M/s. SYMBIOTEC PHARMALAB LTD., Indore V. The ADDL.CIT-5, Indore

ITA 480/IND/2014

• Counselvise Citation: 48022714 RSA 2014
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 30-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: MANISH VAIDYA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE (SINGLE MEMBER CASE) BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER I.T.A.NO.480/IND/2014 A.Y. : 2008-09 M/S.SYMBIOTEC PHARMALAB LIMITED, ADDL. CIT-5, INDORE. 385, PIGDAMBAR, RAU. VS APPELLANT RESPONDENT PAN NO. AAGCS9311M APPELLANT BY : SHRI MANISH VAIDYA, C. A. RESPONDENT BY : SHRI R.A.VERMA, SR. DR DATE OF HEARING : 01 . 0 7 .201 5 DATE OF PRONOUNCEMENT : 01 . 0 7 .201 5 O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-II, INDORE, DATED 31.03.2014 FOR THE ASS ESSMENT YEAR 1997-98. 2. THE SHORT FACTS OF THE CASE ARE AS UNDER. -: 2: - 2 THE ASSESSEE COMPANY IS MAINLY ENGAGED IN MANUFACTURING OF PHARMACEUTICAL INGREDIENTS. THE AS SESSEE FILED THE FBI RETURN AND DECLARING THE TOTAL VALUE OF FRINGE BENEFIT RS. 5,57,182/-. THE ASSESSMENT WAS COMPLETE D U/S 115WE(3) OF THE INCOME-TAX ACT, 1961, ON A TOTAL VA LUE OF FRINGE BENEFIT OF RS. 10,81608/- BY MAKING THE FOLL OWING ADDITIONS : HEAD OF EXPENDITURE AS PER LEDGER A/C ( IN RS.) VALUE OF FB T SHOWN DIFFERENCE PERCENTAGE EXPENDITURE BEING FRINGE BENEFITS VALUE OF FRINGE BENEFITS TO BE ADDED EMPLOYEE FOOD WELFARE & BENEFIT 746502 20% 114876 EMPLOYEE (MEDICAL ) TO BE INCLUDED UNDER STAFF WELFARE 94532 266654 574380 ADVERTISEMENT & BUSINESS PROMOTION 36398+10600+20 47750=2094748 TOTAL RS. 524426 3. THE MATTER CARRIED TO LD. CIT(A) AND THE LD. CIT (A) HAS DISMISSED THE APPEAL. 4. THE LD. AUTHORIZED REPRESENTATIVE HAS FILED THE WRITTEN SUBMISSION, WHICH READS AS UNDER :- -: 3: - 3 ADDITION OF RS. 1,14,876/- @ TWENTY PERCENT OF EMPL OYEES'S FOOD WELFARE & MEDICAL EXPENSES TO THE VALUE OF FRINGE BENEFITS. 1. THE APPELLANT HAS INCURRED EXPENDITURE TO THE TU NE OF RS. 7,46,502/- FOR PROVIDING FOOD AND BEVERAGES TO ITS EMPLOYEES, (COP Y OF LEDGER ENCLOSED AT PAGES 03 TO 37) AS PER SECTION 115 WB(2 )(I): (2) THE FRINGE BENEFITS SHALL BE DEEMED TO HAVE BEE N PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES, IF THE EMPLOYER HAS , IN THE COURSE OF HIS BUSINESS OR PROFESSION (INCLUDING ANY ACTIVITY WHET HER OR NOT SUCH ACTIVITY IS CARRIED ON WITH THE OBJECT OF DERIVING INCOME, PROFITS OR GAINS) INCURRED ANY EXPENSE ON, OR MADE ANY PAYMENT FOR, THE FOLLOWING PURPOSES, NAMELY: (A) ENTERTAINMENT; (B) PROVISION OF HOSPITALITY OF EVERY KIND BY THE EMPLO YER TO ANY PERSON, WHETHER BY WAY OF PROVISION OF FOOD OR BEVE RAGES OR IN ANY OTHER MANNER WHATSOEVER AND WHETHER OR NOT SUCH PROVISION IS MADE BY REASON OF ANY EXPRESS OR IMPLIED CONTRACT OR CUSTOM OR USA GE OF TRADE BUT DOES NOT INCLUDE(I) ANY EXPENDITURE ON, OR PAYMENT FOR, FOOD OR BEVERAGES PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES IN OFFICE OR FACTORY; 2. THE SECTION ITSELF EXCLUDES ANY EXPENDITURE ON, OR PAYMENT FOR, FOOD OR BEVERAGES PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES IN OFFICE OR FACTORY. 3. SIMILARLY AN AMOUNT OF RS.94,532/- ON ACCOUNT OF EM PLOYEE (MEDICAL) TO BE INCLUDED IN THE STAFF WELFARE HAS ALSO BEEN INCL UDED FOR THE CALCULATION OF FBT. THE SAME ARE ON ACCOUNT OF FIXED MEDICAL A LLOWANCE AND A PART OF THE EMPLOYMENT CONTRACT. FURTHER THEY ARE EXCLUD ED BY VIRTUE OF SECTION 115WB(2)(E). A PERUSAL OF THE LEDGER ACCOUN T OF EMPLOYEE'S -: 4: - 4 MEDICAL ACCOUNT ((COPY ENCLOSED AT PAGES 38 TO 47) WOULD SHOW THAT THESE EXPENSES ARE PAID AGAINST MEDICAL BILLS SUBMITTED B Y THE EMPLOYEES. THE AMOUNTS ARE ALSO MEAGER. 4. THERE IS NO PLAUSIBLE REASON GIVEN FOR AS TO WHY TH E DIFFERENCE AMOUNT OF RS. 5,74,380/- IS ADDED TO THE VALUE OF FRINGE B ENEFITS. ONLY THE DIFFERENCE BETWEEN THE TOTAL OF LEDGER ACCOUNT AND THE VALUE OF FBT SHOWN BY THE APPELLANT HAS BEEN TAKEN AND THE SAME HAS BEEN TAXED. THE APPELLANTS SUBMISSIONS MADE DURING THE COURSE OF AS SESSMENT AND FIRST APPELLATE PROCEEDINGS ARE BEING OVERLOOKED (COPY EN CLOSED AT PAGES A-E, 51 TO 54). 5. THE OBSERVATION MADE IN THE ASSESSMENT ORDER THAT T HE APPELLANT HAS SHOWN THE VALUE OF FBT ON ACCOUNT OF EXPENSES INCUR RED ON EMPLOYEES FOOD AND WELFARE AMOUNTING AS NIL IS BECAUSE OF THE FACT THAT THE SAME IS EXEMPT U/S 115 WB(2)(E). 6. THE APPELLANT HAS DULY OFFERED AN AMOUNT OF RS.2,66 ,654/- UNDER THE HEAD STAFF WELFARE WHICH WAS TAXABLE. ADDITION OF RS. 4,09,550/- @ TWENTY PERCENT OF ADV ERTISEMENT AND BUSINESS PROMOTION EXPENSES TO THE VALUE OF FRINGE BENEFITS. 1. THE TOTAL EXPENSES INCURRED UNDER THE HEAD ADVERTIS EMENT TOTALLED TO RS. 28,49,410/-. 2. THE APPELLANT HAD PARTICIPATED IN A TRADE FAIR HELD AT ITALY. THE FAIR WAS ORGANIZED BY CPHI ITALY AND LEADING PHARMACEUTICAL GIANTS PARTICIPATED IN THE FAIR. 3. ONLY TWO EXPENSES VIZ. RS. 3,00,000/- AND RS. 5,01, 660/- HAVE BEEN CONSIDERED AND THE APPELLANT'S SUBMISSION HAVE BEE N OVERLOOKED AS ALSO THE LEDGER ACCOUNT IN THIS BEHALF. THE LEDGER ACCOU NT (COPY ENCLOSED AT -: 5: - 5 PAGES 48 TO 50) WOULD SHOW THAT THERE ARE OTHER EXP ENSES WHICH ARE INCURRED BY THE APPELLANT AND THEY ARE COVERED UNDE R THE EXEMPTION PROVIDED BY SECTION 115 WB(2)(D) WHICH READS AS UND ER: (2) THE FRINGE BENEFITS SHALL BE DEEMED TO HAVE BEE N PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES, IF THE EMPLOYER HAS, IN THE COURSE OF HIS BUSINESS OR PROFESSION (INCLUDING ANY ACTIVITY WHET HER OR NOT SUCH ACTIVITY IS CARRIED ON WITH THE OBJECT OF DERIVING INCOME, PROF ITS OR GAINS) INCURRED ANY EXPENSE ON, OR MADE ANY PAYMENT FOR, THE FOLLOW ING PURPOSES, NAMELY: (D) SALES PROMOTION INCLUDING PUBLICITY: PROVIDED THAT ANY EXPENDITURE ON ADVERTISEMENT, (I) BEING THE EXPENDITURE (INCLUDING RENTAL) ON ADV ERTISEMENT OF ANY FORM IN ANY PRINT (INCLUDING JOURNALS, CATALOGUES OR PRI CE LISTS) OR ELECTRONIC MEDIA OR TRANSPORT SYSTEM; (II) BEING THE EXPENDITURE ON THE HOLDING OF, OR TH E PARTICIPATION IN, ANY PRESS CONFERENCE OR BUSINESS CONVENTION, FAIR OR EXHIBITI ON; . (VIII) SHALL NOT BE CONSIDERED AS EXPENDITURE ON SALES PRO MOTION INCLUDING PUBLICITY; 4. THE ENTIRE EXPENSES ON THE PARTICIPATION IN THAT FA IR IN ITALY SHOULD HAVE BEEN EXCLUDED FROM THE GAMUT OF FBT. OTHER THAN THI S THE APPELLANT HAS ALSO INCURRED EXPENSES ON ADVERTISEMENT IN NEWSPAPE RS/PERIODICALS. 5. AGAIN NO REASON HAS BEEN CITED FOR ADDING THE DIFFE RENCE AMOUNT OF RS. 20,47,750/- TO THE VALUE OF FBT. THERE IS NO FINDIN G AS TO WHY THE THESE -: 6: - 6 AMOUNTS ARE TAXABLE WHEN THEY HAVE BEEN LEFT OUT OF THE PURVIEW OF FBT. 6. SINCE THE APPELLANT HAS DULY OFFERED THE AMOUNT COV ERED UNDER DIFFERENT HEADS UNDER FBT, THE IMPUGNED ADDITIONS ARE WITHOUT ANY BASIS OF JUSTIFICATION AND MAY VERY KINDLY BE DELETED. 5. I HAVE HEARD BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND THAT THE AO AND C IT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE, BUT I FIND FR OM THE ASSESSMENT ORDER THAT THE AO HAS NOT CONSIDERED THE SECTION 115WB(2)(I), WHILE DISALLOWING THE FOOD EXPENSES OF RS. 7,46,502/-. THE ASSESSEE HAS FILED THE WRITTEN SUBM ISSIONS AND CONTENDED BEFORE THE AO AND CIT(A) THAT THE EX PENSES INCURRED FOR PROVIDING THE EMPLOYEES FOOD AND BEVER AGES IN THE OFFICE AND FACTORY ARE NOT LIABLE TO BE FRINGE BENEFIT TAX, BUT THE AO HAS NOT CONSIDERED THE ARGUMENT OF THE A SSESSEE. SIMILARLY, THE ASSESSING OFFICER HAS ALSO NOT CONSI DERED FBT ADVERTISEMENT EXPENSES. THEREFORE, I REVERSE THE FI NDING OF AO AND CIT(A) AND I RESTORE BACK THIS ISSUE TO THE FILE OF AO TO DECIDE THE CLAIM OF THE ASSESSEE AFRESH BY PASSI NG A -: 7: - 7 SPEAKING ORDER. THE AO IS DIRECTED TO PASS THE ORDE R AS PER LAW AFTER GIVING DUE OPPORTUNITY OF HEARING. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 1 ST JULY, 2015. SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 1 ST JULY, 2015. CPU* 1.7.