GRASIM INDUSTRIES LTD, MUMBAI V. ASST CIT CIR 6(3), MUMBAI

ITA 5632/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3423 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 18-03-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 04-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: J D MISTRI
• Keywords: Capital asset; Depreciation; Revised return; Capital expenditure
• Section: 32

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI R.K. GUPTA, JM AND SHRI N.K. BILLAI YA, AM ./I.T.A. NOS.4910 & 4911 & 5632/MUM/2011 ( / ASSESSMENT YEARS :2006-07, 2007-08 & 2008-09 M/S. GRASIM INDUSTRIES LTD., (CORPORATE FINANCE DIVISION), A-2, ADITYA BIRLA CENTRE, S.K. AHIRE MARG, WORLI, MUMBAI-400 030 THE ACIT, CIRCLE 6(3), AAYAKAR BHAVAN, MUMBAI-400 020 ./ ./PAN/GIR NO. : AAACG 4464B ( ! /APPELLANT ) .. ( '#! / RESPONDENT ) ! $ / APPELLANT BY : ` SHRI J.D. MISTRI & SHRI MADHUR AGRAWAL '#! % $ /RESPONDENT BY : SHRI PAVAN VED % &' / DATE OF HEARING :12.06.2013 () % &' / DATE OF PRONOUNCEMENT :19.06.2013 *+ / O R D E R PER N.K. BILLAIYA, AM: THESE THREE SEPARATE APPEALS ARE PREFERRED BY THE ASSESSEE AGAINST THREE SEPARATE ORDERS OF THE LD. CIT(A)-12, MUMBAI PERTAINING TO A.YRS. 2006-07 TO 2008-09. AS COMMON ISSUES ARE INVOLVED I N ALL THESE APPEALS, THEY WERE HEARD TOGETHER AND DISPOSED OF BY THIS CO MMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. BEFORE PROCEEDING WITH THE GROUNDS OF APPEAL, IT WOULD BE PERTINENT TO DISCUSS THE ISSUES RAISED BY THE LD. D EPARTMENTAL REPRESENTATIVE. IT IS THE SAY OF THE LD. DR THAT T HE ASSESSEE ITSELF HAS FILED FRING BENEFIT TAX RETURN AND HAS OFFERED THE VALUE TAXABLE AS FBT, THEREFORE, THE ASSESSEE CANNOT RETRACT NOW RAISING THE ISSUES RELATING TO THE ITA NO.4910, 4911 & 5632/M/2011 2 TAXABILITY OF FBT. IT IS THE CONTENTION OF THE LD. DR THAT IF THE ASSESSEE WAS NOT CONVINCED WITH ITS RETURN OF FRINGE BENEFIT , IT SHOULD HAVE FILED A REVISED RETURN FAILING WHICH THE ASSESSEE SHOULD BE PRECLUDED FROM RAISING SUCH GROUNDS OF APPEAL. IN SUPPORT OF HIS SUBMISSI ONS, THE LD. DR RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN T HE CASE OF ITO VS MURLIDHAR BHAGWAN DAS 52 ITR 335. IT IS THE SAY OF THE LD. DR THAT JURISDICTION OF THE TRIBUNAL IN THE HIERARCHY CREAT ED BY THE ACT IS NOT HIGHER THAN THAT OF THE ITO. THE TRIBUNAL CANNOT D O WHAT THE ITO CANNOT. 3. PER CONTRA, THE LD. SENIOR COUNSEL RELIED UPON T HE DECISION OF CIT VS PRUTHVI BROKERS AND SHAREHOLDERS PVT. LTD., 349 ITR 336 AND CONTENDED THAT THE ASSESSEE CAN TAKE A PLEA NOT TAK EN BEFORE THE ASSESSING AUTHORITIES. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSED THE DECISIONS RELIED UPON BY THE RIVAL PARTIES. IN OUR CONSIDERATE VIEW, THE DECISION RELIED UPON BY THE LD. DR RELATES TO THE P OWER OF THE APPELLATE AUTHORITIES WHEREIN IT HAS BEEN HELD THAT NO POWER IS CONFERRED TO MAKE AN ORDER OR ISSUE DIRECTIONS IN RESPECT OF AN ASSESSM ENT YEAR WHICH IS NOT THE SUBJECT MATTER OF APPEAL WHICH MEANS THAT THE JURIS DICTION OF THE APPELLATE AUTHORITIES IN THE HIERARCHY CREATED BY THE ACT IS CONFINED TO THE YEAR OF ASSESSMENT. 5. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF PRUTHVI BROKERS & SHAREHOLDERS (SUPRA) HAS HELD THAT APPELL ATE AUTHORITIES HAVE POWER TO CONSIDER CLAIM NOT MAKE IN THE RETURN. TH E QUESTION BEFORE THE HONBLE JURISDICTIONAL HIGH COURT WAS WHETHER ON T HE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE HONBLE INCOME TAX APPELLATE TRIBUNAL, IN LAW, WAS RIGHT IN HOLDING THAT CLAIM OF DEDUCTIO N NOT MADE IN THE ORIGINAL RETURN AND SUPPORTED BY REVISED RETURN IS ADMISSIBLE. THE ITA NO.4910, 4911 & 5632/M/2011 3 QUESTION IS ANSWERED IN THE AFFIRMATIVE AND WHILE A NSWERING THIS QUESTION, THE HONBLE JURISDICTIONAL HIGH COURT HAS CONSIDERE D VARIOUS DECISIONS OF THE SUPREME COURT. RESPECTFULLY FOLLOWING THE DECI SION OF THE JURISDICTIO9NAL HIGH COURT, WE PROCEED WITH THE GRO UNDS OF APPEAL ONE BY ONE. MOREOVER , WE FIND THAT THE ASSESSEE HAS RETUR NED FRINGE BENEFITS WITH A RIDER THAT TAKING ABUNDANT PRECAUTION TH E VALUE IS OFFERED FOR FRINGE BENEFIT TAX AND THIS FACT HAS ALSO BEEN ACKN OWLEDGE BY THE AO WHILE DEALING WITH EVERY ITEM OF FRINGE BENEFITS IN HIS ASSESSMENT ORDER. ITA NO. 4910/MUM/2011 A.Y. 2006-07 6. GROUND NO. 1 RELATES TO LEVY OF FBT ON EXPENSES INCURRED ON NON- EMPLOYEES. 7. THE AO AT PAGE-2 PARA 3.1 OF HIS ORDER STATES TH AT AS A MATTER OF ABUNDANT CAUTION, THE ASSESSEE COMPANY HAD OFFERED FOR TAX EXPENSES OF RS. 16,61,19,107/-, FRINGE BENEFIT VALUE AT RS. 3,9 1,08,627/-. IT WAS CONTENDED THAT THE EXPENSES OF RS. 16,61,19,107/- D O NOT INVOLVE EMPLOYEES/NOR INCURRED ON EMPLOYEES AND ARE NOT LI ABLE TO FRINGE BENEFIT TAX. 8. THE ASSESSEE RELIED UPON THE SPEECH MADE BY THE FINANCE MINISTER WHILE PRESENTING THE BUDGET ON 28.2.2005 AND THE EX PLANATION GIVEN IN EXPLANATORY MEMORANDUM. THE AO DID NOT ACCEPT THE CONTENTIONS MADE BY THE ASSESSEE. THE AO WAS OF THE FIRM BELIEF THA T EXPENSES INCURRED BY THE ASSESSEE ON ANY ITEM SPECIFIED UNDER CLAUSE (A) TO( P) OF SEC. 115WB ARE CHARGEABLE TO FRINGE BENEFIT TAX IRRESPECTIVE O F THE FACT THAT THE EXPENSES INVOLVE EMPLOYEES OR NOT. 9. THE ASSESSEE AGITATED THIS MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. ITA NO.4910, 4911 & 5632/M/2011 4 10. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REI TERATED THAT SINCE THE EXPENSES WERE INCURRED FOR NON-EMPLOYEES, THERE IS NO OCCASION FOR THE LEVY OF FRINGE BENEFIT TAX. A SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN THE CASE OF CIT VS TATA CONSULTANCY LTD. IN ITA NO. 34 57/M/2011, WHEREIN ONE OF US (ACCOUNTANT MEMBER) IS THE AUTHOR OF THE SAID DECISION WHEREIN THE TRIBUNAL HAS HELD AS UNDER: WHILE DECIDING REVENUES APPEAL IN ITA NO. 6747/M/ 2011, THIS BENCH HAD THE OCCASION TO CONSIDER THE CIRCULAR ISS UED BY CBDT BEING CIRCULAR NO. 8/2005 DT. 29.8.2005 WHEREIN THIS BENC H HAS HELD THAT EMPLOYER/EMPLOYEE RELATIONSHIP IS A PRE-REQUISITE F OR THE LEVY OF FBT. RATIONALE FOR INTRODUCTION OF FBT IS THAT IT IS DIF FICULT TO ISOLATE THE PERSONAL ELEMENT IF THE BENEFITS ARE COLLECTIVEL Y ENJOYED BY THE PEOPLE WHICH MEANS THAT THE PROVISIONS OF FBT WILL BE APPLICABLE ONLY IN RESPECT OF THOSE EXPENSES WHICH CONTAIN OR ATLE AST ARE LIKELY TO CONTAIN AN ELEMENT OF PERSONAL BENEFIT TO EMPLOYEES . WE DO NOT FIND ANY SUCH THING PRESENT ON THE FACTS OF THE PRESENT CASE. 11. FACTS OF THE PRESENT CASE ARE IDENTICAL, THEREF ORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL, WE DIRECT T HE AO TO EXCLUDE FROM THE TAXABLE VALUE OF FBT AMOUNT OF RS. 3,91,08,627/ -. GROUND NO. 1 IS ACCORDINGLY ALLOWED. 12. GROUND NO. 2 RELATES TO CHARGING OF FBT ON FRIN GE BENEFIT WHICH ARE TAXABLE IN THE HANDS OF EMPLOYEES. 13. THIS HEAD COMPRISES OF 5 EXPENSES: A) MEDICAL REIMBURSEMENT - RS. 1,34,20,291/- B) MEDICAL FACILITIES - RS. 44,35,084/- FOR THESE TWO ITEMS, IT IS THE CLAIM OF THE ASSESS EE THAT THESE ARE TAXABLE IN THE HANDS OF THE EMPLOYEES AS PERQUISITE S. THEREFORE, THE SAME SHOULD BE OUTSIDE THE PURVIEW OF FBT. ON SIMILAR I SSUE, THE CO-ORDINATE BENCH OF THE TRIBUNAL AT BANAGLORE IN ITA NO. 1066/ BANG/2010 IN THE CASE OF VIJAYA BANK HAS HELD THAT WHERE PERQUISITES /BENEFITS WHICH ARE ITA NO.4910, 4911 & 5632/M/2011 5 FULLY ATTRIBUTABLE TO THE EMPLOYEE AND ARE TAXED IN THEIR HANDS, WOULD BE CONTINUED TO BE TAXED UNDER THE EXISTING PROVISIO NS OF SEC. 17(2) OF THE ACT. ONLY IN CASE WHERE THE BENEFITS ARE USUALLY E NJOYED COLLECTIVELY BY THE EMPLOYEES AND CANNOT BE ATTRIBUTED TO AN INDIVI DUAL EMPLOYEE, THEY SHALL BE TAXED IN THE HANDS OF THE EMPLOYER. 14. WE FIND THAT IN THE PRESENT CASE, THESE TWO ITE MS ARE DIRECTLY ATTRIBUTED TO THE PERSONAL BENEFIT OF THE EMPLOYEES THEREFORE DESERVES TO BE KEPT OUTSIDE THE PURVIEW OF FRINGE BENEFIT TAX. THE AO IS ACCORDINGLY DIRECTED TO EXCLUDE THE VALUE OF SUCH FRINGE BENEFI T. THE OTHER THREE ITEMS IN GROUND NO. 2 RELATES TO EDUCATION FACILITIES RS. 77,97,961/- , MAINTENANCE OF RESIDENTIAL COLONY FOR EMPLOYEES RS . 93,78,107/- AND INSURANCE PREMIUM PAID BY EMPLOYER TO KEEP IN FORCE AN INSURANCE ON HEALTH OF EMPLOYEES RS. 8,64,967/-. 15. IT IS THE SAY OF THE LD. COUNSEL THAT THESE ARE ALL PERQUISITES LIABLE TO BE TAXED IN THE HANDS OF THE EMPLOYEES INDIVIDUA LLY. AS WE HAVE HELD HEREINABOVE, THAT PERQUISITES WHICH ARE DIRECTLY AT TRIBUTABLE TO THE EMPLOYEES DESERVES TO BE KEPT OUTSIDE THE PURVIEW O F FBT. ACCORDINGLY, WE DIRECT THE AO TO EXCLUDE THESE ITEMS OF PERQUISI TES OUTSIDE THE AMBIT OF TAXABLE VALUE OF FRINGE BENEFIT. THIS GROUND IS ACCORDINGLY ALLOWED. 16. GROUND NO. 3 RELATES TO ADMINISTRATION EXPENSE S INCURRED ON DRIVER/PILOT WHO ARE IN PAY ROLE OF THE COMPANY IS CHARGEABLE AS SALARY, THEREFORE, SUCH SALARY SHOULD NOT BE TAXED AGAIN AS FRINGE BENEFIT IN THE HANDS OF THE EMPLOYER. 17. THE ASSESSEE FURTHER CONTENDED THAT EXPENSES ON REPAIR, RUNNING AND MAINTENANCE OF MOTOR CAR/AIRCRAFT DO NOT INCLUD E REMUNERATION PAID TO DRIVERS/PILOT. ITA NO.4910, 4911 & 5632/M/2011 6 18. WE FIND THAT THE CONTENTION RAISED BY THE ASSES SEE ARE SUPPORTED BY THE DECISION OF THE HONBLE MADRAS HIGH COURT IN T HE CASE OF CIT VS SHOLINGER TEXTILES LTD. 240 ITR 908. RESPECTFULLY FOLLOWING THE DECISION CITED HEREINABOVE, WE DIRECT THE AO TO EXCLUDE THE VALUE OF SUCH FRINGE BENEFIT AMOUNTING TO RS. 23,61, 629/- FROM TAXABLE VALUE OF FRINGE BENEFIT. THIS GROUND OF THE ASSESSEE IS ALLOWED. 19. GROUND NO. 4 RELATES TO INSURANCE PREMIUM FOR M OTOR CAR AND AIRCRAFT. IT IS THE SAY OF THE COUNSEL THAT THE IN SURANCE PREMIUM IS NOT THE EXPENSE ON REPAIR, RUNNING AND MAINTENANCE OF MOTOR CAR/AIRCRAFT AND THEREFORE NOT LIABLE FOR FRINGE BENEFIT. 20. WE FIND THAT THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS TUNGABHADRA INDUSTRIES LTD. 207 ITR 553 HAS HEL D THAT THE EXPENDITURE INCURRED ON REPAIRS AND INSURANCE OF CA R CANNOT BE CONSIDERED FOR DISALLOWANCE U/S. 37(3A) OF THE ACT. TAKING A LEAF OUT OF THE AFOREMENTIONED DECISION, WE DIRECT THE AO TO EXCLUD E VALUE OF SUCH FRINGE BENEFIT OF RS. 4,70,334/- FROM THE TAXABLE V ALUE OF FRINGE BENEFIT. GROUND NO. 4 IS ACCORDINGLY ALLOWED. 21. GROUND NO. 5 RELATES TO PRE-OPERATIVE EXPENSES. WE FIND THAT THE PRE-OPERATIVE EXPENSES HAVE BEEN INCURRED ON UNITS NOT YET SET UP AND THE EXPENSES HAVE BEEN CLAIMED AS CAPITAL EXPENDITURE. THE CBDT IN ITS EXPLANATORY NOTE ON THE PROVISIONS RELATING TO FBT WHETHER CAPITAL EXPENDITURE FALLING WITHIN THE CATEGORY SPECIFIED I N SEC. 115WB(2) WOULD BE COVERED IN THE SCOPE OF FRINGE BENEFIT. THE CBD T ANSWERED EXPENDITURE ON ANY CAPITAL ASSET IN RESPECT OF WHI CH DEPRECIATION IS ALLOWABLE U/S. 32 OF THE ACT DOES NOT FALL WITHIN T HE SCOPE OF SUB-SEC. (2) OF SEC. 115WB OF THE ACT. SINCE THE APPROXIMATE O BJECTIVE OF INCURRING ITA NO.4910, 4911 & 5632/M/2011 7 SUCH EXPENDITURE IS THE ACQUISITION OF A CAPITAL AS SET THEREFORE, SUCH EXPENDITURE IS NOT INCLUDED IN RECKONING THE VALUE OF FRINGE BENEFIT. DRAWING SUPPORT FROM THE ANSWER OF THE CBDT, WE DIR ECT THE AO TO EXCLUDE VALUE OF SUCH FRINGE BENEFIT OF RS. 6,68,33 2/- FROM THE TAXABLE VALUE OF FRINGE BENEFIT. GROUND NO. 5 IS ACCORDING LY ALLOWED. 22. GROUND NO. 6 RELATES TO EXPENSES ON MAINTENANC E OF RESIDENTIAL ACCOMMODATION NOT IN THE NATURE OF GUEST HOUSE. 23. THE TRIBUNAL HAD THE OCCASION TO DECIDE THE ISS UE OF ACCOMMODATION NOT IN THE NATURE OF GUEST HOUSE WHIL E DISPOSING OF WTA NOS. 41/MUM/1998 AND 242 TO 244/M/199 IN THE CASE O F M/S. GRASIM INDUSTRIES LTD., AND IN THAT WEALTH TAX APPEAL ORDE R, THE TRIBUNAL HAS HELD THAT WHERE THE BUILDINGS HAVE BEEN USED BY TH E EMPLOYEES AND OTHER RELATED VISITORS SUCH AS CUSTOMERS, SURVEYORS, CONT RACTORS, GOVERNMENT OFFICIALS, AUDITORS ETC., CANNOT BE CONSIDERED AS G UEST HOUSE AS THEY ARE CONNECTED WITH ASSESSEES BUSINESS. TAKING A LEAF OUT OF THE SAID DECISION RELATING TO WEALTH TAX PROCEEDINGS, WE DIRECT THE A O TO EXCLUDE VALUE OF SUCH FRINGE BENEFIT AT RS. 30,08,558/- FROM THE TAX ABLE VALUE OF FRINGE BENEFIT. GROUND NO. 6 IS ACCORDINGLY ALLOWED. 28. GROUND NO. 7 RELATES TO EXPENSES ON PRESENTATIO N ARTICLES DISTRIBUTED TO BUSINESS RELATED PERSONS. 29. WE HAVE ALREADY HELD THAT EXPENSES INCURRED ON NON EMPLOYEES ARE OUTSIDE THE PURVIEW OF FBT. AS THESE EXPENSES ARE INCURRED ON PERSONS RELATED TO OR CONNECTED WITH THE BUSINESS B UT ARE NOT EMPLOYEES. WE ACCORDINGLY DIRECT THE AO TO EXCLUDE VALUE OF SU CH FRINGE BENEFIT ITA NO.4910, 4911 & 5632/M/2011 8 FROM THE TAXABLE VALUE OF FRINGE BENEFIT. GROUND N O. 7 IS ACCORDINGLY ALLOWED. 30. GROUND NO. 8 HAS NOT BEEN PRESSED BY THE LD. CO UNSEL FOR THE ASSESSEE, THEREFORE IT IS DISMISSED AS NOT PRESSED. 31. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 4911/MUM/2011 A.Y. 2007-08 32. THE ISSUES INVOLVED ARE IDENTICAL WITH THE ISSUE IN ITA NO. 4910/M/11, THOUGH QUANTUM MAY DIFFER, THEREFORE, ON SIMILAR LI NES, SIMILAR REASONS, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.4911/M/11 FO R ASSESSMENT YEAR 2007- 2008 IS ALSO PARTLY ALLOWED. ITA NO. 5632/MUM/2011 A.Y. 2008-09 33. THE ISSUES INVOLVED ARE IDENTICAL WITH THE ISSUE IN ITA NO. 4910/M/11, THOUGH QUANTUM MAY DIFFER, THEREFORE, ON SIMILAR LI NES, SIMILAR REASONS, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.5632M/11 FOR ASSESSMENT YEAR 2008- 09 IS ALSO PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.6.2013 . *+ % ) , -*. 19.6.2013 ) % / SD/- SD/- (R.K. GUPTA ) (N.K . BILLAIYA ) * /JUDICIAL MEMBER * / ACCOUNTANT MEMBER MUMBAI; -* DATED 19/ 06 /2013 . . ./ RJ , SR. PS ITA NO.4910, 4911 & 5632/M/2011 9 *+ *+ *+ *+ % %% % '&0 '&0 '&0 '&0 10& 10& 10& 10& / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. ' #! / THE RESPONDENT. 3. 2 ( ) / THE CIT(A)- 4. 2 / CIT 5. 03/ '& , , / DR, ITAT, MUMBAI 6. /4 5 / GUARD FILE. *+ *+ *+ *+ / BY ORDER, #0& '& //TRUE COPY// 6 66 6 / 7 7 7 7 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI