Appeal Details
Counselvise Citation
589320114 RSA 2010
Assessee PAN
Bench
Appeal Number
Duration Of Justice
8 month(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-09-2011
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
E
Next Hearing Date
25-08-2011
Assessment Year
2006-2007
Appeal Filed On
23-12-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E NEW DELHI) BEFORE G.E. VEERABHADRAPPA, HON'BLE VICE-PRESIDENT AND SHRI RAJPAL YADAV: HONBLE JUDICIAL MEMBER ITA NO.5893/DEL/2010 ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER, VS. M/S. NEXT BRICK SOLUTION S LTD. WARD 13(2), A-146/25, CHAUDHRY CHAMBERS, NEW DELHI. VIKAS MARG, SHAKARPUR, DELIH-92. (PAN: AABCN1152C) (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. SRUJAN I MOHANTY, SR.DR RESPONDENT BY: S/SH. RAKESH GUPT A & ASHWANI TANEJA, ADVS. ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LEARNED CIT(APPEALS) DATED 03.9.2010 PASSED FOR ASSESSMENT YEAR 2006-07. THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT LEARNED C IT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.13,99,467 MADE BY THE A SSESSING OFFICER UNDER SEC. 115WB(2) OF THE INCOME-TAX ACT, 1961 IN RESPEC T OF VALUE OF FRINGE BENEFIT RELATING TO EXPENSES OF RS.1,40,16,100 INCU RRED ABROAD. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED ITS FBT RETURN ON 29.11.2006 ALONG WITH THE REGULAR RETURN OF INCO ME. IT HAS DECLARED THE VALUE OF FRINGE BENEFITS AT RS.871,488. ASSESSING O FFICER NOTICED THE DETAILS 2 OF EXPENSES UPON WHICH FRINGE BENEFIT-TAX WOULD BE LEVIABLE. SUCH DETAILS ARE REPRODUCED ON PAGE 2 OF THE ASSESSMENT ORDER. T HE WHOLE CONTROVERSY INVOLVED IN THIS APPEAL IS WHETHER THE VALUE OF EXP ENSES INCURRED FOR SPECIFIED PURPOSES BY THE ASSESSEE OUTSIDE INDIA IS SUBJECT TO FRINGE BENEFIT- TAX OR NOT AS PER SECTION 115WB OF THE ACT. ASSESSI NG OFFICER PUT HIS RELIANCE UPON THE JUDGMENT OF THE HON'BLE SUPREME C OURT IN THE CASE OF R & B FALCON (A) PVT. LTD. REPORTED IN 169 TAXMAN 515. LEARNED FIRST APPELLATE AUTHORITY HAS DELETED THE DISALLOWANCE BY PUTTING R ELIANCE UPON THE CIRCULAR OF THE CBDT AND POINTED OUT THAT THE FACTS IN THE C ASE OF R & B FALCON (A) PVT. LTD. ARE DISTINGUISHABLE. THE FINDINGS OF THE LEARNED CIT(APPEALS) RECORDED IN PARAGRAPH 3.2 READ AS UNDER: 3.2 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT COMPANY. THE ISSUE IN APPEAL IS WHETHER THE VALUE OF EXPENSES INCURRED FOR SPECIFIE D PURPOSES BY THE APPELLANT AS PER SEC. 115WB OUTSIDE INDIA IS SUBJEC T TO FRINGE BENEFIT TAX OR NOT. IN THIS REGARD, THE APPELLANT HAS DRAWN ATTENTION TO QUESTION NO.20 OF CBDT CIRCULAR NO. 8/2005 DATED 29 .08.2005. THE TEXT OF THE SAID QUESTION AND ITS ANSWERS ARE AS FO LLOWS: IT FBT PAYABLE BY AN INDIAN COMPANY HAVING EMPLOYE ES BASED BOTH IN AND OUTSIDE INDIA ON ITS TOTAL (GLOBA L) EXPENDITURE INCURRED BY IT FOR THE PURPOSES REFERRED TO IN CLAU SES (A) TO (P) OF SUB-SECTION (2) OF SEC. 115WB? 3 20. FBT IS PAYABLE ON THE VALUE OF FRINGE BENEFITS PROVIDED OR DEEMED TO HAVE BEEN PROVIDED TO EMPLOYEES BASED IN INDIA AND DETERMINED ON A PRESUMPTIVE BASIS IN ACCORDANCE WIT H THE PROVISIONS OF SEC. 115WC OF THE INCOME-TAX ACT. THE VALUE OF SUCH FRINGE BENEFITS IS DETERMINED, INT4ER ALIA, AS A PROPORTION OF THE TOTAL AMOUNT OF EXPENSES INCURRED FOR SOME IDEN TIFIED PURPOSES. IN THE CASE OF AN INDIAN COMPANY HAVING E MPLOYEES BASED BOTH IN INDIA AND IN A FOREIGN COUNTRY, FBT I S PAYABLE ON THE PROPORTION (50 PER CENT, 20 PER CENT OR 5 PER C ENT, AS THE CASE MAY BE) OF THE TOTAL AMOUNT OF EXPENSES INCURRED FO R THE PURPOSES REFERRED TO IN CLAUSES (A) TO (P) OF SUB-S ECTION (2) OF SEC. 115WB AND ATTRIBUTABLE TO THE OPERATIONS IN IN DIA. IF THE COMPANY MAINTAINS SEPARATE BOOKS OF ACCOUNT FOR ITS INDIAN AND FOREIGN OPERATIONS, FBT WOULD BE PAYABLE ON THE AMO UNT OF EXPENSES REFLECTED IN THE BOOKS OF ACCOUNT RELATING TO THE INDIAN OPERATIONS. IF HOWEVER, NO SEPARATE ACCOUNTS ARE MA INTAINED, THE AMOUNT OF EXPENSES ATTRIBUTABLE TO INDIAN OPERATION WOULD BE THE PROPORTIONATE AMOUNT OF THE GLOBAL EXPENDITURE. FURTHER, SUCH PROPORTIONATE AMOUNT SHALL BE DETERMINED BY AP PLYING TO THE GLOBAL EXPENDITURE THE PROPORTION WHICH THE NUM BER OF EMPLOYEES BASED IN INDIA BEARS TO THE TOTAL WORLDWI DE EMPLOYEES OF THE COMPANY. THE ASSESSING OFFICER HAS HOWEVER, RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF R & B FALCON ( A) P. LTD. VS. CIT (2008) 169 TAXMAN 515. HOWEVER, THE FACTS OF TH E 4 AFOREMENTIONED CASE WERE DIFFERENT BECAUSE IN THAT CASE, THE ASSESSEE WAS A NON-RESIDENT FOREIGN COMPANY ENGAGED IN THE B USINESS OF PROVIDING MOBILE OFFSHORE DRILLING RIGS (MODR) ALON G WITH CREW ON A DAY RATE HIRE BASIS TO DRILL OFFSHORE WELLS. IT ENT ERED INTO AN AGREEMENT WITH AN INDIAN COMPANY FOR SUPPLYING MODR ALONG WIT H EQUIPMENT AND OFFSHORE CREW. THE EMPLOYEES OF THAT ASSESSEE W ERE RESIDENTS OF VARIOUS COUNTRIES AND WORKED ON THE MODR ON COMMUT ER BASIS. THE EMPLOYEES CAME TO INDIA, STAYED IN THE RIG FOR 28 DAYS AND WENT BACK TO THEIR OWN COUNTRIES FOR A FURTHER PERIOD OF 28 DAYS. THE CREW OR THE EMPLOYEES WERE TRANSPORTED FROM THEIR HOME C OUNTRY TO THE MODR IN TWO LAPS- THE FIRST WAS FROM THE NEAREST DE SIGNATED BASE CITY IN THEIR HOME COUNTRY TO A DESIGNATED CITY IN INDIA FOR WHICH THE ASSESSEE PROVIDED FREE AIR TICKETS AND SECOND FROM THAT CITY IN INDIA TO THE MODR THROUGH A HIRED HELICOPTER. ON COMPLETION OF 28 DAYS, THEY WENT BACK FROM THE RIG TO THE DESIGNATED BASE CITY IN THE SAME MANNER. THE CREW WAS NOT PAID ANY CONVEYANCE/TRANSPORT ALLO WANCE. 3. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. LEARNED FIRST APPELLATE AUTH ORITY HAS PLACED RELIANCE UPON THE BOARDS CIRCULAR WHICH CONTEMPLATES THAT T HE VALUE OF FRINGE BENEFIT PROVIDED OR DEEMED TO HAVE BEEN PROVIDED TO EMPLOYEES BASED IN INDIA WILL BE TAXABLE. IN THE PRESENT CASE, THE EMP LOYEES WERE SITUATED OUTSIDE INDIA AND THE EXPENSES WERE INCURRED OUTSID E INDIA. IN THE CASE OF R& B FALCON (A) PVT. LTD. (SUPRA), THE EMPLOYEES TH OUGH RESIDENTS OF OTHER 5 STATES BUT BASED IN INDIA, THEREFORE, THE VALUE OF FRINGE BENEFITS PROVIDED TO THEM WAS TERMED TO BE TAXABLE. THE FACTS OF THE PRE SENT CASE ARE QUITE DISTINGUISHABLE. LEARNED FIRST APPELLATE AUTHORITY HAS APPRECIATED THE FACTS AND CIRCUMSTANCES IN RIGHT PERSPECTIVE AND WE DO NO T FIND ANY MERIT IN THIS APPEAL OF THE REVENUE. IT IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 16.09.2011 SD/- SD/- ( G.E. VEERABHADRAPPA) ( RAJPAL YAD AV ) VICE-PRESIDENT JUDICIAL MEMBER DATED: 16/09/2011 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR
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