ACIT, Bangalore V. Late Shri. L. Sohanraj, Bangalore

ITA 47/BANG/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63772 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 1991-1992
• Appeal Filed On: 12-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K AMBASTHA CITI
• Assessee Lawyers: SIDDAREDDY
• Keywords: Gift

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE A BENCH, BANGALORE BEFORE SHRI N. BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI N.V.VASUDEVAN, JUDICIAL MEMBER M.P.NO.47/BANG/2012 (IN I.T.A.NO.1432(B)/2010 (ASSESSMENT YEAR : 2007-08) THE HUTTI GOLD MINES CO.,LTD., THE ADDL. COMMISSIONER INCOME-TAX, 3 RD FLOOR, KHB SHOPPING COMPLEX, RANGE-12, BANGALORE NATIONAL GAMES VILLAGE, KORAMANGLA, BANGALORE VS. PAN NO.AAAAB7055P APPELLANT RESPONDENT ASSESEEE BY : SHRI SIDDA REDDY, ADVOCATE REVENUE BY : SHRI S.K.AMBASTHA, CIT-I DATE OF HEARING : 05-10-2012 DATE OF PRONOUNCEMENT : 05-10-2012 O R D E R PER SHRI N.V.VASUDEVAN, JM. THIS IS A MISCELLANEOUS FILED BY THE ASSESSEE U/S.254(2) OF TH E INCOME TAX ACT, 1961 PRAYING FOR RECTIFICATION OF CERTAIN A PPARENT ERRORS IN THE ORDER OF THIS TRIBUNAL DATED 22.6.2012 IN ITA NO.1432. 2. THE ABOVE APPEAL BY THE ASSESSEE WAS AGAINST THE O RDER OF CIT(A)-III, BANGALORE DATED 12-10-2010 RELATING TO AY: 2007-08 ARISIN G UNDER THE PROVISIONS OF SEC.115WE(3) OF THE ACT. IN GROUND NO. 4 AND 5, THE ASSESSEE HAD CHALLENGED THE ACTION OF THE REVENUE AUTHO RITIES IN TREATING SUVARNA KARNATAKA EXPENSES INCURRED BY THE ASSESSEE AS A FRIN GE BENEFIT UNDER THE HEAD FESTIVAL CELEBERATIONS AND INCLUDING 50% OF T HE EXPENSES SO INCURRED AS VALUE OF FRINGE BENEFIT AS AGAINST THE CLAIM O F THE ASSESSEE M.P.NO.47(B)/2012 2 THAT THESE EXPENSES WERE IN THE NATURE OF EMPLOYEE WELFA RE EXPENSES AND THEREFORE ONLY 20% OF THE EXPENSES INCURRED SHOULD BE C ONSIDERED AS VALUE OF FRINGE BENEFIT. 3. THE TRIBUNAL IN THE ORDER DATED 22.6.2012, DEALT WITH T HE ABOVE ISSUE IN PARA-13 AND 14 OF ITS ORDER WHICH READS THUS: 13. AS FAR AS GROUND NO.4 AND 5 ARE CONCERNED, THE FACT S ARE THAT THE ASSESSEE INCURRED EXPENDITURE OF RS.19,22,391/- ON T HE OCCASION OF SUVARNA KARNATAKA RAJYOTSAVA DAY CELEBRAT ION. THE SAME WAS TAXED AS FRINGE BENEFIT BEING EXPENDITURE INCURRE D BY EMPLOYER ON EMPLOYEES ON THE OCCASION OF FESTIVAL. (SEE SEC.115WB(2)(L)). THE ASSESSEE EXPLAINED BEFORE US THAT SURVA RNA KARNATKA RAJYOTSAVA DAY CELEBRATION WAS THE DAY ON WH ICH KANNADA SPEAKING PEOPLE WERE BROUGHT TOGETHER, 50 YEAR S AGO IN 1956 AND THE UNIFICATION OF THE KARNATAKA STATE CAME ABO UT. THIS WAS THE OCCASION OF THE 50TH YEAR OF THE FORMATION OF THE KARNATAKA AS A SEPARATE STATE. THIS IS THE DAY WHEN KANNADA SPE AKING PEOPLE REJOICE THEIR LANGUAGE, CULTURE AND THEIR ACHIEVEMENTS DU RING THE LAST 50 YEARS. THE ABOVE EXPENDITURE INCLUDES AN ITEM OF RS.1064018/- SPENT ON PROVIDING 'HOT CASES' TO THE EMP LOYEES. RAJYOTSAVA WAS CHOSEN ONLY AS AN OCCASION TO GIVE THE SE HOT CASES. RAJYOTSAVA IS NOT A FESTIVAL IN THE SENSE IN WHICH THE SEC TION USES IT. 'FESTIVAL' MEANS A DAY ON WHICH DEPENDING UPON THE RE LIGIOUS DENOMINATIONS OCCASIONS ARISE CONNECTED WITH RELIGIONS AND ITS PROPHETS. SUVARNA RAJYOSTSAVA WHICH IS THE ATTAINMENT O F A PERIOD IN CONNECTION WITH THE FORMATION OF A STATE CANNOT BE CALLE D AS 'FESTIVAL'. HENCE, INVOKING THAT CLAUSE ITSELF IS ERRONEOUS. SU CH EXPENDITURE FALLS OUTSIDE F.B.T. WITHOUT PREJUDICE, AS STATED ABOVE, OUT OF THE ABOVE SUM, THE ASSESSEE HAS INCURRED A SUM OF RS.I0,64,018/- ON PROVIDING MEMENTOS TO THE EMPLOYEES ON THE ABOVE OCCASION. UNDER SECTION 115 WB (2) (0) WHERE AN EMPLO YER INCURS ANY EXPENSES IN THE COURSE OF HIS BUSINESS FOR THE PURPOSE OF MAKING GIFTS WILL RESULT IN THE PROVISION OF FRINGE BENEFITS. I F SUB CLAUSE (0) APPLIES THEN THE VALUE OF THE FRINGE BENEFIT UNDER SECTION 115 WC (1) (D) WOULD BE 50% OF THE EXPENSES. THEREFORE, TH E ENTIRE ISSUE REVOLVES ON WHETHER THE GIVING OF MEMENTOS IN THE FORM OF THERMO CARRIER IS A GIFT OR NOT. IT WAS ARGUED THAT THE MAIN ACTIVITY OF THE ASSESSEE IS CARRIED ON IN THE DISTRICT OF RAICHUR, FAR AWAY FROM TOWNS AND ALL THE EMPLOYEES THERE ARE LIVING IN A COLON Y SET UP FOR THE EMPLOYEES WHERE MOST OF THEM WORK ON THE MINE S ITE. HAVING REGARD TO THE WORKING HOURS OF THESE EMPLOYEES THEY HAVE TO MAKE ARRANGEMENTS FOR THEIR LUNCH ON THE WORK SITE. TO ENSURE TH AT THEY GET THERE FOOD IN A WARM CONDITION, AS A STAFF WELFARE MEASURE, THE COMPANY DECIDED TO PROVIDE EACH ONE OF THEM WITH A THERMO CARRIER IN WHICH THE FOOD WILL RETAIN ITS WARMTH. THEREFORE, IT IS M.P.NO.47(B)/2012 3 MOST APPROPRIATE TO TREAT THIS AS AN EMPLOYEES' WELFARE MEASURE ATTRACTING THE VALUE OF 20% UNDER SUB CLAUSE (C) OF S.115 WC (1). 14. WE HAVE CONSIDERED THE SUBMISSION OF THE LEARNED COU NSEL FOR THE ASSESSEE AND ARE OF THE VIEW THAT IT WOULD BE JUST AND APPROPRIATE THE VALUE OF PROVIDING HOT CASES TO THE EXT ENT OF RS.10,64,018/- HAS TO BE TREATED AS GIFTS PROVIDED TO EMP LOYEES AND THEREFORE 50% THEREOF WOULD BE INCLUDIBLE IN THE CALCULA TION OF FRINGE BENEFIT. AS FAR AS THE REMAINING SUM IS CONCERNED, WE ARE OF THE VIEW THAT THE ORDERS OF THE REVENUE AUTHORITIES ARE JUST AND FAIR CALLING FOR NO INTERFERENCE. THUS GR.NO.4 AND 5 ARE PARTLY ALLOWED. 4. IN THIS MISCELLANEOUS APPLICATION IT HAS BEEN SUBMITTED T HAT THE STAND OF THE ASSESSEE BEFORE THE TRIBUNAL WAS THAT EXPE NDITURE OF EXPENDITURE OF RS.19,22,391/- INCURRED ON THE OCCASION OF S UVARNA KARNATAKA RAJYOTSAVA DAY CELEBRATION SHOULD NOT BE CO NSIDERED AS A FRINGE BENEFIT AT ALL. ALTERNATIVELY IT WAS CLAIMED THAT THE A BOVE EXPENDITURE OF RS.19,22,391 INCLUDES AN ITEM OF RS.1064018/- SPENT ON PROVIDING 'HOT CASES', THERMO CARRIERS TO THE EMPLOYEES. UNDER SECTION 115 WB (2) (0) WHERE AN EMPLOYER INCURS ANY EXPENSES IN TH E COURSE OF HIS BUSINESS FOR THE PURPOSE OF MAKING GIFTS WILL RESULT IN THE PROVISION OF FRINGE BENEFITS. IF SUB CLAUSE (0) APPLIES THEN THE VALUE OF THE FRINGE BENEFIT UNDER SECTION 115 WC (1) (D) WOULD BE 50% OF THE EXP ENSES. THE ASSESSEE SUBMITTED THAT THE MAIN ACTIVITY OF THE ASSESSE E IS CARRIED ON IN THE DISTRICT OF RAICHUR, FAR AWAY FROM TOWNS AND ALL THE EMP LOYEES THERE ARE LIVING IN A COLONY SET UP FOR THE EMPLOYEES WHERE MOST OF THEM WORK ON THE MINE SITE. HAVING REGARD TO THE WORKING HOURS OF T HESE EMPLOYEES THEY HAVE TO MAKE ARRANGEMENTS FOR THEIR LUNCH ON THE WORK SITE. TO ENSURE THAT THEY GET THERE FOOD IN A WARM CONDITION, AS A STAFF WELFARE MEASURE, THE COMPANY DECIDED TO PROVIDE EACH ONE OF THE M WITH A THERMO CARRIER IN WHICH THE FOOD WILL RETAIN ITS WARMTH. THER EFORE, IT IS MOST APPROPRIATE TO TREAT THIS AS AN EMPLOYEES' WELFARE MEASURE ATTRACTING THE VALUE OF 20% UNDER SUB CLAUSE (C) OF S.115 W C (1). IT HAS BEEN SUBMITTED IN THE MISCELLANEOUS PETITION THAT THE SUBM ISSION WITH REGARD TO THE SUM OF RS.10,64,018 HAVE BEEN NOTICED BUT IN PARA-14 IT M.P.NO.47(B)/2012 4 HAS BEEN MENTIONED THAT IT WOULD BE JUST AND FAIR TO TRE AT THE ABOVE SUM AS GIFTS AND TREAT 50% OF THE EXPENSES AS FRINGE BENEFIT. THIS MEANS THAT THERE IS NO RELIEF GIVEN BECAUSE THE REVENUE HAS TREATE D THE SUM OF RS.10,64,018 AS GIFTS AND TREAT 50% OF THE EXPENSES AS FRIN GE BENEFIT. HOWEVER IN THE SAME PARAGRAPH WHILE DEALING WITH THE REMA INING SUM , THE TRIBUNAL HAS CONFIRMED THE ORDER OF THE REVENUE AUTH ORITIES AND ALLOWED GR.NO.4 AND 5 PARTLY. IT IS THE SUGGESTION IN THE MISCELLANEOUS PETITION THAT THE TRIBUNAL HAS ACCEPTED THE ASSESSEES SUBMISSION BUT HAS WHILE GIVING ITS VERDICT NOT GIVEN THE RELIEF WITH APPROPR IATE FINDINGS. THE REQUEST OF THE ASSESSEE IS THAT THE EXPENDITURE INC URRED ON PROCURING HOT CASES SHOULD BE TREATED AS EMPLOYEE WELFAR E U/S.115 WB (2)(E) AND THE VALUE TO THE ASSIGNED TO THE EXPENDITURE TO BE TREATED AS FRINGE BENEFIT VALUE WOULD BE 20% OF SUCH EXPENDITURE U/S.11 5WC ( C) OF THE ACT. 5. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE WHO REITERATED THE STAND OF THE ASSESSEE AS REFLECTED IN THE MISCELLANEOUS APPLICATION. THE LEARNED DR RELIED ON THE ORD ER OF THE TRIBUNAL AND SUBMITTED THAT THERE IS NO APPARENT MISTAKE IN THE ORDER OF THE TRIBUNAL. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE AGREE WIT H THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE THAT THERE IS A CONTRADICTION IN PARA-14 OF THE ORDER OF THE TRIBUNAL. THIS HAS OCCURR ED BECAUSE OF THE TYPOGRAPHICAL ERROR IN PARA-14 OF THE ORDER OF THE TRIBU NAL. IN FOURTH LINE OF PARA-14, THE WORDS TO BE TREATED AS GIFTS TO EMPLOYE ES AND THEREFORE, 50% THEREOF OUGHT TO HAVE READ AS TO BE TREATED A S EMPLOYEES WELFARE AND THEREFORE 20% THEREOF . THIS WOULD MEAN THAT THE C ONTENTION OF THE ASSESSEE THAT A SUM OF RS.10,64,,018/- BEING EXPENSES INCU RRED FOR PROVIDING HOT CASE TO EMPLOYEES FOR CARRYING LUNCH TO THE WORK SITE SHOULD BE CONSIDERED AS EXPENDITURE INCURRED FOR EMPLOYEE WELFARE U NDER SEC.115WB(E) OF THE ACT AND 20% OF THE EXPENSES SO INCUR RED SHOULD BE M.P.NO.47(B)/2012 5 TREATED AS VALUE OF FRINGE BENEFIT U/S.115WC(1)( C)OF THE ACT. THE ORDER OF THE TRIBUNAL IS ACCORDINGLY MODIFIED AS STATED ABOVE. 7. IN THE RESULT, THE MISC.PETITION IS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE 5 TH OCTOBER, 2012. SD/- SD/- (N.BARATHVAJASANKAR) (N.V.VASUDEVAN) VICE PRESIDENT JUDICIAL MEMBER PLACE: BANGALORE DATED: 5-10-2012 AM* COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. CIT(A) 4. CIT 5. DR 6. GF(BLORE) 7. GF(DELHI) BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE