M/s. Babubhai Cloth Stores, Nashik V. Addl. Comm. of Income-tax, Nashik

ITA 48/PUN/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2674 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 10-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Additional evidence
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , A M . / ITA NO. 48 /PN/201 2 / ASSESSMENT YEAR : 20 0 7 - 08 M/S. BABUBHAI CLOTH STORES, BABUBHAI VILLA, KULKARNI COLONY, SHARANPUR ROAD, NASHIK 422002 . / APPELLANT PAN: A ADFB4642E VS. THE ADDL. COMMISSIONER OF INCOM E TAX , RANGE 1, NASH IK . / RESPONDENT / APPELLANT BY : NONE / APPELLANT BY : NONE / RESPONDENT BY : SHRI S.K. BIJU / DATE OF HEARING : 02 . 0 2 .201 6 / DATE OF PRONOUNCEMENT: 24 . 0 2 .2 01 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - I I , NASHIK , DATED 1 4 . 11 .20 1 1 RELATING TO ASSESSMENT YEAR 20 0 7 - 08 AGAINST ORDER PASSED UNDER SECTION 1 15WE (3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - ITA NO. 48 /PN/20 1 2 M/S. BABUBHAI CLOTH STORES 2 ON FACTS AND IN LAW, 1] THE LEARNED CIT(A)( II ) ERRED IN CONFIRMING THE ADDITION ON ACCOUNT OF FRINGE BENEFITS OF RS.3,15,665/ - AND UPHELD THE ORDER OF HON. ADDL. COMMISSIONER OF INCOME TAX, RANGE I, NASHIK. 2] THE LEARNED CIT(A)(II) FAILED TO APPRECIATE THAT A . THAT MOST OF THE EXPENSES CONSIDERED FOR FBT WERE INCURRED BY THE PRINCIPLE PARTNERS OF THE FIRM AND WERE NOT RELATED TO THE EMPLOYEES INDIRECTLY ALSO. B . THAT A PERUS AL OF CIRCULAR NO.8/2005 DATED 20 TH AUGUST, 2005 ON FBT REVEALS THAT THE SCOPE OF THE TERM 'FRINGE BENEFIT DEEMED TO HAVE BEEN PROVIDED' IS DEFINED IN SUBSECTION (2) OF SECTION 115WB SO AS TO PROVIDE THAT FRINGE BENEFIT SHALL BE DEEMED TO HAVE BEEN PROVIDE D BY THE EMPLOYER IF HE HAS INCURRED ANY EXPENSES ON OR MADE PAYMENT FOR THE PURPOSES MENTIONED IN THE RELEVANT PROVISIONS. C . THAT THE VALUE OF FRINGE BENEFIT IS DETERMINED BY A PRESUMPTIVE METHOD BY APPLYING THE PROPORTIONS SPECIFIED IN SECTION 115WC TO TH E FRINGE BENEFITS PROVIDED AND DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER AND ENUNCIATED IN SECTION 115WB. THE PRESUMPTION IMPLICIT IN THE PROPORTIONS SPECIFIED IN SECTION 115WC IS NOT REBUTTABLE. D . THAT AS REGARDS APPELLANTS CONTENTION THAT NO EXPENDITUR E WERE INCURRED ON THE EMPLOYEES, I AM OF THE CONSIDERED VIEW THAT THE UNDER SECTION UNDER SUBSECTION 115WB , FRINGE BENEFITS SHALL BE UNDER SECTION UNDER SUBSECTION 115WB , FRINGE BENEFITS SHALL BE DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES IF THE CONDITIONS SPECIFIED THEREIN ARE SATISFIED. E . THAT NO SEGREGATIONS AS EXPENSES INCURRED ON EMPLOYEES OR EXPENSES INCURRED ON OTHERS IS PERMISSIBLE. F . THAT THE AIM BEHIND THE PROVISION OF INTRODUCTION OF SECTION 115WB IN THE FINANCE ACT, 2005 IS TO TAX THE EXPENSES IN THE HANDS OF EMPLOYER WHICH ARE DIRE CTLY OR INDIRECTLY BENEFITED TO THE EMPLOYEES BUT COULD NOT BE TAXED IN THE HANDS OF THE LATER. THE CONCEPT OF FBT IS DEPEND ON THE DIRECT RELATIONSHIP OF EMPLOYER AND EMPLOYEE AND THE INDIRECT PERQUISITES GIVEN TO THE EMPLOYEES OUT OF THE SAID RELATIONSHI P. G . THAT THE PARTNERS OF THE FIRM ARE THE REAL OWNERS OF THE FIRM AND NOT THE EMPLOYEES, THEREFORE THE EXPENSES INCURRED BY THEM FOR THE PURPOSE OF BUSINESS MAY COULD NOT BE BROUGHT INTO THE TAXATION NET UNDER FBT. H . THAT THE PROVISION OF SECTION 115WB(2) R EAD WITH CIRCULAR NO.8/2005 DATED 29TH AUGUST, 2005 MAY COULD BE APPLIED IN A BROADER SENSE AS IT HAS BEEN ACCEPTED AND PRONOUNCED IN THE DIFFERENT COURT OF LAW. I . THAT THE PROVISION OF SECTION 115WB(2) WAS IN THE NATURE OF DOUBLE TAXATION AND HAD BEE N ELIMINATED FROM THE FINANCE ACT, 2009. ITA NO. 48 /PN/20 1 2 M/S. BABUBHAI CLOTH STORES 3 3] THE APPELLANT REQUESTS FOR ADMISSION OF ADDITIONAL EVIDENCES IF ANY, REQUIRED IN SUPPORT OF THE APPEAL. 4] THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL . 5] THE ASSESSEE PRAYS A . THE ORDER OF HON. ADDITIONAL COMMISSIONER OF INCOME TAX U / S. 115WE(3) AND THE APPELLATE ORDER OF THE LEARNED CIT(A)(II) MAY PLEASE BE SET ASIDE. B . THE ADDITION OF EXPENSES ON ACCOUNT OF VALUE OF FBT MAY PLEASE BE DELETED. C . THE LEVY OF FB T AND INTEREST THEREON MAY PLEASE BE DELETED. D . THAT A PERSONAL HEARING MAY PLEASE BE GRANTED. E . THAT THE ADDITIONAL SAY MAY PLEASE BE ALLOWED TO SUBMIT. F . ANY OTHER RELIEF THAT THE TRIBUNAL MAY DEEM FIT PLEASE BE GRANTED. G . THE APPEAL MAY PLEASE BE ALLOWED. H . THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR WITHDRAW ANY OF THE GROUNDS OF APPEAL. 2. THE PERUSAL OF ORDER SHEET REFLECTS THAT THE APPEAL WAS FIXED ON VARIOUS DATES AND THE SAME WAS ADJOURNED AT THE REQUEST OF THE ASSESSEE. HOWEVER, ON 28.01.2016 AND ON THE APPOINTED DATE OF HEARING I.E. 02.02.2016 , NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY APPLICATION WAS MOVED FOR ADJOURNMENT. ACCORDINGLY, WE PROCEED TO DECIDE THE PRESENT APPEAL AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE. 3. THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE PRESENT APPEAL IS AGAINST THE ADDITION MADE ON ACCOUNT OF FRINGE BENEFITS OF RS. 3,15,665/ - . 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS A SUPPLIER TO INDIA SECURITY PRESS, NASHIK FOR BI NDING CLOTH, GOLD FOIL, ULTRA VIOLET THREAD, ETC. , WHICH WERE USED IN THE PRODUCTION OF PASSPORTS AND CURRENCY NOTES. THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY. THE PERUSAL OF THE STATEMENT OF FACTS FILED ITA NO. 48 /PN/20 1 2 M/S. BABUBHAI CLOTH STORES 4 BY THE ASSESSEE BEFORE THE CIT(A) REFLE CTS THAT THE ASSESSING OFFICER HAD ISSUED NOTICE UNDER SECTION 142(1) OF THE ACT ALONG WITH NOTICE US 115WE(2) OF THE ACT. THE ASSESSMENT IN THE HANDS OF ASSESSEE WAS COMPLETED UNDER SECTION 143(3) OF THE ACT AND ADDITION OF RS.50,000/ - ON AGREED BASIS WA S MADE IN ORDER TO COVER ANY LEAKAGE AGAINST THE CLAIM OF EXPENSES SUCH AS BUSINESS PROMOTION, REPAIRS & MAINTENANCE AND SHOP EXPENSES. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD FILED COMPUTATION OF FRINGE BENEFIT TAX (FBT) FOR THE RELEVANT YEAR I N THE RETURN OF INCOME FILED ON 30.10.2007 AND FBT AT RS. 43,250/ - ON 29.10.2007. THE EXPENSES FOR THE WORKING OF FBT WERE CONVEYANCE OF RS.90,0,43/ - AND USE OF TELEPHONE OF RS. 21,361/ - . THE ASSESSING OFFICER WHILE COMPLETING PROCEEDINGS UNDER SECTION 115 WE(3) OF THE ACT NOTED VARIOUS EXPENSES I.E. SALES PROMOTION OF RS.5,02,223, HOSPITALITY OF RS.36,685/ - , EMPLOYEES WELFARE OF RS. 58,840/ - , REPAIRS RUNNING MAINTENANCE OF MOTOR CARS OF RS. 1,79,922/ - , VEHICLES INSURANCE OF RS.49,001/ - , DEPRECIATION OF RS.2,1 0,587/ - , TOTALING RS. 4,39,510/ - AND MOBILE EXPENSES OF RS.4,15,895/ - AND TOUR AND TRAVELS OF RS. 5,00,658/ - . THE ASSESSING OFFICER HELD THAT ALL THE ABOVE SAID EXPENSES WERE LIABLE FOR FRINGE BENEFIT TAX AND ASSESSED THE VALUE OF FBT AT RS. 4,27,070/ - . THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD PAID FBT ON TELEPHONE EXPENSES BUT NOT ON MOBILE. ACCORDINGLY, THE ASSESSED VALUE OF FBT WAS COMPUTED AT RS. 4,27,070/ - . 5. THE CIT(A) NOTED FROM THE CIRCULAR NO.8/2005 DATED 20.08.2005 THAT THE SCOPE OF TH E TERM FRINGE BENEFITS DEEMED TO HAVE BEEN PROVIDED IS DEFINED IN SUB - SECTION (2) OF SECTION 115WB OF THE ACT SO AS TO PROVIDE FRINGE BENEFITS SHALL BE DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER IF HE HAD INCURRED ANY EXPENSES AS ENLISTED THEREIN. THE CIT(A) FURTHER HELD THAT VALUE OF FRINGE BENEFIT WAS DETERMINED BY A PRESUMPTIVE METHOD BY APPLYING THE PROPORTIONS ITA NO. 48 /PN/20 1 2 M/S. BABUBHAI CLOTH STORES 5 SPECIFIED IN SECTION 115WC OF THE ACT TO THE FRINGE BENEFITS PROVIDED AND THE SAME IS DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER. THE CI T(A) REJECT ED THE CONTENTION OF THE ASSESSEE THAT NO EXPENDITURE WAS INCURRED ON THE EMPLOYEES AND HE LD THAT FRINGE BENEFITS SHALL BE DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES , WHERE THE CONDITIONS SPECIFIED IN THE SECTION ARE SATISFIED . HE FURTHER OBSERVED THAT NO SEGREGATION AS EXPENSES INCURRED ON EMPLOYEES OR EXPENSES INCURRED ON OTHERS WAS PERMISSIBLE AND THE FRINGE BENEFIT WAS DEEMED TO HAVE BEEN PROVIDED IF THE EMPLOYER HAD INCURRED EXPENSES F OR ANY OF THE PURPOSES REFERRED TO IN SUB - SECTION (2) OF SECTION 115WB OF THE ACT. UNDER THESE CIRCUMSTANCES, THE CIT(A) UPHELD THE APPLICABILITY OF FBT PROVISIONS ON SALE PROMOTION, HOSPITALITY , EMPLOYEES WELFARE, REPAIRS AND RUNNING MAINTENANCE OF MOTOR CARS, TELEPHONE INCLUDING MOBILE AND TOURS & TRAVELS . THE CIT(A) FURTHER NOTED THAT THE ASSESSING OFFICER HAD DISALLOWED RS.50,000/ - OUT OF BUSINESS PROMOTION OUT OF EXPENSES UNDER THE HEAD BUSINESS PROMOTION, REPAIRS AND MAINTENANCE, SHOP EXPENSES, ETC. TO COVER ANY LEAKAGE WHILE COMPLE TING ASSESSMENT UNDER SECTION 143(3) OF THE ACT. THE ASSESSING OFFICER WAS THUS DIRECTED TO REDUCE RS.25,000/ - ON ESTIMATE BASIS OUT OF THE SALE PROMOTION EXPENSES OF RS. 5,02,223/ - TO CALCULATE FBT AND THE REST OF AMOUNTS WERE TO BE TAKEN CORRECTLY. 6. ON PERUSAL OF RECORD AND THE ORDERS PASSED BY THE LOWER AUTHORITIES BELOW, WE HOLD THAT IN VIEW OF THE PROVISIONS OF THE ACT, THE ASSESSEE HAD TO EXPLAIN ITS ONUS OF ELIGIBILITY OF FRINGE BENEFIT TAX APPLICABLE TO VARIOUS EXPENSES INCURRED BY THE ASSESSEE . THE CBDT VIDE CIRCULAR NO.8/2005, DATED 20.08.2005 HAS ENLISTED LIST OF EXPENSES WHICH ARE TO BE CONSIDERED BEING LIABLE FOR FRINGE BENEFIT TAX, WHICH ARE ENLISTED UNDER PARA 6 AT PAGES 6 AND 7 OF THE APPELLATE ORDER. THE PERUSAL OF THE EXPENSES CONSID ERED BY THE CBDT ITA NO. 48 /PN/20 1 2 M/S. BABUBHAI CLOTH STORES 6 CIRCULAR AS BEING ELIGIBLE FOR FRINGE BENEFIT TAX, WE FIND THAT THE EXPENSES LIKE SALES PROMOTION, HOSPITABILITY, EMPLOYEE S WELFARE, REPAIRS, RUNNING AND MAINTENANCE OF MOTOR CAR INCLUDING THE AMOUNT OF DEPRECIATION, MOBILE EXPENSES AND T OUR & TRAVELS ARE COVERED UNDER THE PROVISIONS OF SUB - SECTION (2) OF SECTION 115WB OF THE ACT, WHICH PROVIDES THAT FRINGE BENEFIT SHALL BE DEEMED TO HAVE BEEN PROVIDED BY EMPLOYER IF HE HAD INCURRED ANY EXPENSES OR MADE PAYMENTS FOR THE AFORESAID PURPOSES. IN THE ENTIRETY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE FIND NO MERIT IN THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AND DISMISSING THE SAME, WE UPHOLD THE ORDER OF CIT(A). 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUN CED ON THIS 24 TH DAY OF FEBRU ARY , 201 6 . SD/ - SD/ - SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 24 TH FEBR UARY , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE A PPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - I I, NASHIK ; 4. / THE CIT - I, NASHIK ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE