THE NRK CO, MUMBAI V. JTCIT (OSD) CIR 15(1), MUMBAI

ITA 755/MUM/2013

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8545 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-04-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 29-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAVITA P KAUSHIK
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI BEFORE SHRI MAHAVIR SINGH , JM & SHRI M.BALAGANESH, AM ITA NO. 755 /MUM/201 3 ( ASSESSMENT YEAR : 2007 - 08 ) M/S. THE NRK COMPANY C/O/ KARNAVAT & CO. 2A, KITAB MAHAL 1 ST FLOOR, 192, DR. D.N.ROAD MU MBAI 400 001 VS. ADDITIONAL COMMISSIONER OF INCOME TAX RANGE 15(1), MUMBAI PAN/GIR NO. AADFT5351L (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI M. SUBRAMANIAN REVENUE BY MS. KAVITA P KAUSHIK DATE OF HEARING 06 / 01 /2020 DATE OF PRONOUN CEMENT 15 / 01 /2020 / O R D E R PER M. BALAGANESH (A.M) : THIS APPEAL IN ITA NO. 755/MUM/2013 FOR A.Y. 2007 - 08 OF THE ASSESSEE ARISES OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 26, MUMBAI IN APPEAL NO. CIT(A) - 26/IT - 74/ JCIT 15(1)/11 - 12 DATED 05/11/2012 (LD. CIT(A) IN SHORT) AGAINST THE ORDER PASSED BY DCIT CIRCLE 15(1), MUMBAI (HEREINAFTER REFERRED TO AS AO) U/S.115WE(3) R.W.S. 115 WG OF I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) FRAMING ASSESSMENT IN RESPECT OF FRI NGE BENEFIT TAX. ITA NO. 755/MUM/2013 M/S. THE NRK COMPANY 2 2. THE RETURN OF FRINGE BENEFIT TAX FOR A.Y.2007 - 08 WAS FILED BY THE ASSESSEE ON 02/11/2007 DECLARING TOTAL VALUE OF FRINGE BENEFIT TAX (FBT) AT RS.3,73,725/ - . THE LD. AO ON VERIFICATION OF RETURN OF INCOME OF THE ASSESSEE FOR THE A.Y.20 07 - 08 OBSERVED THAT IN RESPECT OF FOREIGN TRAVEL EXPENSES AMOUNTING TO RS.22,34,628/ - . THE ASSESSEE HAD CONSIDERED ONLY A SUM OF RS.96,107/ - FOR THE PURPOSE OF FBT AND IN RESPECT OF EXPENSES TOWARDS REPAIRS, RUNNING AND DEPRECIATION ON MOTOR CAR AMOUNTING TO RS.26,74,112/ - , THE ASSESSEE HAD CONSIDERED ONLY RS.8,10,626/ - FOR THE PURPOSE OF FBT. ACCORDINGLY, HE SHOW CAUSED THE ASSESSEE AS TO WHY THE REMAINING SUM OF RS.40,02,007/ - TOWARDS AFORESAID TWO EXPENDITURE S WERE NOT CONSIDERED FOR THE PURPOSE OF FBT. THE ASSESSEE IN RESPONSE REPLIED THAT OUT OF THE AFORESAID TWO EXPENDITURE S , THOSE EXPENSES PERTAINING TO EMPLOYEES WERE DULY CONSIDERED BY THE ASSESSEE IN ITS FBT RETURN AND THAT THE REMAINING SUMS REPRESENT EXPENSES INCURRED TOWARDS PARTNERS OF THE ASSES SEE FIRM AND SINCE THE PARTNERS COULD NOT BE CONSIDERED AS EMPLOYEES OF THE ASSESSEE FIRM, THE SAME WOULD BE OUTSIDE THE AMBIT OF LEVY OF FBT. THE LD. AO DID NOT AGREE TO THIS CONTENTION OF THE ASSESSEE AND ACCORDINGLY , BROUGHT TO FRINGE BENEFIT TAX THIS D IFFERENTIAL SUM OF RS.40,02,007/ - TOWARDS FOREIGN TRAVEL EXPENSES AND REPAIRS, RUNNING AND DEPRECIATION OF MOTOR CAR PERTAINING TO PARTNERS. THIS ACTION OF THE LD. AO WAS UPHELD BY THE LD. CIT(A). 3. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK OF THE ASSESSEE COMPRISING OF WORKINGS OF RETURN OF FRINGE BENEFIT TAX TOGETHER WITH THE COPY OF ORDER SHEET NOTING FOR THE A.Y.2007 - 08 RECORDED BY THE LD. AO WHICH ARE ENCLOSED IN PAGES 1 - 5 OF THE PAPER BOOK. IT IS NOT IN DISPUTE THAT FOREIGN TRAVEL EXPENSES OF RS.21,38,521/ - THAT HAS BEEN SUBJECTED TO FBT BY THE ITA NO. 755/MUM/2013 M/S. THE NRK COMPANY 3 LD. AO PERTAINS TO PARTNERS OF THE ASSESSEE FIRM WHICH HAS BEEN SUBJECTED TO FBT OF THE LD. AO . IT IS NOT IN DISPUTE THAT IN RESPECT OF REPAIRS, RUNNING AND DEPRECIATION ON MOTOR CAR IN THE SUM OF RS.18,63,486/ - PERTAINS TO PARTNERS OF THE ASSESSEE FIRM WHICH HAS BEEN SUBJECTED TO FBT OF THE LD. AO. NOW, THE SHORT POINT THAT REQUIRES TO BE ADJUDICATE D IS WHETHER THE PARTNERS OF THE ASSESSEE FIRM COULD BE CONSIDERED AS EMPLOYEES FOR THE PURPOSE OF LEVY OF FBT. WE FIND WITH REGARD TO PARTNERS IN THE ASSESSEE FIRM, THERE IS NO EMPLOYER - EMPLOYEE RELATIONSHIP. HENCE, THEY CANNOT BE CONSIDERED AS EMPLOYEES OF THE ASSESSEE FIRM. WE HOLD THAT THE EXISTENCE OF EMPLOYER - EMPLOYEE RELATIONSHIP IS A PRE - REQUISITE FOR LEVY OF FRINGE BENEFIT TAX. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. TATA CONSUL TANCY SERVICES LTD. REPORTED IN 374 ITR 112(BOM). WE FIND THAT THE ISSUE IN DISPUTE BEFORE US HAD BEEN DIRECTLY ADDRESSED BY THE CO - ORDINATE BENCH DECISION OF AMRITSAR TRIBUNAL IN THE CASE OF GDPA FASTENERS VS. ADDL. CIT REPORTED IN 185 TTJ 706 DATED 21/02 /2017 WHEREIN THE RELEVANT HEAD NOTES ARE REPRODUCED HEREUNDER: - FRINGE BENEFIT CHANGEABILITY EXPENSES INCURRED BY PARTNERS PROVISION OF 11 5WA CLEARLY LAYS EMPHASIS ON EMPLOYER - EMPLOYEE RELATIONSHIP FOR THE APPLICATION OF FBT ONLY THAT EXPENDITURE IS LIA BLE FOR FRINGE BENEFIT TAX WHICH HAS BEEN INCURRED BY THE EMPLOYER FOR HIS EMPLOYEES PARTNERS CANNOT BE SAID TO BE EMPLOYEES OF THE FIRM THEREFORE, EXPENDITURE INCURRED BY PARTNERS IS NOT LIABLE FOR FBT 4.1. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE SUM OF RS.40,02,007/ - WHICH HAS BEEN SUBJECTED BY THE LD. AO TO FBT DESERVES TO BE DELETED. ACCORDINGLY, THE GROUND NO.3 RAISED BY THE ASSESSEE IS ALLOWED. ITA NO. 755/MUM/2013 M/S. THE NRK COMPANY 4 4.2. SINCE, THE RELIEF IS GRANTED TO THE ASSESSEE ON MERITS, THE GROUND NOS.1 & 2 RAISED BY T HE ASSESSEE CHALLENGING THE VALIDITY OF REOPENING OF FBT ASSESSMENT ARE NOT ADJUDICATED AND ARE HEREBY LEFT OPEN. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 / 01 /2020 SD/ - ( MAH AVIR SINGH ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 15 / 01 / 2020 KARUNA , SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT( A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//