FLOWERS VALLEY P.LTD, MUMBAI V. ITO WD 2(1)(3), MUMBAI

ITA 4804/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3468 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2006-2007
• Appeal Filed On: 17-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Depreciation
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI JASON P. BOAZ ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO. 4804/MUM/2014 (ASSESSMENT YEAR : 2006-07) ITA NO. 4805/MUM/2014 (ASSESSMENT YEAR : 2007-08) FLOWERS VALLEY PVT. LTD., MITTAL COURT, 132, B- WING, 12 TH FLOOR, 223 NARIMAN POINT, MUMBAI 400 021 PAN: AABCD 2181M ... APPELLANT VS. THE INCOME TAX OFFICER, WARD 2(1)(3), AAYKAR BHAVAN,M.K.ROAD, MUMBAI 400 020 ..... RESPONDENT APPELLANT BY : SHRI PRAKASH PANDIT RESPONDENT BY : MS.ANU KRISHNA AGARWAL DATE OF HEARING : 08/08/2016 DATE OF PRONOUNCEMENT : 26/08/2016 ORDER PER JASON P. BOAZ, A.M: THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAIN ST THE ORDER OF CIT(APPEALS) -4, MUMBAI, BOTH DATED 12/2/2013 FOR A SSESSMENT YEARS 2006-07 AND 2007-08. 2. THE FACTS OF THE CASE AS EMANATE FROM THE RECORD , BRIEFLY, ARE AS UNDER:- 2.1 THE ASSESSEE IS A COMPANY ENGAGED IN FARMING AN D AGRICULTURE. 2 ITA NO. 4804&4805/MUM/2014 (ASSESSMENT YEAR : 2006-07&2007-08 2.1.1 FOR ASSESSMENT YEAR 2006-07 , THE ASSESSEE FURNISHED ITS RETURN OF FRINGE BENEFITS ON 25/11/2006 DECLARING THE VALUE O F FRINGE BENEFITS AT NIL. THE ASSESSMENT WAS COMPLETED UNDER SECTION 115WE(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) VIDE ORD ER DATED 11/12/2008, WHEREIN THE TOTAL VALUE OF FRINGE BENEFITS WAS DETE RMINED AT NIL. SUBSEQUENTLY, THE ASSESSING OFFICER INITIATED RE-AS SESSMENT PROCEEDINGS, ON OBSERVING THAT THE ASSESSEE HAD PA ID WAGES AND SALARY TO ITS EMPLOYEES AND CERTAIN OTHER EXPENDITURE AGGR EGATING TO RS.8,08,415/- INCURRED BY THE ASSESSEE ON BUSINESS PROMOTIONS, CONVEYANCE, STAFF WELFARE, TELEPHONE AND TRAVELLING EXPENSES, WHICH CONSTITUTE FRINGE BENEFITS PROVIDED TO THE EMPLOYEE S AS PER SECTION 115WA(2) OF THE ACT WERE EXIGIBLE TO FRINGE BENEFIT TAX (FBT)@ 20% THEREOF. THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION. 115WH OF THE ACT TO THE ASSESSEE IN THIS REGARD, AFTER REC ORDING REASONS FOR RE- OPENING THE ASSESSMENT. IN RESPONSE THERETO, THE A SSESSEE REQUESTED THAT THE ORIGINAL RETURN FILED ON 25/11/2006 BE TR EATED AS FILED IN RESPONSE TO THE NOTICE UNDER SECTION. 115WH OF THE ACT. THE ASSESSING OFFICER PROCEEDED TO COMPLETE THE RE-ASSESSMENT UN DER SECTION 115WG OF THE ACT VIDE ORDER DATED 29/1/2013 AND LEV IED FBT @ 20% OF THE FRINGE BENEFITS AMOUNTING TO RS.8,08,415/-. 2.1.2 FOR ASSESSMENT YEAR 2007-08, THE ASSESSEE FILED ITS RETURN OF FRINGE BENEFITS ON 6/10/2007 DECLARING THE VALUE OF FRINGE BENEFITS AT NIL. THE RETURN WAS PROCESSED UNDER SECTION 115 WE OF THE ACT ON 11/09/2009. SUBSEQUENTLY, THE ASSESSING OFFICER INI TIATED RE- ASSESSMENT PROCEEDINGS, ON OBSERVING THAT THE ASSES SEE HAD PAID WAGES AND SALARY TO ITS EMPLOYEES AND THAT CERTAIN OTHER EXPENDITURES 3 ITA NO. 4804&4805/MUM/2014 (ASSESSMENT YEAR : 2006-07&2007-08 WERE INCURRED BY THE ASSESSEE AGGREGATING TO RS.9,0 9,554/- ON BUSINESS PROMOTION, CAR, CONVEYANCE, STAFF WELFARE, TELEPHON E AND TRAVELLING EXPENSES WHICH CONSTITUTE FRINGE BENEFITS PROVIDED TO EMPLOYEES AS PER SECTION 115WA(2) OF THE ACT WERE EXIGIBLE TO FBT @ 20% THEREOF. THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 115WH OF THE ACT TO THE ASSESSEE IN THIS REGARD, AFTER RECORDING REASONS FO R RE-OPENING THE ASSESSMENT. THE ASSESSMENT WAS COMPLETED UNDER SEC TION. 115WG OF THE ACT VIDE ORDER DATED 29/1/2013, WHEREIN THE ASS ESSING OFFICER LEVIED FBT @ 20% OF THE FRINGE BENEFITS AMOUNTING T O RS.9,09,554/-. 2.2 IN COMING TO DECISION IN THE AFORESAID ORDERS F OR BOTH THE ASSESSMENT YEARS 2006-07 AND 2007-08, THE ASSESSING OFFICER OBSERVED THAT AS PER THE PROVISIONS OF SEC.115WA(2), FRINGE BENEFITS SHALL BE DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES IN THE COURSE OF HIS BUSINESS IRRESPECTIVE OF THE FACT THA T WHETHER SUCH ACTIVITY WAS CARRIED ON WITH THE OBJECT OF DERIVING INCOME A ND THAT FBT SHALL BE PAYABLE BY THE EMPLOYER EVEN IF NO INCOME TAX IS PA YABLE BY HIM/IT ON HIS TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PR OVISIONS OF THE ACT. THE ASSESSING OFFICER IN THIS CONTEXT, CAME TO THE VIEW THAT IN THE CASE ON HAND, THOUGH THE ASSESSEE HAD ONLY AGRICULTURAL INCOME WHICH WAS EXEMPT FROM INCOME-TAX, EVEN THEN THE ASSESSEE IS L IABLE TO FBT FOR FRINGE BENEFITS PROVIDED BY THE ASSESSEE TO ITS EMP LOYEES. IN COMING TO THIS FINDING, THE ASSESSING OFFICER PLACED RELIANCE ON THE DECISION OF THE ITAT, KOLKATA BENCH IN THE CASE OF MCLEOD RUSSEL IN DIA LTD., IN ITA NO.289/K/2011 DATED 25/05/2012, WHEREIN IT WAS HELD AS UNDER:- WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF TH E ID. REPRESENTATIVES OF THE PARTIES AND ORDERS OF THE AU THORITIES 4 ITA NO. 4804&4805/MUM/2014 (ASSESSMENT YEAR : 2006-07&2007-08 BELOW. WE HAVE ALSO CONSIDERED THE RELEVANT PROVISI ONS, IE. SECTION 115WA, 115WB & 115 WE OF THE INCOME TAX ACT . WE OBSERVE THAT AN EMPLOYER ASSESSEE IS LIABLE TO PAY FRINGE BENEFIT TAX UNDER SECTION 115WA OF THE INCOME TAX ACT, IN R ELATION TO FRINGE BENEFITS PROVIDED BY HIM TO ITS EMPLOYEES. S UB-SECTION (2) OF SECTION 115WA STARTS WITH AN NON OBSTANTE CLAUSE AND STATES THAT NOTWITHSTANDING THAT NO INCOME- TAX IS P,1YABL E BY AN EMPLOYER TO ITS TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, THE TAX ON FRINGE BENEFITS S HALL BE PAYABLE BY SUCH AN EMPLOYER. THEREFORE, AN EMPLOYER IS LIAB LE TO PAY FRINGE BENEFIT TAX EVEN WHEN NO INCOME-TAX IS PAYAB LE BY AN EMPLOYER ON HIS TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX ACT. THEREFORE, THE CO NTENTION OF THE ID. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT VALUE OF FRINGE BENEFIT SHOULD BE COMPUTED BY APPLYING RULE 8 OF IN COME TAX RULE HAS NO MERIT AS FRINGE BENEFIT TAX IS NOT PAYA BLE ON THE INCOME OF AN ASSESSEE BUT ONLY FRINGE BENEFITS PROV IDED BY AN EMPLOYER TO ITS EMPLOYEES. IN VIEW OF THE ABOVE, WE AGREE WITH THE ID. DEPARTMENTAL REPRESENTATIVE THAT THE CONTEN TION OF THE ID. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS NO M ERIT AND ACCORDINGLY, WE UPHOLD THE ORDER F THE ID. CIT(A) B Y REJECTING GROUNDS OF APPEAL TAKEN BY THE ASSESSEE. RESPECTFUL LY FOLLOWING THE TRIBUNAL'S DECISION WE REVERSE THE ORDER OF ERR (A) AND THIS ISSUE OF REVENUE'S APPEAL IS ALLOWED.' 3. AGGRIEVED BY THE ORDERS UNDER SECTION 115WG OF T HE ACT DATED 29/1/2013 FOR BOTH ASSESSMENT YEARS 2006-07 AND 200 7-08, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD CIT(APPEALS)-4, MUMBAI. THE LD. CIT(A) VIDE SEPARATE ORDERS DATED 12/2/2013, DISMISSED THE ASSESEES APPEALS. 4. THE ASSESSEE, AGGRIEVED BY THE IMPUGNED ORDERS O F THE CIT(APPEALS)-4, MUMBAI DATED 12/2/2013, HAS PREFERR ED THESE APPEALS RAISING SIMILAR/IDENTICAL GROUNDS WHICH ARE EXTRAC TED HEREUNDER:- 5 ITA NO. 4804&4805/MUM/2014 (ASSESSMENT YEAR : 2006-07&2007-08 4.1 FOR ASSESSMENT YEAR 2006-07:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE NOTICE ISSUED U/S.115WH R/W. SECTION 115WG OF THE I NCOME TAX ACT, 1961, IS VOID AB INITIO. 2. THE REASONS GIVEN BY CIT-(A) FOR CONFIRMING THE AO.'S ACTION OF INITIATING NOTICE U/S. 115WH R/W. SECTION 115WG OF THE ACT IS WRONG, INSUFFICIENT AND CONTRARY TO FACTS AND EVIDE NCE ON RECORD. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE NOTICE ISSUED U/S. 115WH R/W. SECTION 115WG OF THE ACT IS VOID AB INITIO AS THE SAME IS ISSUED WITHOUT OBTAINING SATISFACTION FROM CHIEF COMMISSIONER OR THE COMMISSIONER. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LEARNED CIT- (A) ERRED IN CONFIRMING AO'S ACTION OF IMPOSING FRINGE BENEFIT TAX OF RS. 3,00,149/- INCLUDING INTEREST OF RS. 1,35,232/- U/S. 115WJ(5) OF THE INCOME TAX ACT, 1961. 5. REASONS GIVEN BY THE LEARNED CIT-(A) FOR CONFIR MING AO'S ACTION OF IMPOSING FRINGE BENEFIT TAX OF RS. 3,00,149/- IN CLUDING INTEREST OF RS. 1,35,232/- U/S. 115WJ(5) OF THE INCOME TAX A CT, 1961, ARE WRONG, INSUFFICIENT AND CONTRARY TO FACTS AND EVIDE NCE ON RECORD. 6. APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, MOD IFY OR OMIT ANY OF THE AFORESAID GROUNDS OF APPEAL AS OCCASION MAY ARISE OF DEMAND. 4.2 FOR ASSESSMENT YEAR 2007-08:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE NOTICE ISSUED U/S.115WH R/W. SECTION 115WG OF THE I NCOME TAX ACT, 1961, IS VOID AB INITIO. 2. THE REASONS GIVEN BY CIT-(A) FOR CONFIRMING THE AO.'S ACTION OF INITIATING NOTICE U/S. 115WH R/W. SECTION 115WG OF THE ACT IS WRONG, INSUFFICIENT AND CONTRARY TO FACTS AND EVIDE NCE ON RECORD. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE NOTICE ISSUED U/S. 115WH R/W. SECTION 115WG OF THE ACT IS VOID AB INITIO AS THE 6 ITA NO. 4804&4805/MUM/2014 (ASSESSMENT YEAR : 2006-07&2007-08 SAME IS ISSUED WITHOUT OBTAINING SATISFACTION FROM CHIEF COMMISSIONER OR THE COMMISSIONER. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LEARNED CIT- (A) ERRED IN CONFIRMING AO'S ACTION OF IMPOSING FRINGE BENEFIT TAX OF RS. 3,11,722/- INCLUDING INTEREST OF RS. 1,26,173/- U/S. 115WJ(5) OF THE INCOME TAX ACT, 1961. 5. REASONS GIVEN BY THE LEARNED CIT-(A) FOR CONFIR MING AO'S ACTION OF IMPOSING FRINGE BENEFIT TAX OF RS. 3,11,722/- INCLUDING INTEREST OF RS. 1,26,173/ U/S. 115WJ(5) OF THE IN COME TAX ACT, 1961, ARE WRONG, INSUFFICIENT AND CONTRARY TO FACTS AND EVIDENCE ON RECORD. 6. APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, MOD IFY OR OMIT ANY OF THE AFORESAID GROUNDS OF APPEAL AS OCCASION MAY ARISE OF DEMAND. 5. GROUNDS 1 TO 3 AND 6: 5.1 AT THE OUTSET, THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS NOT PRESSING OR URG ING THE GROUNDS RAISED AT SL.NO.1 TO 3 AND 6 IN THESE APPEALS. SIN CE, GROUNDS NOS.1 TO 3 AND 6 ARE NOT BEING PRESSED BY THE ASSESSEE IN ITS APPEALS FOR ASSESSMENT YEARS 2006-07 AND 2007-08, THESE GROUND S ARE RENDERED INFRUCTUOUS AND ARE ACCORDINGLY DISMISSED. 6. GROUNDS 5 & 5:- 6.1 IN THESE GROUNDS (SUPRA), THE ASSESSEE ASSAILS THE ORDER OF THE LD. CIT(A) IN UPHOLDING THE ASSESSING OFFICERS ACTION IN IMPOSING FBT IN THE CASE ON HAND AS BEING ERRONEOUS. THE LD. REPRESENT ATIVE FOR THE ASSESSEE WAS HEARD IN SUPPORT OF THE GROUNDS RAISED . URGING THAT THE PROPOSITION THAT SINCE THE ASSESSEES INCOME COMPRI SED OF ONLY AGRICULTURAL INCOME THAT WAS EXEMPT FROM INCOME TAX UNDER SECTION. 10 OF THE ACT THE LD. REPRESENTATIVE FOR THE ASSESSEE CONTENDED THAT NO 7 ITA NO. 4804&4805/MUM/2014 (ASSESSMENT YEAR : 2006-07&2007-08 FBT WAS CHARGEABLE, SINCE THE EXPENDITURE INCURRED BY THE ASSESSEE IN EXTENDING FRINGE BENEFITS TO ITS EMPLOYEES WAS SOLE LY FOR THE PURPOSE OF ITS AGRICULTURAL ACTIVITIES. IN SUPPORT OF THIS PRO POSITION, THE LD. AR FOR THE ASSESSEE PLACED RELIANCE ON THE RATIO OF THE DE CISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF APEEJAY TEA LTD. VS. CIT AND ANOTHER (2015) 370 ITR 775(CAL.); WHICH IT WAS SUBMITTED CO VERED THE QUESTION OF WHETHER FBT IS IMPOSABLE IN A CASE WHERE THE INC OME INVOLVED; I.E. AGRICULTURAL INCOME IS ITSELF EXEMPT FROM TAX; IN F AVOUR OF THE ASSESSEE, AS THE PROVISIONS OF CHAPTER-XII H OF THE ACT HAVE TO BE READ SUBJECT TO SECTION-10 OF THE ACT AND ANYTHING TO THE CONTRARY WOULD RESULT IN AGRICULTURAL INCOME ITSELF BECOMING LIABLE TO TAX W HICH IS NOT PERMISSIBLE UNDER SECTION 10(1) OF THE ACT. 6.2 PER CONTRA, THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL DECISIONS CITED. THE QUESTION BEFORE US FOR CONSIDERATION IN THE CAS E ON HAND IS WHETHER THE ASSESSEE EMPLOYER IS LIABLE TO BE CHARGED WITH FBT, NOTWITHSTANDING THE FACT THAT THE ASSESSEES INCOME DERIVED ONLY F ROM AGRICULTURE WAS EXEMPT FROM INCOME TAX UNDER SECTION 10(1) OF THE A CT. 6.3.2 ACCORDING TO THE AUTHORITIES BELOW, AS IN THE CASE ON HAND, IN VIEW OF THE PROVISIONS OF CHAPTER XII-H DEALING WIT H FBT, EVEN IF THE ASSESSEE HAS ONLY AGRICULTURAL INCOME, FBT IS ATTRA CTED IN RESPECT OF FRINGE BENEFITS PROVIDED BY THE ASSESSEE EMPLOYER T O ITS EMPLOYEES, EVEN THOUGH AGRICULTURAL INCOME IS EXEMPT FROM INCO ME, BEING AN INCOME THAT DOES NOT FORM PART OF TOTAL INCOME. IN SUPPORT OF THIS 8 ITA NO. 4804&4805/MUM/2014 (ASSESSMENT YEAR : 2006-07&2007-08 PROPOSITION, THE AUTHORITIES BELOW RELIED ON THE DE CISION OF THE ITAT, KOLKATTA BENCH IN THE CASE OF MCLEOD RUSSEL INDIA LTD.(SUPRA), WHEREIN IT WAS HELD AS UNDER :- WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF TH E ID. REPRESENTATIVES OF THE PARTIES AND ORDERS OF THE AU THORITIES BELOW. WE HAVE ALSO CONSIDERED THE RELEVANT PROVISI ONS, IE. SECTION 115WA, 115WB & 115 WE OF THE INCOME TAX ACT . WE OBSERVE THAT AN EMPLOYER ASSESSEE IS LIABLE TO PAY FRINGE BENEFIT TAX UNDER SECTION 115WA OF THE INCOME TAX ACT, IN R ELATION TO FRINGE BENEFITS PROVIDED BY HIM TO ITS EMPLOYEES. S UB-SECTION (2) OF SECTION 115WA STARTS WITH AN NON OBSTANTE CLAUSE AND STATES THAT NOTWITHSTANDING THAT NO INCOME- TAX IS P,1YABL E BY AN EMPLOYER TO ITS TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, THE TAX ON FRINGE BENEFITS S HALL BE PAYABLE BY SUCH AN EMPLOYER. THEREFORE, AN EMPLOYER IS LIAB LE TO PAY FRINGE BENEFIT TAX EVEN WHEN NO INCOME-TAX IS PAYAB LE BY AN EMPLOYER ON HIS TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX ACT. THEREFORE, THE CO NTENTION OF THE ID. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT VALUE OF FRINGE BENEFIT SHOULD BE COMPUTED BY APPLYING RULE 8 OF IN COME TAX RULE HAS NO MERIT AS FRINGE BENEFIT TAX IS NOT PAYA BLE ON THE INCOME OF AN ASSESSEE BUT ONLY FRINGE BENEFITS PROV IDED BY AN EMPLOYER TO ITS EMPLOYEES. IN VIEW OF THE ABOVE, WE AGREE WITH THE ID. DEPARTMENTAL REPRESENTATIVE THAT THE CONTEN TION OF THE ID. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS NO M ERIT AND ACCORDINGLY, WE UPHOLD THE ORDER F THE ID. CIT(A) B Y REJECTING GROUNDS OF APPEAL TAKEN BY THE ASSESSEE. RESPECTFUL LY FOLLOWING THE TRIBUNAL'S DECISION WE REVERSE THE ORDER OF ERR (A) AND THIS ISSUE OF REVENUE'S APPEAL IS ALLOWED.' 6.3.3. FROM A PERUSAL OF THE DECISION OF THE HON'BL E CALCUTTA HIGH COURT IN THE CASE OF APEEJAY TEA LTD. (SUPRA), WE FIND TH AT IN THAT CASE ALSO THIS VERY SAME ISSUE AS IN THE CASE ON HAND HAD COME UP FOR CONSIDERATION BEFORE THE ITAT KOLKATTA BENCH AND THE TRIBUNAL IN ITS DECISION IN ITA NO.557/KOL/2010 HAD HELD, IN FAVOUR OF THE REVENUE ; EXACTLY AS HAD 9 ITA NO. 4804&4805/MUM/2014 (ASSESSMENT YEAR : 2006-07&2007-08 BEEN HELD BY THEM IN THE CASE RELIED ON BY REVENUE I.E. MCLEOD RUSSEL INDIA LTD. (SUPRA); THE FINDING OF WHICH WE HAVE EX TRACTED AT PARA 6.3.2 OF THIS ORDER (SUPRA).THE RELEVANT FINDING IN THE C ASE OF APEEJAY TEA LTD. BY KOLKATTA ITAT (SUPRA) AT PARA-7 THEREOF IS EXTRA CTED HEREUNDER FOR THE SAKE OF CLARITY :- 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LEARNED REPRESENTATIVES OF THE PARTIES AND THE ORDERS OF TH E AUTHORITIES BELOW. WE HAVE ALSO CONSIDERED THE RELEVANT PROVISIONS, I.E., SECTIONS 115WA, 115WB AND 115WE OF THE INCOME-TAX ACT. WE OBSERVE THAT AN EMPLOYER ASSESSEE IS LIABLE TO PAY FRINGE BENEFIT TAX UNDER SECTION 115W A OF THE INCOME-TAX ACT IN RELATION TO FRINGE BENEFITS PROVIDED BY HIM TO ITS EMPLOYEES, SUB-SECTION (2) OF SECTION 115WA STARTS WITH A NON OBSTANTE CLAUSE AND STATES THAT NOTWITHSTANDING THAT NO INCOME-TAX IS PAYABLE BY AN EMPLOYER TO ITS TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS O F THE ACT, THE TAX ON FRINGE BENEFITS SHALL BE PAYABLE BY SUCH AN EMPLOYE R. THEREFORE, AN EMPLOYER IS LIABLE TO PAY FRINGE BENEFIT TAX EVEN WHEN NO IN COME-TAX IS PAYABLE BY AN EMPLOYER ON HIS TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PRO- VISIONS OF THE INCOME-TAX ACT. THEREFORE, THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE THAT THE VALUE OF F RINGE BENEFIT SHOULD BE COMPUTED BY APPLYING RULE 8 OF THE INCOME- TAX RULE S HAS NO MERIT AS FRINGE BENEFIT TAX IS NOT PAYABLE ON THE INCOME OF THE ASS ESSEE BUT ONLY FRINGE BENEFITS PROVIDED BY AN EMPLOYER TO ITS EMPLOYEES. IN VIEW OF THE ABOVE, WE AGREE WITH THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSES SEE HAS NO MERIT AND, ACCORDINGLY, WE UPHOLD THE ORDER OF THE LEARNED COM MISSIONER OF INCOME-TAX (APPEALS) BY REJECTING THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE.' 6.3.4 ON APPEAL BY THE ASSESSEE, THE HON'BLE HIGH C OURT OF CALCUTTA, IN THE CASE OF APEEJAY TEA LTD. SUPRA), REVERSED THE A BOVE DECISION OF THE ITAT KOLKATTA BENCH IN APEEJAY TEA LTD. (SUPRA), HO LDING IT TO BE UNSUSTAINABLE. AT PARAS 8 TO 11 OF THIS ORDER, THEI R LORDSHIPS HELD AS UNDER:- 8.WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ADVANCED BY ME LEARNED ADVOCATES. FOR THE PURPOSE OF RESOLVING THE DISPUTE S, WE WOULD LIKE TO REFER TO THE ILLUSTRATION APPEARING FROM THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT V. DOOM DOO1NA INDIA LTD. (SUPRA). THE ILLUS TRATION IN PARA- GRAPHS 12 AND 13 OF THE JUDGMENT READS AS FOLLOWS (PAGE 397) : 10 ITA NO. 4804&4805/MUM/2014 (ASSESSMENT YEAR : 2006-07&2007-08 'BE THAT AS IT MAY, WE CAN GIVE THE FOLLOWING ILLUS TRATION(S) WHICH WILL GIVE AN EXAMPLE OF HOW THE 'WRITTEN DOWN VALUE' NEE DS TO BE COMPUTED : ILLUSTRATION -A (RS.) INCOME FROM SALE OF TEA 1000 LESS : EXPENSES: DEPRECIATION (100) OTHERS (300) BUSINESS PROFIT 600 INCOME SUBJECT TO CHARGE UNDER THE INCOM E-TAX ACT BY APPLICATION OF RULE 8(40% OF 600) 240 ILLUSTRATION -B (RS.) INCOME FROM SALE OF TEA (40% OF 1000) 400 LESS : EXPENSES: DEPRECIATION (40) OTHERS (40% OF 300) (120) BUSINESS PROFIT SUBJECT TO CHARGE OF INCOME TAX(40% OF 600) 240 ANALYSING THE ABOVE TWO CHARTS, WE FIND THAT AT THE END OF COM- PUTATION THE INCOME' CHARGEABLE TO TAX BY APPLYING RULE 8 COMES TO RS. 240. UNDER ILLUSTRATION A, THE NORMAL DEPRECIAT ION IS RS. 100 WHICH IS DEDUCTIBLE FROM RS:1,OOO~HEIII.G THE INCOME FROM SALE OF TEA. ON THE OTHER HAND, UNDER ILLUSTRATION B, WE HAVE' TAKE N 40 PER CENT. OF EACH OF THE ITEMS, NAMELY, INCOME 'FROM SALE' OF TE A, DEPRECIATION AND OTHER EXPENSES. ACCORDINGLY,' 'ON COMPARISON IT MAY BE NOTED THAT WHEREAS INCOME FROM SALE OF TEA IS RS. '1,000 UNDER ILLUSTRATION- A, PROPORTION- ATELY IT COMES TO RS. 400 UNDER ILLUSTR ATION B. SIMILARLY, DEPRECIATION UNDER ILLUSTRATION- A WHICH IS NORMAL DEPRECIATION IS RS. 100 WHEREAS IN ILLUSTRATION B AT 40PER CENT. THE PR O RATA DEPRECIATION IS 40. WHAT IS IMPORTANT TO 'BE NOTED' IS' THAT AT THE END OF COMPUTATION UNDER BOTH THE ILLUSTRATIONS, THE INCOM E. TAXABLE BY APPLYING RULE 8 COMES TO RS.240 IN BOTH THE CASES . THE ONLY DIFFERENCE IS THAT IN ILLUSTRATION, B WE HAVE GONE BY PRO RATA BASIS.' 9. THE QUESTION FOR CONSIDERATION BEFORE THEIR LOR DSHIPS WAS WHETHER DEDUCTION ON ACCOUNT OF DEPRECIATION IS ALLOWABLE F ROM THE BUSINESS INCOME ARRIVED AT AFTER APPLYING RULE 8. THIS QUESTION WAS ANSWERED, BY THEIR LORDSHIPS IN THE AFFIRMATIVE. FROM ILLUSTRATION A, IT WOULD APPEAR THAT BUSINESS PROFIT AFTER TAKING INTO ACCOUNT THE EXPEN SES WAS COMPUTED AT RS.600. APPLYING RULE 8 TAXABLE INCOME ON ACCOUNT O F BUSINESS WAS COMPUTED AT RS. 240, THAT IS TO SAY, 40 PER CENT OF RS. 600. FROM ILLUSTRATION B, IT WOULD 11 ITA NO. 4804&4805/MUM/2014 (ASSESSMENT YEAR : 2006-07&2007-08 APPEAR THAT 40 PER CENT. OF THE TOTAL INCOME FROM S ALE OF TEA WAS TAKEN INTO ACCOUNT. FROM ILLUSTRATION A IT WOULD APPEAR THAT T OTAL DEPRECATION RS. 100. FOR THE PURPOSE OF COMPUTING BUSINESS PROFIT AND LO SS OF 40 PER CENT OF THE TOTAL DEPRECIATION WAS TAKEN INTO ACCOUNT. FROM IL LUSTRATION A IT WOULD APPEAR THAT OTHER EXPENSES WERE COMPUTED AT RS.300 AND ILLUSTRATION B WOULD SHOW THAT OTHER EXPENSES WERE COMPUTED AT RS. 120, IN OTHER WORDS, 40 PER CENT OF RS.300 HAD BEEN TAKEN INTO ACCOUNT. 10. WE SHALL TAKE ASSISTANCE OF THE ILLUSTRATION T O RESOLVE THE ISSUE. LET US 10 ASSUME THAT THE OTHER EXPENSES IN ILLUSTRATION A AMOUNTING TO RS. 300 INCLUDE RS. 100 SPENT BY THE EMPLOYER ON ACCOUNT OF FRINGE BENEFITS MADE AVAILABLE TO ITS EMPLOYEES. IN THAT CASE, 40 PER CE NT. OF THE AFORESAID SUM OF RS. 100 WOULD ALSO BE INC1UDIBLE IN ILLUSTRATION B. THEREFORE, THE QUESTION POSED BEFORE US HAS REALLY BEEN .ANSWERED BY THE IL LUSTRATION GIVEN BY THE APEX COURT IN THE AFORESAID JUDGMENT. IT CANNOT BE DISPUTED THAT THE AMOUNT OF EXPENDITURE INCURRED BY THE ASSESSEE IN EXTEND ING FRINGE BENEFITS TO ITS EMPLOYEES WAS NOT SOLELY FOR THE PURPOSE OF BUSINES S. THE EXPENDITURE INCURRED IS BOTH FOR THE PURPOSE OF BUSINESS AND F OR THE PURPOSE OF AGRICULTURE. THE THE SUBMISSION MADE BY MRS. GUT GUTIA THAT THE EXPENDITURE ON ACCOUNT OF FRINGE BENEFITS HAS ALREA DY BEEN TAKEN INTO ACCOUNT IS NOT CORRECT. THE NET PROFIT. AND LOSS OF THE BUSINESS HAS TO BE ARRIVED AT AFTER DEDUCTING ALL THE EXPENSES AS INDI CATED IN ILLUSTRATION A IN THE CASE OF DOOM DOOMA(SUPRA). ONCE THAT IS DONE 40 PER CENT. OF THE NET PROFIT AND LOSS HAS TO BE, WORKED OUT WHICH SHALL BE CHARG EABLE TO TAX. ONCE THIS IS DONE THE EXPENDITURE ON ACCOUNT OF FRINGE BENEFITS WOULD AUTOMA- TICALLY STAND REDUCED TO 40 PER CENT. AS WOULD APPEAR FROM ILLUSTRATION B IN THE CASE OF DOOM D007NA (SUPRA). THE REVENUE IS INTERESTED I N CONTENDING AS WOULD APPEAR FROM THE IMPUGNED ORDERS THAT THE EXPENDITUR E ON ACCOUNT OF FRINGE BENEFIT CANNOT BE REDUCED TO 40 PER CENT. FOR THE P URPOSE OF COMPUTING FRINGE BENEFIT TAX. IF THAT IS DONE, THE RESULT WOU LD BE THAT THE AGRICULTURAL INCOME ITSELF WOULD BECOME LIABLE TO TAX, WHICH IS NOT PERMISSIBLE UNDER SUB- SECTION (1) OF SECTION 10 OF THE INCOME TAX ACT. TH E PRO- VISIONS CONTAINED IN CHAPTER XII-H OF THE INCOME-TAX ACT HAVE TO BE READ SUBJECT TO SECTION 10 OF THE INCOME-TAX ACT. 11. FOR THE AFORESAID REASONS, WE ARE OF THE OPINIO N THAT THE JUDGMENT OF THE LEARNED TRIBUNAL CANNOT BE SUSTAINED. 6.3.5 ON A PERUSAL OF THE DECISION OF THE HON'BLE C ALCUTTA HIGH COURT IN THE CASE OF APEEJAY TEA LTD. (SUPRA), AND THE FINDI NG RENDERED THEREIN, WE FIND THAT IT COVERS THE ISSUE BEFORE US SQUARELY IN FAVOUR OF THE ASSESSEE IN THE CASE IN HAND. RESPECTFULLY, FOLLOWI NG THE AFORESAID DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF APEEJAY TEA LTD.(2015) 370 ITR 775 (CAL.), WE REVERSE THE IMPUG NED ORDERS OF THE LD. 12 ITA NO. 4804&4805/MUM/2014 (ASSESSMENT YEAR : 2006-07&2007-08 CIT(A) FOR ASSESSMENT YEARS 2006-07 AND 2007-08 AND ALLOW THE ASSESSEES GROUNDS AT SL.NO. 4 AND 5 THEREOF, HOLDI NG THAT THE ASSESSEE IN THE CASE ON HAND IS NOT LIABLE FOR IMPOSITION O F FBT, SINCE ITS ONLY INCOME I.E., AGRICULTURAL INCOME IS EXEMPT FROM INC OME TAX UNDER SECTION 10(1) OF THE ACT AND THIS INCOME DOES NOT F ORM PART OF AND IS NOT TO BE INCLUDED IN TOTAL INCOME. 7. IN THE RESULT, THE ASSESSEES APPEAL ARE PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 26/08/2016 SD/- SD/- (SANDEEP GOSAIN) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI, DATED 26 /08/2016 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI