M/s Rashtriya Ispat Nigam Limited, Visakhapatnam V. THE Addl. CIT., RANGE - 3, Visakhapatnam

ITA 500/VIZ/2012

• Counselvise Citation: 50025314 RSA 2012
• Duration Of Justice: 1 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 31-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA

Judgement Text

1 I.T.A. NOS.996 & 500/VIZ/2012 ASSESSMENT YEARS:2006-07 & 2009-10 RINL IN THE INCOME TAX APPELLATE TRIBUNAL, VISHAKHAPATNA M BEFORE S/SHRI D.MANMOHAN (VP) & J.SUDHAKAR REDDY (A M) I.T.A. NO.96/VIZ/2012 : ASSESSMENT YEAR: 2006-07 I.T.A. NO.500/VIZ/2012: ASSESSMENT YEAR: 2009-2010 M/S. RASHTRIYA ISPAT NIGAM LIMITED, VISAKHAPATNAM STEEL PLANT, 2 ND FLOOR, ADMINISTRATIVE BUILDING, F& A DEPARTMENT, TAXATION CELL, VISAKHAPATNAM- 530031 VS. ADDL. CIT, RANGE - 3, VISAKHAPATNAM. PAN/GIR NO. : AABCR 0435 L ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI G.V.N. HARI RESPONDENT BY : SHRI K.V.N. CHARYA DATE OF HEARING : 01/12/2014 DATE OF PRONOUNCEMENT :05/12/2014 O R D E R PER J.SUDHAKAR REDDY, AM THESE TWO APPEALS ARE FILED BY THE ASSESSEE AND DI RECTED AGAINST SEPARATE IDENTICAL ORDERS DATED 19.12.2011 AND 31.10.2012 OF LD CIT(A) -VISAKHAPATNAM, WHEREIN, THE FRINGE BENEFITS TAX LEVIED BY THE AO HAS BEEN CONFIRMED. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY IN WHICH PUBLIC ARE SUBSTANTIALLY INTERESTED AND IS ENGAGED IN MANUFACT URE AND SALE OF IRON AND STEEL PRODUCTS. THE ASSESSEE COMPANY FILED ITS RETURN OF FRINGE BENEFIT S ALONGWITH RETURN OF INCOME ADMITTING TOTAL 2 I.T.A. NOS.996 & 500/VIZ/2012 ASSESSMENT YEARS:2006-07 & 2009-10 RINL VALUE OF FRINGE BENEFITS OF RS.11,68,13,130/- AND R S.13,55,65,573/-, FOR THE ASSESSMENT YEARS 2006-07 AND 2009-2010. ASSESSMENTS WERE TAKEN UP F OR SCRUTINY AND WERE COMPLETED BY MAKING THE FOLLOWING ADDITIONS: 2006-07 2009-2010 ADDITION TOWARDS POST RETIREMENT BENEFIT EMPLOYEES SCHEME RS.79,02,617/- RS.16,67,505/- ADDITION TOWARDS EXPENSES ON EMPLOYEES FAMILY BENEF IT SCHEME: R.2,46,022/- R.1,32,45,056 3. ON APPEAL, THE FIRST APPELLATE AUTHORITY CONFIRM ED THE ACTION OF THE ASSESSING OFFICER. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US FOR BOTH THE ASSESSMENT YEARS. 4. LD COUNSEL FOR THE ASSESSEE SHRI G.V.N. HARI SUB MITTED THAT THE TWO SCHEMES IN QUESTION, ON WHICH, FRINGE BENEFITS TAX HAS BEEN LE VIED, ARE WELFARE SCHEMES FOR THE EMPLOYEES, THE BENEFIT OF WHICH ARE PAYABLE POST RETIREMENT. HE RELIED ON THE LANGUAGE OF SECTION 115WB(1)(A) R.W.S 115WB (2) (E). HE SUBMITTED THA T THESE SECTIONS DO NOT COVER FORMER EMPLOYEES. HE REFERRED TO SECTION 115WB(1)(A) AND SUBMITTED THAT A REFERENCE HAS BEEN MADE HEREIN TO PRESENT AND FORMER EMPLOYEES AND THAT, IN THE COMPUTATION PROVISIONS U/S.115WB(1)(A)(3) NO REFERENCE HAS BEEN MADE TO S ECTION 115WB(1)(A) AND ARGUED THAT THE COMPUTATION PROVISIONS FAIL IN RESPECT OF FORMER EM PLOYEES. HE RELIED ON CBDT CIRCULAR NO.8 OF 2005 DATED 29 TH AUGUST, 2005 AND SUBMITTED THAT THE CBDT ACKNOWLED GES THE POSITION THAT COMPUTATION PROVISIONS FALL AS FAR AS PROVISIONS OF U/S.115WB(1)(A) OF THE ACT. HE SUBMITTED THAT THE ASSESSEES CASE FALLS UNDER SECTION 115WB( 2)(E) OF THE ACT. HE FURTHER RELIED ON SECTION 115WB(3) AND SUBMITTED THAT THE PRIVILEGE, SERVICE, FACILITY OR AMENITY DOES NOT INCLUDE PERQUISITES IN RESPECT OF WHICH TAX IS PAID OR PAYA BLE BY THE EMPLOYEES. HE ARGUED THAT THERE IS NO PROVISION IN THE INCOME TAX ACT FOR GRANTING EXE MPTION FROM TAX TO THE EMPLOYEE FOR POST RETIREMENT BENEFIT EMPLOYEES SCHEME AMOUNTS RECEIV ED BY THEM OR WHICH ARE RECEIVED UNDER EMPLOYEES FAMILY BENEFIT SCHEME. HE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF R & B FALCON (A) PTY LTD. VERSUS COMMISSIONER OF IN COME TAX, 301 ITR 309 (SC) AND SUBMITTED THAT THE FINDINGS OF LD CIT(A) THAT SECTI ON 115WB(1)(A) AND (B) ARE ON THE SAME FIELD. 3 I.T.A. NOS.996 & 500/VIZ/2012 ASSESSMENT YEARS:2006-07 & 2009-10 RINL 5. ON THE OTHER HAND, LD D.R. SHRI K.V.N.CHARYA OPP OSED THE CONTENTION OF THE ASSESSEE AND SUBMITTED THAT SOME OF THE RETIREMENT BENEFITS ARE GIVEN TO THE EMPLOYEES ON THE MORNING OF THE LAST DATE OF HIS EMPLOYMENT AND THAT AT THA T TIME HE IS STILL AN EMPLOYEE. UNDER THESE CIRCUMSTANCES, THE ARGUMENTS THAT PAYMENT IS GIVEN TO FORMER EMPLOYEE AND HENCE IT DOES NOT FALL WITHIN THE AMBIT OF SECTION 115WB DOES NOT ARI SE. HE RELIED ON THE ORDER OF LD CIT(A) AND SUBMITTED THAT SECTION 115WB (1)(A) CLEARLY PROVIDE S FOR TAXING OF ANY FACILITY OR AMENITY PROVIDED BY THE EMPLOYER TO THE EMPLOYEES. 6. RIVAL CONTENTIONS HEARD. ON CAREFUL CONSIDERATI ON OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAPERS ON RECORD AND ORD ERS OF AUTHORITIES BELOW AS WELL AS CASE LAW CITED, WE HOLD AS FOLLOWS: 1) THE NATURE OF BENEFITS THAT ARE COVERED UNDER TH E TWO SCHEMES IN QUESTION ARE NOT ON RECORD. 2) UNLESS THE DETAILS ARE AVAILABLE, IT WOULD NOT B E POSSIBLE TO ADJUDICATE THE ISSUE IN THE CORRECT PERSPECTIVE. 3) BE THAT AS IT MAY, WE, ON A PLAIN READING OF THE ACT, COME TO THE FOLLOWING CONCLUSIONS: A) SECTION 115WB (1)(A) READS AS FOLLOWS: (1) FOR THE PURPOSES OF THIS CHAPTER FRINGE BENEF ITS MEANS ANY CONSIDERATION FOR EMPLOYMENT PROVIDED BY WAY OF (A) ANY PRIVILEGE, SERVICE, FACILITY OR AMENITY, DIRECT LY OR INDIRECTLY, PROVIDED BY AN EMPLOYER, WHETHER BY WAY OF REIMBURS EMENT OR OTHERWISE, TO HIS EMPLOYEES (INCLUDING FORMER EMPLO YEE OR EMPLOYEES B) SECTION 115WC (1)(A) READS AS FOLLOWS: (1) FOR THE PURPOSES OF THIS CHAPTER, THE VALUE OF FRINGE BENEFITS SHALL BE THE AGGREGATE OF THE FOLLOWING, NAMELY:- (A) COST AT WHICH THE BENEFITS REFERRED TO IN CLAUSE (B ) OF SUB-SECTION91) OF SECTION 115WB, IS PROVIDED BY THE EMPLOYER TO T HE GENERAL PUBLIC 4 I.T.A. NOS.996 & 500/VIZ/2012 ASSESSMENT YEARS:2006-07 & 2009-10 RINL AS REDUCED BY THE AMOUNT, IF ANY, PAID BY, OR RECOV ERED FROM, HIS EMPLOYEE OR EMPLOYEES. (B) THE CBDT IN ITS CIRCULAR NO.8 OF 2005 DATED 29.8.20 05 HAS AT PARA 11.1 QUESTION NO.7 STATED AS FOLLOWS: QUESTION NO.7- WHETHER THE DEEMING PROVISIONS OF SU B-SECTION (2) OF SECTION 115WB QUANTIFY THE FRINGE BENEFITS REFERRED TO IN CLAUSE (A) OF SUB-SECTION (1) OF SECTION 115WB? IF NOT, HOW ARE T HE BENEFITS REFERRED TO IN THE SAID CLAUSE TO BE VALUED? ANSWER: ANS. IN TERMS OF THE PROVISIONS OF SUB-SECT ION (1) OF SECTION 115WA, AN EMPLOYER IN INDIA IS LIABLE TO FBT IN RESPECT OF TH E VALUE OF FRINGE BENEFITS : (A) PROVIDED BY HIM TO HIS EMPLOYEES; AND {B} DEEMED TO HAVE BEEN PROVIDED BY HIM TO HIS EMPL OYEES. THE SCOPE OF FRINGE BENEFITS PROVIDED OR DEEMED TO HAVE BEEN PROVIDED IS DEFINED IN SECTION 115WB. SUB-SECTION (1) OF THE SA ID SECTION DEFINES THE SCOPE OF FRINGE BENEFITS PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES. SIMILARL Y, SUB- SECTION (2) OF THE SAID SECTION DEFINES THE SCOPE O F FRINGEBENEFITS DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES . THEREFORE, SUB-SECTION (2) EXPANDS THE SCOPE OF SUB-SECTION (1) THROUGH A DEEMING PROVISION. THE PROVISION RELATING TO THE COMPUTATION OF THE VA LUE OF THE FRINGE BENEFITS IS CONTAINED IN SECTION 115WC. IT IS A SETTLED PRINCIP LE OF LAW THAT WHERE THE COMPUTATION PROVISION FAILS, THE CHARGING SECTION C ANNOT BE EFFECTUATED. THEREFORE, IF THERE IS NO PROVISION FOR COMPUTING T HE VALUE OF ANY PARTICULAR FRINGE BENEFIT, SUCH FRINGE BENEFIT, EVEN IF IT MAY FALL WITHIN CLAUSE (A) OF SUB- SECTION (1) OF SECTION 115WB, IS NOT LIABLE TO FBT. THUS, THE REVENUE HAS NO CASE, WHEN FRINGE BENEFITS ARE PROVIDED TO PERSONS WHO ARE NOT PRESENT EMPLOYEES OF THE ASSESSEE. NO FBD CAN BE LEVIED IN SUCH CASES. THE OTHER ASPECT THAT HAS TO BE SEEN WHETHER THE CO NDITIONS SPECIFIED IN SUB- SECTION (3) OF SECTION 115WB ARE FULFILLED OR NOT? THE FACTS ARE NOT ON RECORD. IN THE EVENT WHERE THERE IS NO SPECIFIC EXEMPTION U NDER THE INCOME TAX ACT WITH RESPECT TO TAXING OF THESE AMOUNTS IN THE HANDS OF THE EMPLOYEES, THEN NO FRINGE BENEFIT TAX CAN BE LEVIED ON THEM. THUS, WE SET AS IDE THE ISSUE TO THE FILE OF THE AO TO VERIFY : 5 I.T.A. NOS.996 & 500/VIZ/2012 ASSESSMENT YEARS:2006-07 & 2009-10 RINL AS TO WHAT ARE THE BENEFITS THAT ARE RECEIVED BY TH E EMPLOYEES DURING THEIR SERVICE AND TO VERIFY IF THESE BENEFITS ARE OTHERWI SE THAN BY CASH AND READJUDICATE THE MATTER IN ACCORDANCE WITH THE LAW . 7. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 5/12/201 4 . SD/- SD/- (D. MANMOHAN ) (J.SUDHAKAR REDDY) VICE PRESIDENT ACCOUNTANT MEMBER VISHAKHAPATNAM DATED 5/12/2014 PARIDA , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE : M/S. RASHTRIYA ISPAT NIGAM LIMITED, VISAKHAPATNAM STEEL PLANT, 2 ND FLOOR, ADMINISTRATIVE BUILDING, F& A DEPARTMENT, TAXATION CELL, VISAKHAPATNAM-53003 1 2. THE RESPONDENT. : ADDL. CIT, RANGE - 3, VISAKHAPATNAM 3. THE CIT(A) - VISAKHAPATNAM 4. CIT ,VISAKHAPATNAM 5. DR, ITAT, VISHAKHAPATNAM 6. GUARD FILE. BY ORDER SR.PS, ITAT, VISAKHAPATNAM //TRUE COPY//