Mahanagar Telephone Nigam Ltd., New Delhi V. DCIT, New Delhi

ITA 510/DEL/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7311 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 23-09-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 31-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P CHANDRAKAR
• Assessee Lawyers: RANO JAIN S; VED JAIN C A SHRI V CHORASIYA
• Keywords: Reopening of assessment; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E NEW DELHI BEFORE S HRI G .D. AGARWAL , HON BLE VI CE PRESIDENT AND SHRI GEORGE GEORGE K. , JUDICIAL MEMBER ITA NO. 5 1 0/(DEL) 201 1 ASSESSMENT YEAR 200 6 - 200 7 MAHANAGAR TELEPHONE NIGAM LTD. VS. DCIT 12 TH FLOOR, TOWER - I LTU JEEWAN BHARTI BUILDING NEW DELHI. 124, CANNAUGHT CIRCUS NEW DELHI. PAN: AAACM 0828 R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VED JAIN, C.A. , SHRI V. CHORASIYA AND SHRI RANO JAIN, ADVOCATES R ESPONDENT BY : S HRI J.P. CHANDRAKAR , SR . D.R . ORDER PER GEORGE GEORGE K., J . M : 1. THIS APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST THE LD. CIT(A) S ORDER DATED 15.12.2010. THE CIT(A) S ORDER ARISE OUT OF THE ASSESSING O FFICER ORDE R PASSED U/S 115WE(3) R.W.S. 115WC OF THE INCOME TAX ACT, 1961. THE RELEVANT ASSESSMENT YEAR IS 2006 - 07. ITA NO. 510/(DEL) 201 1 ASSESSMENT YE AR 2006 - 2007 2 2. THE GROUNDS RAISED READS AS UNDER: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOM E TAX (A) (CIT(A) IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE VALIDITY OF THE REOPENING OF ASSESSMENT UNDER SECTION 115WG OF THE ACT. 3. ON THE FA CTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN REJECTING THE CONTENTION OF THE APPELLANT THAT THE REASONS FOR REOPENING ARE BAD IN LAW AND AS SUCH REASSESSMENT DONE IN CONSEQUENCE THEREOF IS BAD IN LAW AND IS LIABLE TO BE QUASHED. 4(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING ADDITION OF RS.322,74,88,883/ - MADE BY AO ON ACCOUNT OF CONTRIBUTION TOWARDS PENSIONS FUND. (II) THAT THE ABOVE SAID ADDITION HAS BEEN MADE ARBITRARILY IGNORING THE EXPLANATION AND EVIDENCES FURNISHED BY THE ASSESSEE. (III) THAT THE ABOVE SAID ADDITION HAS BEEN MADE MISINTERPRETING THE PROVISIONS OF SECTION 115WB AND 115WC OF THE ACT. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL. 3. BRIEF FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE FILED RETURN DECLARING VALUE OF FRINGE BENEFIT AMOUNTING TO RS. 16,60,66,503/ - . THE ASSESSMENT U/S 115WE WAS COMPLETED ON 11.12.2008 ACCEPTING THE VALUE OF FRINGE BENEFIT DECLARED IN THE RETURN. THEREAFTER , THE ASSESSMENT WAS REOPENED, SINCE ACCORDING TO THE ASSESSING OFFICER ASSESSEE HAS FAILED TO DISCLOSE THE CONTRIBUTION TO THE SUPERANNUATION FUND AMOUNTING TO RS.322,74,88,883/ - . THE ASSESSEE OBJECTED TO THE REOPENING OF THE ASSESSMENT ON ITA NO. 510/(DEL) 201 1 ASSESSMENT YE AR 2006 - 2007 3 THE GROUND THAT THE ASSESSMENT WAS COMPLETED IN SCRUTINY AND THERE WAS NO REASON FOR THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT. ON MERIT , IT WAS SUBMITTED THAT AN AMOUNT PAID DOES NOT PERTAIN TO THE ASSESSEE EMPLOYEES ON THE CONTRAR Y THIS IS A CONTRIBUTION BY THE ASSESSEE TO THE DEPARTMENT OF TELECOMMUNICATION TO WHOM THESE EMPLOYEES BELONGS AND ARE ON DEPUTATION WITH THE ASSESSEE COMPANY. FURTHER IT WAS SUBMITTED THAT LIABILITY TO PAY THE PENSION IS WITH THAT OF THE GOVERNMENT OF IN DIA AND NOT ASSESSEE AND HENCE THIS AMOUNT CANNOT BE CONSIDERED TO BE A FRINGE BENEFIT WITHIN THE MEANING OF SECTION 115WB(1)(C) OF THE ACT. THE ASSESSING OFFICER, HOWEVER, REJECTED THE CONTENTION S RAISED BY THE ASSESSEE AND COMPLETED THE REASSESSMENT BY T HE ORDER DATED 12.02.2010 BY INCLUDING SUM OF RS.322,74,88,883/ - AS VALUE OF FRINGE BENEFIT. 4. ON APPEAL, T HE CIT(A) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. THE RELEVANT FINDINGS OF THE CIT(A) READS AS FOLLOWS: PERUSAL OF THE ABOVE PROVIS IONS OF THE ACT SHOW THAT THE PROVISIONS CLEARLY COVER ANY CONTRIBUTION MADE TO SUPERANNUATION FUND. THE PROVISIONS OF THE STATUE ARE VERY STRAIGHT AND THERE IS NO DOUBT OR ANY AMBIGUITY. ANY CONTRIBUTION MADE TO THE SUPERANNUATION FUND IS LIABLE TO FBT. I N THE INSTANT CASE THE APPELLANT HAS MADE CONTRIBUTION OF RS.32274888 83/ - TOWARDS SUPERANNUATION FUND OF THE EMPLOYEES. THE CONTENTION OF THE APPELLANT THAT IT WAS MAKING THE PAYMENT ON BEHALF OF THE GOVERNMENT DOES NOT HOLD GOOD SINCE IT IS THE APPELLANT WHO HAS MADE THE PAYMENT AND THEREFORE THE LIABILITY IS OF THE APPELLANT TO OFFER THE CONTRIBUTION MADE TOWARDS THE SUPERANNUATION FUND FOR FBT. IN VIEW OF THE CLEAR PROVISIONS OF SECTION 115WB(1)(C) THE APPELLANT IS LIABLE TO PAY FBT ON THE ABOVE AMOUNT. KEEPING IN VIEW THE FINDINGS ABOVE I AM IN ITA NO. 510/(DEL) 201 1 ASSESSMENT YE AR 2006 - 2007 4 AGREEMENT WITH THE VIEWS OF THE AO THAT THE AMOUNT OF RS.3227488883/ - WAS LIABLE FOR FBT. THIS GROUND OF APPEAL IS DISMISSED. 5. THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFORE US. THE L D. COUNSEL FOR THE ASSESS EE REITERATED THE SUBMISSION S MADE BEFORE THE INCOME TAX AUTHORITY. HE ALSO FILED BRIEF WRITTEN SUBMISSION S , GIST OF THE SAME READS AS FOLLOWS: - 12 . 2 FRINGE BENEFITS TAX IS LEVIABLE WHEN THERE IS AN EMPLOYER - EMPLOYEE RELATIONSHIP . IN THE PRESENT CASE , TH ESE BEING EMPLOYEES OF DEPARTMENT OF TELECOMMUNICATION , GOVERNMENT OF INDIA WHO WERE ON DEPUTATION WITH THE MAHANAGAR TELEPHONE NIGAM LTD ., THERE WAS NO EMPLOYER - EMPLOYEE RELATIONSHIP. THE AMOUNT UNDER CONSIDERATION WAS THE PAYMENT BY THE MAHANAGAR TELEPHO NE NIGAM LTD . TO THE ACCOUNT OF DEPARTMENT OF TELECOMMUNICATION , GOVERNMENT OF INDIA AND AS SUCH IT WAS NOT A CONTRIBUTION TO ANY APPROVED SUPERANNUATION FUND . 12.3 THIS FACT ALSO GETS SUPPORT FROM THE DISPUTE WHICH WAS GOING BETWEEN THE EMPLOYEES AND T HE GOVERNMENT OF INDIA AND THE GOVERNMENT OF INDIA HAS AGREED TO PROVIDE ALL THE BENEFITS TO ITS EMPLOYEES ON THE LINE OF BSNL . 12 . 4 THUS THE VERY BASIS FOR THE AO FOR INCLUDING THIS AMOUNT AS FRINGE BENEF I T IS NOT CORRECT . 12 . 5 IN THIS REGARD IT MAY BE RELEVANT TO REFER TO THE CIRCULAR NO . 8/2005 DATED 29.08 . 2005 CLARIFYING VARIOUS FRINGE BENEFITS AND FRINGE BENEFIT TAX . ON PAGE 5 , IT HAS BEEN CLARIFIED THAT EMPLOYER - EMPLOYEE RELATIONSHIP IS A PRE - REQUISITE FOR THE LEVY OF FBT . 12.6 SECONDLY ON GOIN G THROUGH THE PROVISIONS OF SECTION 115WB(1 ) ( C) IT IS TO BE NOTED THAT THIS TAX IS LEVIABLE IN RESPECT OF THE CONTRIBUTION TO APPROVED SUPERANNUATION FUND . 12.7 THE ASSESSEE DOES NOT HAVE ANY APPROVED SUPERANNUATION FUND . IT HAS NOT CONTR I BUTED TO ANY SUP ERANNUATION FUND . IT HAS PAID THE AMOUNT TO THE DEPARTMENT OF TELECOMMUNICATION , GOVERNMENT OF IND I A . THIS PROVISION WAS SPECIFICALLY MEANT FOR BRINGING TO TAX CONTRIBUTION TO APPROVED SUPERANNUATION FUND. IN THE ABSENCE OF ANY SUCH APPROVED SUPERANNUATION FUND , THE AMOUNT CANNOT BE CONSIDERED AS FRINGE BENEFIT LIABLE FOR TAX. ITA NO. 510/(DEL) 201 1 ASSESSMENT YE AR 2006 - 2007 5 12.8 FURTHER IN THE PRESENT CASE THE AMOUNT HAS NOT BEEN CREDITED TO ANY IND I VIDUAL EMPLOYEE ACCOUNT . IT IS A LUMPSUM PAYMENT CREDITED TO THE ACCOUNT OF THE DEPARTMENT OF TELECOMMUN ICATION AND THE SAME DOES NOT ATTRACT THE PROVISIONS OF SECTION 115W8(1)(C) AS HAS BEEN HELD BY THE HON ' BLE ITAT IN THE CASE OF ANDHRA BANK, HYDERABAD VS DCIT I N ITA NO . 601/HYD/2012 DATED 16.7 . 2014. 6. THE LD. D.R. PRESENT WAS DULY HEARD. 7. WE HAVE HEA RD RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. THE RELEVANT PROVISION NAMELY SECTION 115W B(1) IS REPRODUCED IS BELOW: - 12.1 THE PROVISIONS OF SECTION 115WB(1) READS AS UNDER : - 115WB. (1) FOR THE PURPOSES OF THIS CHAPTER , 'FRINGE BENEFITS' MEANS ANY CONSIDERATION FOR EMPLOYMENT PROVIDED BY WAY OF - (A) ANY PRIVILEGE , SERVICE , FACILITY OR AMENITY , DIRECTLY OR INDIRECTLY , PROVIDED BY THE EMPLOYER, WHETHER BY WAY OF REIMBURSEMENT OR OTHERWISE , TO HIS EMPLOYEES (INCLUDING FORMER EMPLOYEE OR ' EMPLOYEES) ; (B) ANY FREE OR CONCESSIONAL TICKET PROVIDED BY THE EMPLOYER FOR PRIVATE JOURNEYS OF HIS EMPLOYEES OR THEIR FAMILY MEMBERS ; AND (C) ANY CONTRIBUTION BY THE EMPLOYER TO AN APPROVED SUPERANNUATION FUND FOR EMPLOYEES; AND (D) ANY S PECIFIED SECURITY OR SW EAT EQUITY SHARES ALLOTTED OR TRANSFERRED , DIRECTLY OR INDIRECTLY , BY THE EMPLOYER FREE OF COST OR AT CONCESSIONAL RATE TO HIS EMPLOYEES (INCLUDING FORMER EMPLOYEE OR EMPLOYEES). FROM READING OF THE ABOVE PROVISION , IT IS CLEAR CONTRIBUTION CAN BE BROUGH T TO THE VALUE OF FRINGE BENEFIT PROVIDED THERE IS AN EMPLOYER - EMPLOYEE RELATIONSHIP AND THE SAME IS PAID TO AN APPROVE D SUPERANNUATION FUND. THE CIRCULAR NO.8/2005 DATED 29.08.2005 ALSO CLARIFIES THAT EMPLOYER - EMPLOYEE RELATIONSHIP IS PRE REQUISITE FOR T HE LEVY OF FRINGE BENEFIT TAX. THE OTHER IMPORTANT ASPECT IS THAT, THE CONTRIBUTION MUST BE TO AN APPROVED SUPERANNUATION FUND. THE CONTENTION OF THE ITA NO. 510/(DEL) 201 1 ASSESSMENT YE AR 2006 - 2007 6 ASSESSEE IS THAT IT IS NOT CONTRIBUTION MADE TO ITS EMPLOYEES BUT LUMPSUM PAYMENT TO THE DEPARTMENT OF TE LECOMMUNICATION AND EVEN ASSUMING IT IS PAYMENT TO ITS EMPLOYEES IT IS NOT A CONTRIBUTION TO AN APPROVE SUPERANNUATION FUND. ON PERUSAL OF THE ORDER S OF BOTH THE ASSESSING OFFICER AS WELL AS THE CIT(A) , WE NOTICE THESE CONTENTIONS OF THE ASSESSEE HAS NOT B EEN PROPERLY ADDRESSED TO . THEREFORE, IN THE INTEREST OF JUSTICE , WE A R E OF THE VIEW THAT THIS MATTER NEEDS TO BE RECONSIDERED BY THE ASSESSING OFFICER T AKING INTO CONSIDERATION OF THE CONTENTIONS RAISED BY THE ASSESSEE. HENCE , THIS ISSUE IS RESTORED TO TH E ASSESSING OFFICER FOR DE NOVO CONSIDERATION . N EEDLESS TO STATE THAT THE ASSESSEE SHALL BE GIVEN REASONABLE OPPORTUNITY OF BEING HEARD. IT IS ORDER ED ACCORDINGLY. 8. IN THE RESULT , THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE ORD ER IS PRONOUNCED IN THE OPEN COURT ON 26 .0 9 .2014 SD/ - SD/ - ( G.D. AGARWAL ) ( GEORGE GEORGE K. ) VICE PRESIDENT JUDICIAL MEMBER DATED 26 .0 9 .2014 COPY OF THE ORDER FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, ASSISTANT REGISTRAR