JET AIRWAYS (INDIA) LTD, MUMBAI V. DCIT 5(2), MUMBAI

ITA 5309/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1851 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 02-01-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 23-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S D SRIVASTAVA
• Keywords: Gift
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI !' , # $% & BEFORE SHRI B.R. MITTAL AND SHRI N.K. BILLAIYA , AM ./I.T.A. NOS. 6955, 5308 & 5309/MUM/2012 ( ' ' ' ' / ASSESSMENT YEARS : 2006-07 TO 2008-09 M/S. JET AIRWAYS (INDIA) LTD., SIROYA CENTRE, SAHAR AIRPORT ROAD, ANDHERI (E), MUMBAI-400 099 / VS. THE DCIT 5 (2), MUMBAI %( # ./ ) ./PAN/GIR NO. AAACJ0920H ( (* /APPELLANT ) .. ( +,(* / RESPONDENT ) (* - / APPELLANT BY: SHRI VIJAY MEHTA +,(* . - / RESPONDENT BY SHRI S.D. SRIVASTAVA . /0# / DATE OF HEARING :02.01.2013 12' . /0# /DATE OF PRONOUNCEMENT :30.01.2013 $3 / O R D E R PER N.K. BILLAIYA, AM: WITH THESE APPEALS, THE ASSESSEE HAS CHALLENGED THE CORRECTNESS OF THE ORDER OF THE LD. CIT(A)-9 MUMBAI PERTAINING TO A.YRS. 2006-07 TO 2008-09. IN ALL THESE APPEALS, ASSESSEE HAS TAKEN C OMMON GROUNDS EXCEPT THE QUANTUM FOR LEVY OF FBT VARIES. SINCE ALL THES E APPEALS WERE HEARD TOGETHER, THEY ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA NOS.6955, 5308 & 5309/M/2012 2 ITA NO. 6955/MUM/2012 A.Y. 2006-07 2. THE ASSESSEE HAS RAISED AS MANY AS 11 GROUNDS OF APPEAL. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT GROUND NO. 1 IS NOT PRESSED. THEREFORE GROUND NO. 1 OF APPEAL IS DISMI SSED. 3. GROUND NO. 2 TO 6 RELATES TO LEVY OF FRINGE BENE FIT TAX ON FREE/CONCESSIONAL TICKETS ISSUED TO THE EMPLOYEES F OR PRIVATE JOURNEYS. 4. FACTS GIVING RISE TO THIS GRIEVANCE SHOW THAT WH ILE SCRUTINIZING THE RETURN OF FBT U/S. 115WE[3], THE ASSESSING OFFICER NOTICED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS GIVEN FR EE/CONCESSIONAL TICKETS TO ITS EMPLOYEES FOR THEIR PRIVATE JOURNEYS. THE AO F URTHER OBSERVED THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS FOR THE YE AR UNDER CONSIDERATION U/S. 143(3) OF THE ACT, A SPECIAL AUDIT U/S. 142(2A ) OF THE ACT WAS CARRIED OUT. THE SPECIAL AUDITORS IN THEIR REPORT HAVE GIVEN A C ATEGORICAL FINDING THAT THE COMPANY HAS ISSUED 2,48,334 FREE/CONCESSIONAL TICKE TS TO ITS EMPLOYEES. THE AO ALSO OBSERVED THAT THE AUDITORS HAVE TAKEN THE A VERAGE VALUE OF EACH FREE/CONCESSIONAL TICKETS AT RS. 5510/-. CONSIDERI NG THE FACT THAT THE COMPANY HAS ISSUED 2,48,334 TICKETS THE AUDITORS COMPUTED THE VALUE OF TAXABLE FRINGE BENEFIT AT RS. 136,83,20,340/-. HOW EVER, THE AO NOTICED THAT THE ASSESSEE HAS TAKEN THE VALUE OF FRINGE BENEFIT ON ACCOUNT OF THIS ISSUE AT NIL. THE AO SOUGHT EXPLANATION FROM THE ASSESSEE. THE ASSESSEE STRONGLY OBJECTED FOR THE LEVY OF FBT ON FREE/CONCESSIONAL T ICKETS ON THE GROUND THAT A TICKET IS ISSUED TO THE EMPLOYEE IS ALWAYS SUBJECT TO LOAD I.E THE EMPLOYEE WOULD BE ALLOWED TO BOARD THE AIRCRAFT ONLY IF THER E IS ANY VACANT SEAT AVAILABLE. THE ASSESSEE ALSO STRONGLY OBJECTED TO THE NUMBER OF TICKETS TAKEN BY THE AUDITORS AT 2,48,334 WHEREAS THE ACTUAL NO. OF TICKETS ISSUED WERE AT 74,637. THE ASSESSEE ALSO OBJECTED TO THE METHOD O F VALUATION OF FRINGE BENEFIT. THE ASSESSEE PROVIDED THREE METHODS AS UN DER: ITA NOS.6955, 5308 & 5309/M/2012 3 1) MINIMUM FARE METHOD: IN THIS ALTERNATIVE METHOD THE ASSESSEE COMPANY HAS ADOPTED MINIMUM VALUE AT WHICH THE TICK ET IS SOLD TO GENERAL PUBLIC IN RESPECT OF ANY PARTICULAR FLIGHT. 2) COST TO THE COMPANY: IN THIS METHOD THE COMPANY HAS EVALUATED THE FRINGE BENEFIT VALUE OF EACH TICKET ON THE BASIS OF BREAK-UP VALUE WHEREIN IT HAS TAKEN AIRCRAFT FUEL, CRS CHARGES, FOOD AND CABIN CHARGES, PRINTING & STATIONERY AND HAS AR RIVED VALUE PER TICKET AT RS. 446.06. 3) J.P. MILAGE: THE VALUATION METHOD FOR THIS PURPOSE ADOPTED BY THE ASSESSEE IS NET OF THE CONCESSION GIVEN TO THE FREQUENT FLYERS. 5. HOWEVER, THE SUBMISSIONS MADE BY THE ASSESSEE DI D NOT FIND FAVOUR FROM THE AO WHO WAS OF THE OPINION THAT PROVISIONS OF SEC. 115WC(1A) SQUARELY APPLIES ON THE FACTS OF THE CASE AND THE M ETHOD OF COMPUTATION OF THE VALUE OF FBT IS ALSO PROVIDED UNDER THE ACT AN D ACCORDINGLY PROCEEDED TO ADOPT THE VALUE OF EACH CONCESSIONAL/FREE TICKETS A T RS. 5510/- AS WORKED OUT BY THE SPECIAL AUDITORS AND REJECTING THE NO. OF TI CKETS AS POINTED OUT BY THE ASSESSEE, TOOK THE NO. OF TICKETS AS POINTED OUT BY THE SPECIAL AUDITORS AND COMPUTED THE VALUE OF TAXABLE FRINGE BENEFIT AT RS. 136,83,20,340/-. 6. AGGRIEVED, ASSESSEE AGITATED THIS MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. LD. CIT(A) WAS CONVINCED THAT PROVISIONS OF SEC. 115WC(1A) R.W. CBDT CIRCULAR NO. 8 DT. 29.8.2005 AP PLIED ON THE FACTS OF THE CASE AND HELD THAT THE AO HAS CORRECTLY COMPUTED TH E VALUE OF FRINGE BENEFIT AT RS. 136,83,20,340/- UNDER THE HEAD FREE/CONCESSI ONAL TICKETS FOR EMPLOYEES OR THEIR FAMILY MEMBERS. 7. AGGRIEVED BY THIS FINDING OF LD. CIT(A), ASSESSE E IS BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUBMITTED THAT FB T IS NOT AT ALL LEVIABLE ON THE IMPUGNED FREE/CONCESSIONAL TICKETS PROVIDED TO THE EMPLOYEES OR THEIR FAMILY MEMBERS FOR THEIR PRIVATE JOURNEYS. IT IS TH E SAY OF THE COUNSEL THAT THE ASSESSEE COMPANY NEVER ISSUED ANY TICKET TO THE EMPLOYEE THEREFORE ITA NOS.6955, 5308 & 5309/M/2012 4 PROVISIONS OF SEC. 115WB(1B) ARE NOT APPLICABLE. T HE LD. COUNSEL FURTHER SUBMITTED THAT EVEN IF IT IS ASSUMED THAT THE SLIPS /COUPONS COME WITHIN THE PURVIEW OF TICKETS THEN ALSO THE BASIS OF VALUATION ADOPTED BY THE AO IS INCORRECT AND AGAINST THE FACTS OF THE CASE. THE L D. COUNSEL FURTHER POINTED OUT THAT THE SPECIAL AUDITORS IN THEIR SUPPLEMENTAR Y AUDIT REPORT EXHIBITED FROM PAGES 35 TO 49 OF THE PAPER BOOK HAVE ACCEPTED THAT 76633 COUPONS WERE ONLY ISSUED TO THE EMPLOYEES FOR VACATION WHIC H MAY BE CONSIDERED AS THE FRINGE BENEFIT TO EMPLOYEES THEREFORE THE TOTAL NUMBER OF COUPONS TAKEN BY THE AO AT 248334 IS AGAINST THE FINDING OF THE S PECIAL AUDITORS. 7.1 THE LD. COUNSEL FOR THE ASSESSEE FURTHER POINTE D OUT THAT THE VALUE OF FRINGE BENEFIT HAVE TO BE TAKEN AS PER PROVISIONS O F SEC. 115WC(1A) WHICH PROVIDES THAT COST AT WHICH THE BENEFITS REFERRED TO IN CLAUSE (B) OF SUB- SECTION (1) OF SEC. 115 WB IS PROVIDED BY THE EMPLO YER TO THE GENERAL PUBLIC AS REDUCED BY THE AMOUNT, IF ANY, PAID BY OR RECOVE RED FROM ITS EMPLOYEES . IT IS THE SAY OF THE COUNSEL THAT THE TICKETS ISSU ED TO THE EMPLOYEES CANNOT BE COMPARED WITH THE TICKETS ISSUE D TO THE GENERAL PUBLIC FOR THE FOLLOWING REASONS: I) TICKETS ISSUED TO THE EMPLOYEES DO NOT GIVE ANY INH ERENT RIGHT TO BOARD THE FLIGHT BECAUSE AN EMPLOYEE WOULD BE AL LOWED TO BOARD THE FLIGHT ONLY IF THERE IS AVAILABILITY OF T HE LOAD OR THE SEAT IS VACANT WHEREAS TICKET ISSUED TO THE GENERAL PUBL IC GIVE THEM VESTED RIGHT TO BOARD THE PLANE. II) IF THE SEAT IS NOT VACANT OR THE LOAD DOES NOT PERMI T, THE EMPLOYEE HAS TO RETURN BACK WITHOUT TAKING THE FLIG HT. THE SAME CANNOT BE SAID TO THE MEMBER OF THE GENERAL PU BLIC. ITA NOS.6955, 5308 & 5309/M/2012 5 III) FURTHER TICKETS ISSUED TO THE GENERAL PUBLIC GIVE C ONFIRMED BOOKING FOR THE DATE OF TRAVEL, FLIGHT ETC. WHEREAS CONFIRM TICKETING IS NOT GIVEN TO FREE/CONCESSIONAL TICKETS TO EMPLOYEES. SUCH TICKETS ARE ONLY STAND BY TICKETS SUBJECT TO LOAD/VACANCIES WHICH MEANS THAT THE TICKETS ISSUED TO THE EMPLOYEES CARRY LOWEST PRIORITY. 7.2. POINTING OUT FURTHER DIFFERENCE BETWEEN THE TW O, THE LD. COUNSEL STATED THAT IN CASE OF THE FLIGHT IS DELAYED OR CANCELLED, PASSENGER FROM THE GENERAL PUBLIC IS ENTITLED TO HOTEL ACCOMMODATION CONVENIEN CE AND OTHER FACILITIES WHEREAS THE EMPLOYEES ARE NOT ENTITLED TO SUCH FACI LITIES. FURTHER IF FOR SOME REASON, THE BOARDING IS DENIED TO THE PASSENGER FRO M GENERAL PUBLIC, IT IS THE DUTY OF THE AIRLINE TO PROVIDE ALTERNATIVE FLIGHT W HEREAS THE SAME FACILITY IS NOT PROVIDED TO THE EMPLOYEES OF THE COMPANY WHO HAVE B EEN GIVEN FREE/CONCESSIONAL TICKETS. THE LD. COUNSEL THUS CO NCLUDED THAT THE COST OF THE TICKET ISSUED TO THE GENERAL PUBLIC IS NOT AT PAR WITH THE TICKETS ISSUED TO THE EMPLOYEES. 7.3. IN ALTERNATIVE, THE LD. COUNSEL SUGGESTED T HAT IF AT ALL SOME VALUE HAS TO BE ALLOCATED TOWARDS THE COST OF THE FRINGE BENE FIT PROVIDED BY THE EMPLOYER, THEN THE METHOD CONSISTENTLY ADOPTED BY T HE COMPANY FOR MAKING PROVISION IN CASE OF THE TICKETS TO BE ISSUED UNDER THE FREQUENT FLYER PROGRAMME (FFP) SHOULD BE ADOPTED. THEREAFTER, THE LD. COUNSEL EXPLAINED THE SCHEME OF FFP. IT WAS EXPLAINED THAT THE JET P RIVILEGE MEMBERS EARN JP MILES EVERY TIME THEY FLY JET AIRWAYS. IN ADDITION , THEY ALSO EARNED JP MILES WHENEVER THEY FLY THROUGH PARTNER AIRLINES OR STAY AT ANY PARTNER HOTELS OR USE PARTNER CAR RENTALS OR TELECOM PARTNER SERVICES. T HE JET AIRWAYS HAS RECIPROCAL FFP AGREEMENTS WITH BRITISH AIRWAYS, KLM AND NORTHWEST AIRLINES. BY VIRTUE OF IT, JP MEMBERS CAN REDEEM THEIR MILES FOR FREE FLIGHTS ACROSS THE WORLD ON BRITISH AIRWAYS, KLM AND NORTHWEST AIRLINE S. THE LD. COUNSEL FURTHER EXPLAINED THAT JET AIRWAYS HAS A COMPANY BRANDED CR EDIT CARD WITH CITIBANK. THIS CARD IS AVAILABLE IN GOLD VARIANT AND HAS AN A NNUAL FEE PAYABLE TOWARDS ITA NOS.6955, 5308 & 5309/M/2012 6 THE SAME. THE ADVANTAGE OF THIS CREDIT CARD IS T HAT THE CARD USER COLLECTS JP MILES FOR ALL HIS SPENDS USING THE JET AIRWAYS CITI BANK CO. BRANDED CREDIT CARD. THESE JP MILES ARE CREDITED TO THE JET PRIVILEGE ACCOUNT OF THE MEMBER AND CAN BE USED BY HIM FOR FREE FLIGHTS ON JET AIRWAYS OR ANY OF ITS PARTNER AIRLINE. THE PROGRAMME GETS REWARDING DEPENDING ON THE MEMBERSHIP STATUS, I.E. PLATINUM, GOLD, SILVER, BLUE PLUS OR B LUE. OTHER BENEFITS INCLUDE UPGRADES TO PREMIERE, CHECK-IN AT CLUB PREM IERE DESKS, TELE CHECK-IN AND EXCESS BAGGAGE ALLOWANCE ETC. JP GOLD AND PLATINUM MEMBERS ALSO ENJOY ACCESS TO LOUNGES OF JET AIRWAYS PARTNER AIRLINES, I.E. KLM, BRITISH AIRWAYS AND NORTH WEST AIRLINES. TO TR ACK THE MILES EARNED BY EACH MEMBER, A MEMBER IS REQUIRED TO MENT ION HIS JP MEMBERSHIP NUMBERS AT THE TIME OF MAKING A BOOKING OR AT THE TIME OF CHECKING IN FOR A FLIGHT. BASED ON THIS INFORMATION AVAILABLE IN THE SYSTEM, THE MILES ARE THEN UPDATED IN EACH MEMBERS ACCOUNT . THE COST OF THE UNUTILISED MILEAGE LYING TO THE CREDIT OF THE PASSE NGERS IS THEN PROVIDED FOR IN THE BOOKS OF ACCOUNTS EACH YEAR. EVERY PASSENGER WHO IS ADMITTED TO THE FREQUEN T FLYER PROGRAMME IS ENTITLED TO REDEEM THE UNUTILISED MILES HE HAS EARN ED AND THE COMPANY IS UNDER AN OBLIGATION TO GIVE THE BENEFIT OF FREE TRA VEL BASED ON THE MILEAGE HE REDEEMS OUT OF HIS ACCUMULATED MILEAGE. BASED ON THE ABOVE CRITERIA THE TOTAL NUMBER OF MILES EARNED IS ASCERTAINED AND A PROVISION IS MADE IN THE BOOKS OF ACCOUNTS FOR THE COST OF TRAVEL IN FUT URE AGAINST THE NUMBER OF THE UNUTILISED, REDEEMABLE MILES. THE PROVISION IS CALCULATED ON A YEAR TO YEAR BASIS AS PER THE JP MILES ACCUMULATED, AVER AGE MILES PER REDEMPTION & VARIABLE COST PER PASSENGER . THE COMPUTATION OF THE COST OF THE TICKET TO BE ADOPTED FOR FREE/CONCESSIONAL TICK ETS ISSUED UNDER FFP IS ACCEPTED BY THE DEPARTMENT IN EARLIER YEARS. THE AS CERTAINING OF THE LIABILITY IS ON A SCIENTIFIC BASIS. IN THIS REGARD, IT IS PERTINENT TO NOTE THAT ITA NOS.6955, 5308 & 5309/M/2012 7 THE HONBLE ITAT, MUMBAI FOR A.Y.1999-00 TO A.Y.200 5-06 HAS ACCEPTED THE METHOD FOLLOWED BY THE ASSESSEE AND HA S ALLOWED THE CLAIM OF THE ASSESSEE IN RESPECT OF THE PROVISION MADE ON ACCOUNT OF FFP. 7.4. THE LD. COUNSEL CONCLUDED THAT THE VALUE TAKEN FOR A.Y. 2006-07 FOR THE PROVISIONS OF FFP AT RS. 446.06 IS THE MOST REASONABLE AND FAIR VALUE TO BE ADOPTED FOR COMPUTING THE FRINGE BENEFI T ON TICKETS PROVIDED FREE/CONCESSIONAL TO THE EMPLOYEES. 8. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY PLACED RELIANCE ON THE ORDERS OF THE LOWER AUTHORITIES. THE DR POINTED OUT THAT THE CHARGING SECTION AS WELL AS THE COMPUTATION SEC TION IS ABSOLUTELY CLEAR AND UNAMBIGUOUS IN COMPUTING THE VALUE OF FRINGE BE NEFIT AND THEREFORE THE SAME SHOULD BE ADOPTED. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE LOWER AUTHORITIES. WE HAVE ALSO CONSIDERED THE PAPER BOOK SUBMITTED BY THE ASSESSEE. AT THE VERY OUTSET, WE DO NOT AGREE WITH THE SUBMISSIONS OF THE COUNSEL THAT FBT IS NOT LEVIABLE ON THE FACTS OF THE PRESENT ISSUE. SECTION 115WB(1)(B) SPECIFICALLY PR OVIDES AS UNDER ANY FREE OR CONCESSIONAL TICKETS PROVIDED BY THE E MPLOYER FOR PRIVATE JOURNEYS OF HIS EMPLOYEES OR THEIR FAMILY M EMBERS, CHARGING SECTION IS ABSOLUTELY CLEAR AND UNAMBIGUOU S. 10. AS IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS P ROVIDED FREE/CONCESSIONAL TICKETS TO ITS EMPLOYEES DURING T HE YEAR UNDER CONSIDERATION, IT IS LIABLE FOR FRINGE BENEFIT TAX. THE ONLY DISPUTE REMAINS NOW IS WHAT SHOULD BE THE VALUE ASSIGNED TO SUCH FR INGE BENEFIT. THOUGH ITA NOS.6955, 5308 & 5309/M/2012 8 SEC. 115WC(2)(A) CONTAINS THE PROVISIONS FOR COMPUT ING THE COST OF SUCH BENEFIT BUT IN OUR CONSIDERATE VIEW THAT METHOD CA NNOT BE APPLIED ON THE FACTS OF THE PRESENT CASE FOR THE SIMPLE REASON THA T THE COST AT WHICH THE BENEFITS ARE PROVIDED TO THE EMPLOYEE CANNOT BE EQU ATED WITH THE COST PROVIDED BY THE EMPLOYER TO THE GENERAL PUBLIC. TO THIS EXTENT, WE AGREE WITH THE SUBMISSIONS OF THE COUNSEL THAT THE NEARES T AVAILABLE, LOGICAL AND ACCEPTABLE METHOD IS TO VALUE THE BENEFIT AS PER TH E COST ASSIGNED FOR PROVISIONS FOR FFP IN THE BOOKS OF ACCOUNT. MORE S O, BECAUSE SUCH PROVISION HAS BEEN ACCEPTED BY THE DEPARTMENT IN AS SESSEES OWN CASE FROM ASSESSMENT YEAR 1999-2000 TILL ASSESSMENT YEA R 2005-06 AND AS THIS METHOD IS SCIENTIFIC AND HAS ATTAINED FINALITY IN THE DUE COURSE OF TIME SINCE A.Y. 1999-2000 , KEEPING IN MIND THAT THE MEM BERS OF THE FFP SCHEME ARE FROM GENERAL PUBLIC. WE, THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, RESTORE THIS ISSUE BACK TO THE FILES OF THE AO. THE AO IS DIRECTED TO VALUE THE FRINGE BENEFIT OF FREE/CONCES SIONAL TICKETS AS PER THE VALUATION OF FFP AS PROVIDED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT AT RS.446.06 AS THE SAME HAS ALSO BEEN ACCEPTED BY THE DEPARTMENT WHILE MAKING PROVISIONS FOR FREQUENT FLYER PROGRAMME FOR EARNING JP MILEAGE, AND IF THERE ARE COSTS FOR FOREIGN TRAVELS THE SAME SHOULD BE ELIMINATED FROM THE SAME , THEREAFTER , THE AO IS A LSO DIRECTED TO REDUCE THE COST RECOVERED FROM THE EMPLOYEES . 11. THERE IS ONE MORE DISPUTE REMAINS ON THIS ISSUE WHICH RELATES TO THE NUMBER OF TICKETS ISSUED DURING THE YEAR. AS PER T HE AO, THE NO. OF TICKET AS COMPUTED BY THE SPECIAL AUDITORS COMES TO 2,48,3 34 WHEREAS IT IS THE CONTENTION OF THE ASSESSEE THAT THE SAME SPECIAL A UDITORS HAVE RECTIFIED THE NUMBERS AT 76,633. AS POINTED OUT BY THE LD. C OUNSEL, WE HAVE GONE THROUGH THE SUPPLEMENTARY SPECIAL AUDIT REPORT AS E XHIBITED FROM PAGES 38 TO 49 OF THE PAPER BOOK. WE FIND FORCE IN THE SUBM ISSION OF THE ASSESSEE. ITA NOS.6955, 5308 & 5309/M/2012 9 WE, THEREFORE, DIRECT THE AO TO VERIFY FROM THE SPE CIAL AUDITORS REPORT ABOUT THE ACTUAL FIGURE OF THE TICKETS ISSUED. NEED LESS TO MENTION, THE AO MUST COMPUTE THE VALUE OF FRINGE BENEFIT BY ADOPTIN G THE CORRECT NUMBER OF TICKETS ISSUED TO THE COST COMPUTED IN THE CASE OF FFP. THE ASSESSEE IS DIRECTED TO FURNISH THE DETAILS OF THE AMOUNT RECOV ERED FROM THE EMPLOYEES TOWARDS THE COST/CONCESSION/FREE TICKETS. THE AO IS DIRECTED TO REDUCE THE VALUE OF THE FRINGE BENEFIT TO THE EX TENT OF THE COST OF BENEFIT RECOVERED BY THE ASSESSEE FROM ITS EMPLOYEES. GROU ND NOS. 2 TO 6 ARE ALLOWED FOR STATISTICAL PURPOSES. 12. GROUND NO. 7 RELATES TO THE CHARGE OF FBT ON FE STIVAL EXPENSES OF RS. 9,59,442/-. DURING THE COURSE OF THE FRINGE BE NEFIT ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE SPECIAL AUDITO RS HAVE POINTED OUT THAT ASSESSEE HAS INCURRED FESTIVAL EXPENSES AMOUNT ING TO RS. 9,59,442/- WHICH HAS BEEN DEBITED UNDER THE HEAD BUSINESS PRO MOTION EXPENSES. THE AO ADOPTED THE VALUE OF FRINGE BENEFIT OF SUCH FESTIVAL EXPENSES. THE ASSESSEE QUESTIONED THE FINDING OF THE AO BEFOR E THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 13. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE DRE W OUR ATTENTION TO THE DETAILS OF EXPENSES CONSIDERED AS BUSINESS PROM OTION EXPENSES THOUGH THEY ARE RELATED TO FESTIVAL CELEBRATIONS AS EXHIBI TED FROM PAGES 60 TO 62 OF THE PAPER BOOK AND POINTED OUT THAT THESE EXPENS ES HAVE BEEN INCURRED ON TRAVEL AGENTS/VARIOUS GOVT. DEPARTMENTS AND THER EFORE ARE OUTSIDE THE AMBIT OF FBT AS THERE IS NO EMPLOYER/EMPLOYEE RELAT IONSHIP BETWEEN THE COMPANY AND THE RECIPIENT OF THESE BENEFITS. 14. THE LD. DR RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 15. WE HAVE CONSIDERED THE SUBMISSIONS AND THE ORDE RS OF THE LOWER AUTHORITIES AND HAVE CAREFULLY PERUSED THE DETAILS AS EXHIBITED AT PAGES 60 ITA NOS.6955, 5308 & 5309/M/2012 10 TO 62 OF THE PAPER BOOK. THE CBDT IN ITS EXPLANATO RY NOTE ON THE PROVISIONS RELATING TO FRINGE BENEFIT TAX HAS ANSWE RED TO 107 QUESTIONS FREQUENTLY ASKED. QUESTION NO. 2 IS RELEVANT FOR T HE ISSUE IN HAND Q. WHETHER EMPLOYER/EMPLOYEE RELATIONSHIP IS A PRE- REQUISITE FOR THE LEVY OF FBT? ANS: YES. 16. A PERUSAL OF THE DETAILS CLEARLY SHOW THAT THER E IS NO EMPLOYER/EMPLOYEE RELATIONSHIP BETWEEN THE PAYER [ ASSESSEE ] AND THE RECIPIENT . THEREFORE, WE HAVE NO HESITATION IN HOL DING THAT NO FBT IS LEVIABLE ON THESE EXPENSES. FINDING OF THE LD. CIT (A) ARE ACCORDINGLY REVERSED. GROUND NO. 7 IS ALLOWED. 17. GROUND NO. 8 RELATES TO THE CHARGE OF FBT ON IN SURANCE EXPENSE OF RS. 2,13,589/-. IN THE LIGHT OF THE FINDINGS OF T HE AUDITORS, THE AO BROUGHT RS. 2,13,589/- UNDER FBT TAKING IT AS ON AC COUNT OF EMPLOYEE WELFARE. 18. THE MATTER WAS AGITATED BEFORE THE LD. CIT(A). THE LD. CIT(A) CONFIRMED THE FINDING OF THE AO STATING THAT THE AS SESSEE HAS NOT FURNISHED ANY DETAILS IN SUPPORT OF THE CLAIM THAT SUCH INSURANCE EXPENSES WERE STATUTORY LIABILITY. 19. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE INSURANCE EXPENSES HAVE BEEN INCURRED BY THE ASSESS EE WHICH IS NOTHING BUT A STATUTORY LIABILITY. THE LD. COUNSEL DREW OU R ATTENTION TO QUESTION NO. 68 OF THE CBDT CIRCULAR NO. 8 OF 2005 AND POINT ED OUT THAT IF SUCH EXPENDITURE IS A STATUTORY OBLIGATION THEN THE SAME WOULD NOT BE LIABLE TO FBT. ITA NOS.6955, 5308 & 5309/M/2012 11 20. AFTER CONSIDERING THE FACTS AND THE FINDINGS OF THE LOWER AUTHORITIES, IT APPEARS THAT THE ASSESSEE HAS NOT S UBMITTED ANY DETAILS BEFORE THE LOWER AUTHORITIES TO SUBSTANTIATE ITS CL AIM. THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE RESTORE THIS ISSUE BACK TO THE FILES OF AO. THE ASSESSEE IS DIRECTED TO SUBSTANTIATE ITS C LAIM THAT SUCH INSURANCE PREMIUM IS A STATUTORY LIABILITY BY BRINGING COGENT MATERIAL EVIDENCE. THE AO IS DIRECTED TO VERIFY/EXAMINE THE SAME AND I F SATISFIED , DELETE THE SAME FROM THE LIABILITY OF FBT. GROUND NO. 8 IS AL LOWED FOR STATISTICAL PURPOSES. 21. GROUND NO. 9 & 10 TOGETHER RELATE TO THE CHARGI NG OF FBT ON TRADE DISPLAY EXPENSES OF RS. 17,57,496/- AS BEING IN THE NATURE OF GIFT ITEMS AND FURTHER RS. 93,86,718/- AS BEING IN THE NATURE OF GIFT ITEMS. 22. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS , THE AO RELIED UPON THE FINDINGS OF THE SPECIAL AUDITOR WHO HAS OB SERVED THAT OUT OF DISPLAY EXPENSES , RS. 1,11,44,214/- IS IN THE NAT URE OF GIFTS. IT WAS ALSO OBSERVED THAT THE ASSESSEE HAS ALREADY OFFERED THE AMOUNT OF RS. 17,57,496/- UNDER THE HEAD SALES PROMOTION FOR TH E PURPOSE OF FRINGE BENEFIT TAX. THE AO COMPUTED THE VALUE OF FRINGE BENEFIT OF RS. 93,26,718/- AND RS. 46,93,359/- AT THE RATE OF 50% AND AT THE RATE OF 30% OF RS. 17,57,496/-. 23. THE ASSESSEE AGITATED THIS MATTER BEFORE LD. CI T(A). THE LD. CIT(A) WAS CONVINCED THAT OUT OF THE TOTAL EXPENDIT URE OF RS. 2,31,33,698/- UNDER THE HEAD TRADE DISPLAY, THE ASSESSEE HAS INCURRED A SUM OF RS. 1,11,44,214/- ON GIFT ITEMS. THE LD. CIT(A) CONCLUDED THAT THE AO HAS CORRECTLY CALCULATED THE FBT UNDER THE H EAD TRADE DISPLAY. 24. BEFORE US, THE LD. COUNSEL DREW OUR ATTENTION T O PAGE-51 OF THE PAPER BOOK AND POINTED OUT THAT THESE ARE THE DETAI LS OF TRADE DISPLAY ITA NOS.6955, 5308 & 5309/M/2012 12 EXPENSES. THE LD. COUNSEL FURTHER POINTED OUT THAT THE FIRST FOUR ITEMS AMOUNTING TO RS. 93,26,718/- ARE PROMOTIONAL GIFTS TO CUSTOMERS AND ITEM NO. 5 IS UMBRELLA WITH WOODEN FRAME VALUED AT RS. 1 7,57,496/- AGAIN GIVEN TO TRAVEL AGENT/CUSTOMERS. THE LD. COUNSEL RE ITERATED THAT FBT IS NOT LEVIABLE IF THERE IS NO EMPLOYER/EMPLOYEE RELAT IONSHIP BETWEEN BUYER AND THE PAYEE. 25. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE FINDINGS OF THE LOWER AUTHORITIES. 26. WE HAVE CONSIDERED THE FACTS AND THE SUBMISSION S. AS WE HAVE HELD IN GROUND NO. 7 HEREINABOVE THAT THE EMPLOYER/ EMPLOYEE RELATIONSHIP IS A PRE-REQUISITE FOR THE LEVY OF FBT AND AFTER CONSIDERING THE DETAILS OF TRADE DISPLAY EXPENSES, IN OUR HUMBL E OPINION THE GIFT ITEMS HAVE BEEN GIVEN TO THE TRAVEL AGENT/CUSTOMERS WITH WHOM THE ASSESSEE DOES NOT ENJOY EMPLOYER/EMPLOYEE RELATIONSHIP. ACC ORDINGLY, THE LEVY OF FBT ON THIS COUNT IS DELETED. GROUND NO. 9 & 10 TA KEN TOGETHER IS ALLOWED. 27. GROUND NO. 11 RELATES TO LEVY OF FBT ON PER DIE M EXPENDITURE OF RS. 61,07,025/-. THE AO LEVIED FBT ON THE EXPENDIT URE INCURRED AT RS. 61,07,025/- RELYING UPON TO THE QUESTION NO. 79 OF THE CIRCULAR NO. 8/2005 OF CBDT. THE ASSESSEE QUESTIONED THIS BEFO RE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 28. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT PER DIEM EXPENDITURE INCURRED BY THE ASSESSEE IS NOT COLLECT IVELY ENJOYED BY THE EMPLOYEES BUT ARE INCURRED FOR THE INDIVIDUAL BENEF IT. THEREFORE, IT IS OUTSIDE THE PURVIEW OF FRINGE BENEFIT TAX. ITA NOS.6955, 5308 & 5309/M/2012 13 29. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED T HE ORDERS OF THE LOWER AUTHORITIES. 30. WE FIND THAT IN SUBSEQUENT ASSESSMENT YEAR I.E. 2008-09 FOR WHICH ALSO ASSESSEE IS IN APPEAL VIDE ITA NO. 5309/M/12. THE ASSESSEE ITSELF HAS OFFERED THE PER DIEM EXPENSES FOR FBT UNDER THE CATEGORY TOUR AND TRAVEL. SINCE THE ASSESSEE ITSELF HAS OFFERED PER DIEM EXPENSES FOR FBT IN A.Y. 2008-9, WE DO NOT FIND ANY REASON WHY THE S AME SHOULD NOT BE OFFERED FOR THE YEAR UNDER CONSIDERATION. ACCORDIN GLY GROUND NO. 11 IS DISMISSED. 31. THIS APPEAL FILED BY THE ASSESSEE IS PARTLY ALL OWED. ITA NO. 5308/MUM/2012 A.Y. 2007-08 32. THE ASSESSEE HAS RAISED 5 GROUNDS OF APPEAL. T HE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT GROUND NO. 1 IS NOT PRE SSED. THEREFORE GROUND NO. 1 IS DISMISSED AS NOT PRESSED. 33. GROUND NO. 2 & 3 RELATE TO LEVY OF FRINGE BENEF IT TAX ON FREE/CONCESSIONAL TICKETS ISSUED TO THE EMPLOYEES F OR PRIVATE JOURNEYS. THIS ISSUE HAS ALREADY BEEN DISCUSSED IN PARA NOS. 4 TO 11 OF ITA NO. 6955/M/2012 OF THIS ORDER. FOLLOWING THE DECISION ABOVE, THESE GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSE. THE AO IS DIRE CTED TO CONSIDER THE PROVISION FOR FFP FOR AY 07 -08 FOR LEVY OF FBT FOR THIS YEAR. ADDITIONAL GROUND RAISED IS ALSO ACCORDINGLY DISPOSED OF. 34. GROUND NO. 4 RELATES TO THE CHARGE OF FBT ON FE STIVAL EXPENSES OF RS. 7,90,036/-. THIS ISSUE HAS ALREADY BEEN DISCUS SED IN PARA NOS. 12 TO 16 OF ITA NO. 6955/M/2012 OF THIS ORDER. FOLLOWING THE DECISION ABOVE, THIS GROUND RAISED BY THE ASSESSEE IS ALLOWED. ITA NOS.6955, 5308 & 5309/M/2012 14 35. GROUND NO. 5 RELATES TO THE CHARGE OF FBT ON IN SURANCE EXPENSE OF RS. 1,44,555/-. THIS ISSUE HAS ALREADY BEEN DISCUS SED IN PARA NOS. 17 TO 20 OF ITA NO. 6955/M/2012 OF THIS ORDER. FOLLOWING THE DECISION ABOVE, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 36. THIS APPEAL FILED BY THE ASSESSEE IS PARTLY AL LOWED. ITA NO. 5309/MUM/2012 A.Y. 2008-09 37. THE ASSESSEE HAS RAISED 4 GROUNDS OF APPEAL. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT GROUND NO. 1 IS NOT PRE SSED. THEREFORE GROUND NO. 1 IS DISMISSED AS NOT PRESSED. 38. GROUND NO. 2 & 3 RELATE TO LEVY OF FRINGE BENEF IT TAX ON FREE/CONCESSIONAL TICKETS ISSUED TO THE EMPLOYEES F OR PRIVATE JOURNEYS. THESE ISSUES HAVE ALREADY BEEN DISCUSSED IN PARA NO S. 4 TO 11 OF ITA NO. 6955/M/2012 OF THIS ORDER. FOLLOWING THE DECISION ABOVE, THESE GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSE. THE AO IS DIRE CTED TO CONSIDER THE PROVISION FOR FFP FOR AY 08 -09 FOR LEVY OF FBT FOR THIS YEAR. ADDITIONAL GROUND RAISED IS ALSO ACCORDINGLY DISPOSED OF. 39. GROUND NO. 4 RELATES TO THE CHARGE OF FBT ON FE STIVAL EXPENSES OF RS. 12,38,597/-. THIS ISSUE HAS ALREADY BEEN DISCU SSED IN PARA NOS. 12 TO 16 OF ITA NO. 6955/M/2012 OF THIS ORDER. FOLLOWING THE DECISION ABOVE, THIS GROUND RAISED BY THE ASSESSEE IS ALLOWED. 40. THIS APPEAL FILED BY THE ASSESSEE IS PARTLY ALL OWED. ITA NOS.6955, 5308 & 5309/M/2012 15 41. IN THE RESULT, ALL THE THREE APPEALS FILED BY T HE ASSESSEE ARE PARTLY ALLOWED. 4 /5 4/ . 6 7. 89: 3 %;/ . / SD/- SD/- (B.R. MITTAL ) (N.K. BIL LAIYA) $% / JUDICIAL MEMBER # $% / ACCOUNTANT MEMBER MUMBAI; =$ DATED 30.1.2013 . . ./ RJ , SR. PS $3 . +/ ?'/ / COPY OF THE ORDER FORWARDED TO : 1. (* / THE APPELLANT 2. +,(* / THE RESPONDENT. 3. @ ( ) / THE CIT(A)- 4. @ / CIT 5. A> +/ , , / DR, ITAT, MUMBAI 6. >B C / GUARD FILE. $3 / BY ORDER, ,/ +/ //TRUE COPY// 8 / < DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI