ASSESSMENT YEAR: -2008-09 LUPIN LIMITED 159, C.S.T. ROAD, KALINA SANTACRUZ (EAST), MUMBAI 400098. VS.` ADDITIONAL COMMISSIONER OF INCOME TAX-LTU, CENTER NO. 1, WORLD TRADE CENTRE, 29 TH FLOOR, CUFFE PARADE MUMBAI 400 005. PAN: - AAACL1069K APPELLANT RESPONDENT ITA NO.3568/MUM/2013 ASSESSMENT YEAR: -2009-10 LUPIN LIMITED 159, C.S.T. ROAD, KALINA SANTACRUZ (EAST), MUMBAI 400098. VS.` ASSISTANT COMMISSIONER OF INCOME TAX- LTU, CENTER NO. 1, WORLD TRADE CENTRE, 28 TH FLOOR, CUFFE PARADE, MUMBAI 400 005. 005. PAN:-AAACL1069K APPELLANT RESPONDENT ASSESSEE BY SHRI RAJAN VORA & SHRI HEMEN CHANDARIYA REVENUE BY SHRI LOVE KUMAR DATE OF HEARING 29.01.2015 DATE OF PRONOUNCEMENT 20.02.2015 LUPIN LIMITED 2 | P A G E ORDER PER BENCH THESE FOUR APPEALS BY THE ASSESSEE ARE DIRECTED AGAIN ST THE FOUR SEPARATE ORDERS OF CIT(A) ARISING FROM ASSESSMENT ORDER PASSED U/S 115WE(3) FOR A.Y. 2006-07 TO 2009-10 RESPECTIVELY. SINCE COMMON GROU NDS INVOLVED IN ALL THE FOUR YEARS, THEREFORE, ALL THESE APPEALS OF THE ASS ESSEE ARE CLUBBED TOGETHER FOR THE SAKE OF CONVENIENCE OF HEARING AND ACCORDINGLY BE ING DISPOSED OFF BY THIS COMPOSITE ORDER. FOR THE A.Y. 2006-07, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS. THE APPELLANT OBJECTS TO THE ORDER DATED 20 JULY 2 011 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)24, ON THE FOLLOWING AMONG OTHER GROUNDS: 1. THE LEARNED COMMISSIONER (APPEALS) ERRED IN THE CONFIRMING THE ADDITION OF AN AMOUNT OF RS. 14,76,41,747 TO THE VALUE OF FRING E BENEFITS. 2. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONF IRMING THE ACTION OF THE ASSESSING OFFICER IN CONSIDERING THE ENTIRE AMOUNT OF BUSINESS EXPENDITURE INCURRED UNDER CLAUSE (A) TO (P) OF SECTION 115WB(2 ) FOR COMPUTING THE VALUE OF FRINGE BENEFITS. 3. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECIATED THAT ONLY THOSE SPECIFIED EXPENSES WHICH RESULTED IN DIRECT O R INDIRECT BENEFIT TO THE EMPLOYEES OUGHT TO BE CONSIDERED FOR COMPUTATION OF THE VALUE OF FRINGE BENEFITS. 2. GROUND NOS. 1 TO 3 ARE REGARDING THE ADDITION OF AMOUNT OF RS. 14.76 CRORE TO THE VALUE OF FRINGE BENEFIT. THE ASSESSEE IN THIS CASE IS ENGAGED IN THE BUSINESS OF MANUFACTURING & TRADING OF PHARMACEUTICA L PRODUCTS. THE ASSESSEE FILED ITS RETURN OF FBT INCOME, DECLARING TOTAL VALU E OF FRINGE BENEFITS OF RS. 12,04,80,016/-. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, THE ASSESSING LUPIN LIMITED 3 | P A G E OFFICER NOTED THAT IN CASE OF SOME EXPENSES, THE ASS ESSEE HAD TAKEN ONLY THE EXPENSES PERTAINING TO EMPLOYEES FOR FBT CONSIDERATI ON. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY FBT SHOULD N OT BE CHARGED ON TOTAL EXPENSES EVEN WHEN THEY ARE PURE BUSINESS EXPENSES AND AS PER ASSESSEE, DO NOT PERTAIN TO THE EMPLOYEES OR THERE IS NO DIRECT O R INDIRECT BENEFIT TO THE EMPLOYEES OR INVOLVEMENT OF EMPLOYEES. IN RESPONSE , THE ASSESSEE SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 115WA(1) R.W. S 115WB(1) OF THE INCOME TAX ACT, FBT IS CHARGEABLE ONLY ON THOSE EXPENSES W HICH ARE INCURRED UNDER SPECIFIED HEADS FOR THE EMPLOYEES ALONE AND THUS, PU RE BUSINESS EXPENSES, WHERE THERE IS NO EMPLOYEE INVOLVEMENT, CANNOT BE C HARGED TO FBT DESPITE THE DEEMING PROVISIONS OF SEC. 115WB(2). IN SUPPORT OF ITS CONTENTION, THE ASSESSEE HAS REFERRED THE FINANCE MINISTERS SPEECH IN THE PARLIAMENT WHILE INTRODUCING THE FINANCE BILL 2005 AND EXPLANATORY M EMORANDUM EXPLAINING THE PROVISIONS OF FINANCE BILL 2005. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND PLACED RELIANCE ON CBD T CIRCULAR NO. 8/2005 DATED 29/08/2005 AND ACCORDINGLY HELD THAT ONCE THE EM PLOYER HAS INCURRED THE EXPENSES MENTIONED UNDER FBT SECTIONS, THEN SEGRE GATION INTO OFFICIAL AND PERSONAL PURPOSES WILL NOT BE DONE. ACCORDINGLY, THE ASSESSING OFFICER MADE THE ADDITION IN THE VALUE OF FBT OF RS 14 ,76,41,747/-. THE ASSESSEE CHALLENGED THE ACTION OF ASSESSING OFFICER BEFORE TH E CIT(A) BUT COULD NOT SUCCEED. 3. BEFORE US THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THE APPELLANT HAS INCURRED THE EXPENSE S IN QUESTION FOR PURE BUSINESS PURPOSES ON NON-EMPLOYEES AND ALSO, DOES NOT RESULT IN ANY COLLECTIVE BENEFIT, EITHER DIRECTLY OR INDIRECTLY, TO THE EMPLOY EES. HE HAS REFERRED THE LUPIN LIMITED 4 | P A G E ASSESSMENT ORDER AND IMPUGNED ORDER OF CIT(A) AND SUBMI TTED THAT THIS FACT HAS NOT BEEN DISPUTED BY THE AUTHORITIES BELOW THAT THE EXPENDITURE IN QUESTION WAS NOT FOR THE PURPOSE OF EMPLOYEES OF TH E ASSESSEE BUT FOR THE PURPOSE OF BUSINESS. THE LD. AUTHORIZED REPRESENTATIV E HAS SUBMITTED THAT AS PER THE PROVISIONS OF CHAPTER XII-H OF THE ACT, FBT IS APPLICABLE ON VALUE OF FRINGE BENEFITS PROVIDED OR DEEMED TO HAVE BEEN PROVIDE D BY THE EMPLOYER TO THE EMPLOYEES. THEREFORE, THE EXPENDITURE INCURRED FOR PURE BUSINESS PURPOSE ON NON-EMPLOYEES CANNOT BE INCLUDED IN THE VALUE OF F BT. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE JUDGMENT OF HONBL E DELHI HIGH COURT IN THE CASE OF T.T. MOTORS VS. ACIT ( 341 ITR 332) AND SUBM ITTED THAT THE HONBLE HIGH COURT AFTER CONSIDERING THE PROVISIONS OF SECTI ON 115WD(2)(D) HELD THAT LEGISLATURE HAS EXCLUDED FROM FBT EXPENDITURE IN THE F ORM OF PAYMENT TO THIRD PERSON. SUCH EXPENDITURE IS NOT FRINGE BENEFIT WHICH IS NOT ENJOYED BY THE EMPLOYEE/RECIPIENTS BUT IT IS AN EXPENDITURE INCURRE D FOR THE PURPOSE OF BUSINESS AND THE PAYMENT IS INCOME EARNED BY THE THI RD PARTY. HE HAS ALSO RELIED UPON THE FOLLOWING DECISIONS:- (I) DCIT VS. KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE L TD (134 ITD 388) (II) TOYOTA KIRLOSKAR MOTOR (P) LTD VS. ACIT (54 SOT 70) (III) TML DRIVERS LTD. VS. ACIT ( IN ITA NO. 6294/MUM/20 10) (IV) TETRA PAK INDIA PVT LTD VS. ACIT (150 ITD 175) (V) T&T MOTORS VS. ACIT ( 341 ITR 332) (VI) ACIT VS. TATA MOTORS LTD. ( ITA NO. 8297/MUM/2011) (VII) INTERVALVE (INDIA) LTD VS ACIT (149 TTJ 365) 4. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE O RDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THE PROVISIONS OF SECTION 11 5WB(2) IS THE DEEMING PROVISIONS WHICH INCLUDES IN ITS AMBIT THE EXPENDITUR E WHICH IS STIPULATED IN THE CIRCULAR NO. 08/2005. LUPIN LIMITED 5 | P A G E 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS NOT DISPUTED THE F ACT THAT THE EXPENDITURE IN QUESTION WAS INCURRED BY THE ASSESSEE FOR THE PURPO SE OF ITS BUSINESS AND HAS NO DIRECT OR INDIRECT NEXUS WITH THE BENEFIT TO THE EMPLOYEES OF THE ASSESSEE. THE DETAILS OF THE EXPENDITURE WHICH IS NOT RELATED TO THE EMPLOYEE BUT RELATED TO THE BUSINESS EXPENSES HAS BEEN GIVEN Y THE ASSES SING OFFICER IN THE ANNEXURE 1 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER HAS GIVEN THE DETAILS ON WHICH THE ASSESSING OFFICER HAS CHARGED THE FBT. AS PER TH E DETAILS GIVEN IN ANNEXURE 1, THE EXPENSES WERE UNDER THE HEAD SALES PROMOTION E XPENSES WHICH ARE ADDED BY THE ASSESSING OFFICER TO THE VALUE OF FBT C OMPRISING OF GIFTS, BUSINESS DEVELOPMENT/CUSTOMERS, TRAVEL, HOTEL, SAMPLES TO DOCT ORS, DELIVERY COST ON SAMPLES, CONFERENCES ETC. ALL THESE EXPENSES WERE I NCURRED UNDER THE HEAD SALES AND PROMOTION EXPENSES. THE ASSESSING OFFIC ER HAS REFERRED THE PROVISIONS OF SECTION 115WB(2)(C)(D)(F)(G) AND (O) FOR THE PURPOSE OF BRINING THE SAID SALES PROMOTION EXPENSES UNDER THE AMBIT O F FBT. THE HONBLE DELHI HIGH COURT IN THE CASE OF T&T MOTORS VS. ACIT (SUPR A) WHILE CONSIDERING THE ISSUE OF ADDITION OF SALES PROMOTION EXPENSES INCLUD ING PUBLICITY IN THE VALUE OF FRINGE BENEFIT HAS OBSERVED IN PARA 16 AND 17 AS UNDE R:- 16. THE OBJECT AND PURPOSE BEHIND FBT AND SECTION 115WB(2)(D) IS DIFFERENT FROM SECTION 37(3A). EXPENDITURE INCURRED AS STIPUL ATED IN CLAUSE (I) TO (VIII) HAVE TO BE EXCLUDED AND NOT TO BE TREATED AS SALES PROMOTION EXPENDITURE INCLUDING PUBLICITY. CLAUSE (VII) TO SECTION 115WB( 2)(D) EXPRESSLY STIPULATES THAT EXPENDITURE ON DISTRIBUTION OF SAMPLE EITHER FREE O F COST OR AT CONCESSIONAL RATE IS NOT SALES PROMOTION OR PUBLICITY FOR FBT. 17. A CAREFUL READING OF CLAUSE (I), (II), (IV), (V ), (VI) AND (VIII) OF SECTION 115WB(2)(D) ELUCIDATES THAT THE LEGISLATURE HAS EXC LUDED FROM FBT EXPENDITURE IN FORM OF PAYMENTS TO THIRD PERSONS. THE EXEMPTION IN THESE CLAUSES, IT IS APPARENT, HAS BEEN GRANTED BECAUSE THIS IS NOT A FR INGE BENEFIT WHICH IS ENJOYED LUPIN LIMITED 6 | P A G E BY THE 'EMPLOYEE/RECIPIENT' BUT IT IS AN EXPENDITUR E INCURRED FOR THE PURPOSE OF BUSINESS AND THE PAYMENT IS INCOME EARNED BY THE TH IRD PARTY. IN THE HANDS OF THE SAID RECIPIENT THE EXPENDITURE IS TAXABLE AS IN COME EARNED. 6. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF TH E CASE, AND BY FOLLOWING THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF T&T MOTORS VS. ACIT (SUPRA), WE SET ASIDE THE ORDERS OF AUTHORITIES BELO W ON THIS ISSUE AND DELETE THE ADDITION MADE BY ASSESSING OFFICER. 7. THE ASSESSEE HAS ALSO RAISED ADDITIOAL GROUNDS WHI CH READS AS UNDER:- THE APPELLANT FURTHER OBJECTS TO THE ORDER DATED 2 0 JULY 2011 PASSED BY THE COMMISSIONER OFINCOMETAX (APPEALS)24, MUMBAI, ON THE FOLLOWING GROUND: 1. THE APPELLANT SUBMITS THAT THE MEDICAL EXPENDITU RE OF RS. 4,26,04,363 REIMBURSED TO THE EMPLOYEES, WAS PERQUISITE WITHIN THE MEANING OF SECTION 17(2) AND THEREFORE NOT LIABLE FOR FRINGE BENEFIT TAX. 8. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSI DERED THE RELEVANT MATERIAL ON RECORD. THOUGH THE ASSESSEE PAID FBT ON REIMBURSEMENT OF MEDICAL EXPENSES TO ITS EMPLOYEES IN THE RETURN OF F RINGE BENEFIT, HOWEVER, THE ASSESSEE HAS SUBMITTED THAT MEDICAL EXPENSES ARE DIRE CTLY ATTRIBUTABLE TO EACH EMPLOYEE DISTINCTLY AND IT IS NOT IN THE NATURE OF CO LLECTIVE BENEFIT ENJOYED BY THE EMPLOYEES. FURTHER THE MEDICAL REIMBURSEMENT IS PERQUISITE AS PER SECTION 17(2) OF THE ACT AND, THEREFORE, IS TREATED AS INCOM E OF THE EMPLOYEE. THEREFORE, IN VIEW OF THE VARIOUS DECISIONS OF THIS TRIBUNAL, THE ASSESSEE PRAYED FOR ADMISSION OF ADDITIONAL GROUNDS. THE ASSESSEE HAS RELIED UPON THE FOLLOWING DECISIONS:- (I) GODREJ PROPERTIES LTD VS. ACIT ( ITA NO. 840/MUM/20 10) (II) GRASIM INDUSTRIES LTD VS. ACIT ( 135 TTJ 426) (III) GRINDWELL NORTON LTD VS. ACIT ( ITA NO. 6551/MUM/201 1) LUPIN LIMITED 7 | P A G E 9. ON THE OTHER HAND, THE LD. DR HAS OBJECTED THE ADM ISSION OF ADDITIONAL GROUNDS OF THE ASSESSEE. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. THOUGH THE ASSESSEE HAS PAID FBT ON THE MEDI CAL REIMBURSEMENT, HOWEVER, IT IS UNDISPUTED PROPOSITION OF LAW THAT ME DICAL REIMBURSEMENT TO THE EMPLOYEES IS INCOME IN THE HANDS OF THE EMPLOYEE S AS PER SECTION 17(2) OF THE ACT BEING PERQUISITE. THEREFORE, ONCE THE AMOUN T PAID TO THE EMPLOYEE IS TREATED AS INCOME IN THE HANDS OF THE EMPLOYEES THEN THE SAME CANNOT BE REGARDED AS FRINGE BENEFIT UNDER THE PROVISIONS OF SEC TION 115WB OF THE INCOME TAX ACT. WE FIND THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY THE MUMBAI BENCHES OF THIS TRIBUNAL IN THE CASE OF ACIT VS. M/S EXCEL INDUSTRIES LTD. IN ITA NO. (5381/MUM/2012) V IDE ORDER DATED 14.11.2014. THE RELEVANT FINDING OF THE TRIBUNALS OR DER IS AS UNDER - 3. WE HAVE HEARD THE LD. DR AS WELL AS LD. AUTHORI ZED REPRESENTATIVE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT THIS ISSUE IS COVERED BY TH E SERIES OF DECISIONS OF THIS TRIBUNAL. THE CIT(A) HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF CHANDIGARH BE NCHES OF THIS TRIBUNAL IN THE CASE OF SWARAJ ENGINES LTD. VS. DCI T IN PARA 3 AS UNDER:- 3. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT , ORDER OF THE A.O. AND FACTS OF THE CASE, IT IS NOTICED THAT THIS ISSUE HAS BEEN DECIDED IN THE CASE OF THE ASSESSEE FOR A.Y. 20 08-09 BY LD. CIT(A)-36, MUMBAI BY HOLDING AS UNDER: RECENTLY, THE HONBLE ITAT, A BENCH, CHANDIGARH IN THE CASE OF SWARAJ ENGINES LTD. VS. DCIT CIRCLE 6(1) ITA NO. (1123/CHD/2010) VIDE ORDER DATED JUNE 21, 2011 FOR A.Y. 2006- 07 DECIDED AS UNDER: LUPIN LIMITED 8 | P A G E 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE REC ORD. UNDER CHAPTER XII-H OF THE INCOME-TAX ACT, VIDE SECTI ON 115WA IT HAS BEEN PROVIDED THAT IN ADDITION TO THE INC OME TAX CHARGED UNDER THE ACT, FOR EVERY ASSESSMENT YEAR COMMENCING ON OR AFTER 1.4.2006 ADDITIONAL INCOME T AX, REFERRED TO AS FBT IN RESPECT OF FRINGE BENEFITS PR OVIDED OR DEEMED TO HAVE BEEN PROVIDED BY AN EMPLOYER TO HIS EMPLOYEES, DURING THE PREVIOUS YEAR, IS TO BE CHARGED TO TAX @ 30% ON THE VALUE OF SUCH FRINGE BENEFITS. THE SAID F RINGE BENEFIT T AX IS TO BE PAID B Y THE EMPLOYER IRRESPEC TIVE OF THE FACT WHETHER ANY INCOME TAX IS PAYABLE B Y AN EMP LOYER ON HIS TOTAL INCOME. UNDER SECTION 115WB OF THE ACT FRINGE BENEFITS IS DEFINED. UNDER SECTION 115WB(2 )(E), THE EXPENDITURE INCURRED ON EMPLOYEES WELFARE IS A FRINGE BENEFIT. AS PER THE EXPLANATION, ANY EXPENDITURE INC URRED OR PAYMENT MADE, TO FULFILL ANY STATUTORY OBLIGATIO N OR MITIGATE OCCUPATIONAL HAZARDS OR PROVIDE FIRST AID F ACILITIES IN THE HOSPITAL OR DISPENSARY RUN BY THE EMPLOYER, SHAL L NOT BE CONSIDERED AS AN EXPENDITURE FOR EMPLOYEES WELF ARE. SECTION 115WB(3) OF THE ACT PRESCRIBES THAT PERQUISIT E IN RESPECT OF WHICH TAX IS PAYABLE OR PAID BY EMPLOYEE W OULD NOT BE FRINGE BENEFIT UNDER SUB-SECTION (1) TO SECTI ON 115WB OF THE ACT. 7. UNDER SECTION 17 OF THE ACT, SALARY, PERQUISITE AND PROFITS IN LIEU OF SALARY ARE DEFINED. AS PER SECTI ON 17(1) OF THE ACT, SALARY INCLUDES WAGES, ANNUITY, PENSION, GRAT UITY, AN Y FEES, COMMISSION, PERQUISITES OR PROFITS IN LI EU OF OR IN ADDITION TO ANY SALARY OR WAGES, ETC. UNDER SECTION 17(2), PERQUISITE IS DEFINED. ONE SUCH PERQUISITE IS THE AMO UNT PAID BY THE EMPLOYEE IN RESPECT OF EXPENDITURE ON ME DICAL EXPENSES. THE FRINGE BENEFIT TAX IS NOT APPLICABLE W HERE, AMOUNT GIVEN BY THE EMPLOYER TO THE EMPLOYEE IS INCLUDIBLE WITHIN THE MEANING OF SALARY AS DEFINED U/ S 17(1) OF THE ACT. PROVISO TO SECTION 17(2) OF THE PROVIDES THAT CERTAIN SUMS SHALL NOT BE INCLUDED AS PERQUISITE IN THE HANDS OF THE EMPLOYEES. AS PER CL AUSE (V) OF THE PROV ISO TO SECTION 17(2) OF THE ACT, ANY SUM PAID BY THE EMPLOY ER IN RESPECT OF AN Y EXPENDITURE INCURRED BY THE EMPLOYEE ON HIS MEDICAL TREATMENT OR OF HIS FAMILY, WHERE SUCH SUM LUPIN LIMITED 9 | P A G E DOES NOT EXCEED RS.15000/- IN THE PREVIOUS YEAR, IS NOT A PERQUISITE. IN VIEW OF THE PROVISO (V) TO SECTION 17 (2) OF THE ACT, THE MEDICAL REIMBURSEMENT BY EMPLOYER TO HIS EMPLOYEES TO THE EXTENT OF RS.15,000/- IS NOT TO BE INCLUDED IN THE HANDS OF THE EMPLOYEES AS PART OF ITS SALARY. HOWEVER, ANY EXPENDITURE INCURRED ABOVE RS.15000/- REIMBURSED TO ANY EMPLOYE E, IS TO BE INCLUDED IN T HE HANDS OF THE EMPLOYEE AS PART OF HIS SALARY. THE SAID POSITION HAS BEEN CLARIFIED BY THE CBDT CIRCULAR NO.8 OF 2005 DATED 29.08.2005 IN ANSWER TO QUESTION NO.47, 48 AND 69. THE SAID QUESTIONS AND ANSWERS TO THE SAME AR E INCORPORATED AT PAGES 8 & 9 OF THE APPELLATE ORDER. IN REPLY TO QUESTION NO.47, IT HAS BEEN CLARIFIED THAT THE ALLO WANCES FALLING WITHIN THE MEANING OF SALAR Y AS DEFINED IN S ECTION 17(1) OF THE INCOME-TAX ACT AND ANY EXPENDITURE INCU RRED FOR THE PURPOSE OF SALARY, DOES NOT FALL WITHIN THE SC OPE OF SECTION 115WB(2) OF THE ACT. IN RESPONSE TO QUESTION NO.69 WHICH RELATED TO THE MEDICAL REIMBURSEMENT UPTO RS.15000/- AND MEDICAL REIMBURSEMENT OVER RS.15000/ -, WHETHER BEING LIABLE TO FBT, IT IS OBSERVED THAT WHERE A N Y SUM IS PAID BY THE EMPLOYER FOR EXPENDITURE INCURRED BY THE EMPLOYEE FOR MEDICAL TREATMENT IN AN UNAPPROVED HOSPITAL, WHICH EXCEEDS RS.15000/- DURING THE YEAR, S UCH SUM IS SALARY AS PER SECTION 17(1) OF THE ACT AND L IABLE TO INCOME TAX IN THE HANDS OF THE EMPLOYEE. SUCH SUM ONCE TAXABLE IN THE HANDS OF THE EMPLOYEE, THE SAME WAS NOT LIABLE TO FBT. HOWEVER, THE SUM PAID BY THE EMPLOYER FOR EXPENDITURE ACTUALLY INCURRED BY THE EMPLOYEE FOR ME DICAL TREATMENT IN AN UNAPPROVED HOSPITAL, NOT EXCEEDING RS.15000/- DURING THE YEAR, DOES NOT FALL WITHIN THE MEANING OF PERQUISITE U/S 17(1) OF THE ACT AND NOT L IABLE TO INCOME TAX IN THE HANDS OF THE EMPLOYEES, IS LIABLE T O FBT AS IT IS NOT TAXABLE IN THE HANDS OF THE EMPLOYEES. 8. UNDER THE PROVISIONS OF SECTION 17(2) OF THE ACT, REIMBURSEMENT OF EXPENDITURE INCURRED BY EMPLOYEE O N MEDICAL TREATMENT OF SELF OR FAMILY EXCEEDING RS.150 00/- IS TO BE INCLUDED IN HIS HANDS AS PERQUISITE, WHICH IN T URN IS PART OF SALARY OF THE EMPLOYEE FOR THE FINANCIAL YEA R. THE EMPLOYEE IS ENTITLED TO DEDUCTION UPTO RS.15000/- A ND THE BALANCE IS INCLUDIBLE IN THE SALARY. THE COMPUTATION OF THE PERQUISITE VALUE IN THE HANDS OF THE EMPLOYEE IS LUPIN LIMITED 10 | P A G E DETERMINED BY THE EXTENT OF EXPENDITURE I.E. WHERE TH E TOTAL EXPENDITURE EXCEEDS RS.15000/- IN THE PREVIOUS YEAR. MERELY BECAUSE PART OF SUCH MEDICAL EXPENDITURE I.E. UPTO RS.15000/- IS NOT EXIGIBLE TO TAX IN THE HANDS OF THE EMPLOYEE, BECAUSE OF THE PROVISIONS OF THE ACT, DOES NOT CHANGE ITS NATURE I.E. PERQUISITE PAID TO THE EMPLOYE E. IN VIEW OF THE PROVISIONS OF SECTION 115WB(3), SUCH SUMS PAID BY EMPLOYER, WHICH ARE INCLUDIBLE IN THE HANDS OF EMPLOYEE AS ITS INCOME ARE NOT COVERED BY THE DEFINI TION OF FRINGE BENEFIT AND NO FBT IS CHARGEABLE ON THE SAME. W E, THUS SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE AO T O EXCLUDE THE SUM OF RS.711,488/- FROM THE PURVIEW OF F BT TAX. THE GROUND OF APPEAL 1 & 2 IS ALLOWED. 4. WE FURTHER NOTE THAT THIS ISSUE HAS ALREADY BEEN DECIDED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2008-0 9 IN ITA NO. 8277/MUM/2011 IN PARA 8 AND 9 AS UNDER:- WE HAVE HEARD THE ARGUMENTS OF THE PARTIES AND HAV E PERUSED THE ORDERS. THE FACTUM OF PERQUISITE TO THE EMPLOYEE IS NOT IN DISPUTE. IT IS ALSO ACCEPTED BY THE ASSESSING OFFICER THAT THE PERQUISITE VALUE IS TAXE D IN THE HANDS OF THE EMPLOYEE. THE ASSESSING OFFICER HAS TA RGETED THE VALUE OF PERQUISITE WHICH IS CLAIMED AS DEDUCTI ON BY THE EMPLOYEES IN THIS RETURN AND HAS FORMED AN OPIN ION THAT, THAT VALUE BECOMES FRINGE BENEFIT AND WOULD C OME UNDER THE PURVIEW OF SECTION 115WB(3) IN THE HANDS OF THE EMPLOYER COMPANY. THIS ARGUMENT, WE CANNOT ACCEPT. WE ALSO FIND THAT SIMILAR VIEW WAS TAKEN BY THE COORDI NATE BENCHES AS CITED BY THE CIT(A), WHILE GIVING RELIEF TO THE ASSESSEE. ON GOING THROUGH THE FACTS AND THE CASES AS CITED B EFORE THE CIT(A) AND BEFORE US, WE RESPECTFULLY FOLLOW TH E CASES AND DO NOT FIND ANY REASON TO INTERFERE WITH THE OR DER OF THE CIT(A), WHICH WE SUSTAIN. HENCE THE GROUNDS OF APPEAL AS FILED BY THE DEPARTMENT IS REJECTED. 5. IN VIEW OF THE DECISION OF THIS TRIBUNAL INCLUDI NG THE DECISION IN THE ASSESSEES OWN CASE FOR A.Y. 2008-09 (SUPRA), W E DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF CIT(A) QUA THIS ISSUE. LUPIN LIMITED 11 | P A G E 11. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF T HE CASE AND IN THE INTEREST OF JUSTICE, WE ADMIT THE ISSUE RAISED IN ADDITIONAL GRO UNDS AND REMIT THE SAME TO THE RECORD OF ASSESSING OFFICER TO CONSIDER AND DEC IDE THE SAME IN THE LIGHT OF VARIOUS DECISIONS AS RELIED UPON BY THE ASSESSEE. 12. FOR THE A.Y. 2007-8 TO 2009-10, THE ASSESSEE H AS RAISED IDENTICAL GROUNDS AS RAISED FOR A.Y. 2006-07. THE ONLY DIFFERENCE IS T HAT FOR A.Y. 2009-10, THE ASSESSEE HAS RAISED THE ADDITIONAL GROUND REGARDING FRI NGE BENEFIT IN RESPECT OF MEDICAL REIMBURSEMENT BEFORE THE CIT(A) WHICH WAS DIS MISSED BY THE CIT(A). IN VIEW OF OUR FINDING ON THE MAIN GROUND AS WELL A S ADDITIONAL GROUND FOR A.Y. 2006-07, THE MAIN GROUNDS RAISED FOR A.Y. 2007-08, 2 008-09 ARE ALLOWED AND GROUND NO. 1 TO 3 OF THE A.Y. 2009-10 ARE ALLOWED WHE REAS, THE ADDITIONAL GROUND RAISED FOR A.Y. 2007-08 AND 2008-09 AND GROUND N O. 4 OF A.Y. 2009-10 ARE SET ASIDE TO THE RECORD OF ASSESSING OFFICER WIT H THE SAME DIRECTION AS GIVEN FOR THE A.Y. 2006-07. 13. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUCNED IN THE OPEN COURT ON THIS 20 TH DAY OF FEBRUARY 2015. SD/- SD/- ( SANJAY ARORA ) (VIJAY PAL RAO) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 20-02-2015 SKS SR. P.S, LUPIN LIMITED 12 | P A G E COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI