ACIT, New Delhi V. M/s. Global Vantedge Pvt. Ltd., Gurgaon

ITA 775/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53418 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 07-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRA
• Assessee Lawyers: ATUL NIRIAWAT

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI G.D. AGGRAWAL, HONBLE VICE PRESIDENT & SHRI C.L. SETHI, JUDICIAL MEMBER ITA NO. 775/DEL/2011 ASSESSMENT YEAR: 2006-07 ACIT, VS. M/S GLOBAL VANTEDGE (P) LTD., CIRCLE 12(1), 77B, IFFCO ROAD, SECTOR-18, NEW DELHI. GURGAON, HARYANA. AABCG 8076E (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SALIL MISHRA, SR. DR RESPONDENT BY : SH. ATUL NIRIAWAT, AR ORDER PER C.L. SETHI, J.M. THE PRESENT APPEAL IS FILED BY THE REVENUE AGAINST THE LD. CIT(A)S ORDER DATED 22.11.2010 PASSED IN THE M ATTER OF AN ASSESSMENT MADE BY THE ASSESSING OFFICER U/S 115WE( 3) OF THE INCOME TAX ACT, 1961 FOR THE A.Y. 2006-07. THE ONLY GROUND RAISED BY THE REVENUE IS DIRECTED AGAINST CI T(A)S ORDER IN DELETING THE ADDITION OF RS. 26,56,792/- M ADE BY THE AO ON ACCOUNT OF TELEPHONE LINK EXPENSES WHILE DETE RMINING THE TOTAL AMOUNT OF FRINGE BENEFIT U/S 115WB OF THE ACT. ITA NO. 775/D/11 2 2. THE ASSESSEE FILED FRINGE BENEFIT RETURN ON 30.1 1.2006 DECLARING VALUE OF FRINGE BENEFITS AT RS. 46,11,732 /-. IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS ASKED BY T HE AO AS TO WHY THE TOTAL EXPENDITURE UNDER THE HEAD TELEPH ONE (COMMUNICATION EXPENSES) AMOUNTING TO RS. 6,73,93,7 40/- SHOULD NOT BE TREATED AS ELIGIBLE FOR FRINGE BENEFI T TAX AS AGAINST SUM OF RS. 46,07,979/- SHOWN BY THE ASSESSE E. THE DETAILS OF TOTAL EXPENSES OF RS. 6,73,93,740/- WERE FURNISHED BY THE ASSESSEE AS UNDER: - PARTICULARS AMOUNT (RS.) (1) TELECOM EXPENSES A) TELECOM LINK EXPENSES RS. 13283960/- B) PSTN CHARGES RS. 45160927 /- 5,84,44,887/- (2) CONSUMABLES (HEADSETS) 14,89,240/- (3) POSTAGE & COURIER 1,45,513/- (4) TELEPHONE 46,07,740/- 3. OUT OF THE AFORESAID AMOUNT, THE SUM OF RS. 46,0 7,740/- ON ACCOUNT OF TELEPHONE EXPENSES WERE CONSIDERED BY THE ASSESSEE FOR FRINGE BENEFIT TAX. HOWEVER, THE ASSE SSING OFFICER WAS OF THE OPINION THAT TELECOM LINK EXPENS ES AMOUNTING TO RS. 1,32,83,960/- SHOULD ALSO BE INCLU DED IN THE VALUE OF FRINGE BENEFIT. THE AO THEN TREATED THE A MOUNT OF ITA NO. 775/D/11 3 RS. 1,32,83,960/- ON ACCOUNT OF TELECOM LINK EXPENS ES AS ELIGIBLE FOR FRINGE BENEFIT. AS SUCH, 20% OF RS. 1 ,32,83,960/- WHICH WORKS OUT TO RS. 26,56,792/- WAS ADDED TO THE FRINGE BENEFIT LIABLE TO BE TAXED. 4. ON AN APPEAL, THE LD. CIT(A) DELETED THE DISALLO WANCE BY OBSERVING THAT TELEPHONE LINK EXPENSES ARE EXCLUDED UNDER CLAUSE (J) OF SUB-SECTION (2) OF SECTION 115WB OF T HE ACT, AND AS SUCH IT IS NOT LIABLE TO BE INCLUDED INTO THE VA LUE OF FRINGE BENEFITS. THE RELEVANT PORTION OF THE LD. CIT(A)S ORDER IS AS UNDER: - I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE FINDINGS OF THE AO AND THE FACTS ON RECORD. SECTION 115WB(2)(J) OF THE ACT IS REPRODUCED HEREIN BELOW : THE FRINGE BENEFITS SHALL BE DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES, IF THE EMPLOYER HAS, IN THE COURSE OF HIS BUSINESS OR PROFESSION (INCLUDING ANY ACTIVITY WHETHER OR NOT SUCH ACTIVITY IS CARRIED ON WITH THE OBJECT OF DERIVING INCOME, PROFITS OR GAINS) INCURRED ANY EXPENSE ON, OR MADE ANY PAYMENT FOR, THE FOLLOWING PURPOSES, NAMELY: - (A) . (B) ITA NO. 775/D/11 4 (C) .. (D) . (E) . (F) .. (G) .. (H) .. (I) . (J) USE OF TELEPHONE (INCLUDING MOBILE PHONE) OTHER THAN THE EXPENDITURE ON LEASED TELEPHONE LINES....... FROM THE ABOVE IT IS VERY EVIDENT THAT SEC. 115WB(2)(J) OF THE ACT SPECIFICALLY EXCLUDES LEASED TELEPHONE LINES FROM THE PURVIEW OF FBT. LEASED LINE MEANS A PERMANENT TELEPHONE CONNECTION BETWEEN TWO POINTS SET UP BY A TELECOMMUNICATIONS COMMON CARRIER. TYPICALLY, LEASED LINES ARE USED BY BUSINESSES TO CONNECT GEOGRAPHICALLY DISTANT OFFICES. THE TELECOM LINK EXPENSES INCURRED BY THE APPELLANT ARE EXPENSES INCURRED ON THE LEASED TELEPHONE LINES. THESE EXPENSES WERE INCURRED BY THE APPELLANT FOR THE PURPOSE OF OBTAINING PRIVATE LEASE LINES FROM VARIOUS TELECOM SERVICE PROVIDERS AND THE SAID LEASE LINES ARE A NECESSITY FOR THE BUSINESS ACTIVITY OF THE APPELLANT I.E. IT ENABLED SERVICES. THEREFORE, THE EXPENSES INCURRED BY THE APPELLANT ARE SPECIFICALLY EXCLUDED FROM THE ITA NO. 775/D/11 5 PURVIEW OF FBT THROUGH SECTION 115WB(2)(J) OF THE ACT. 5. HENCE, THE DEPARTMENT IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFULL Y PERUSED THE MATERIAL ON RECORD. 7. SUB-SECTION (2) OF SEC. 115WB PROVIDES THAT THE FRINGE BENEFITS SHALL BE DEEMED TO HAVE BEEN PROVIDED BY T HE EMPLOYER TO HIS EMPLOYEES, IF THE EMPLOYER HAS, IN THE COURSE OF HIS BUSINESS OR PROFESSION (INCLUDING ANY ACTIVI TY WHETHER OR NOT SUCH ACTIVITY IS CARRIED ON WITH THE OBJECT OF DERIVING INCOME, PROFITS OR GAINS) INCURRED ANY EXPENSE ON, OR MADE ANY PAYMENT FOR, THE FOLLOWING PURPOSES, NAMELY: - (A) . (B) (C) .. (D) . (E) . (F) .. (G) .. (H) .. (I) . (J) USE OF TELEPHONE (INCLUDING MOBILE PHONE) OTHER THAN THE EXPENDITURE ON LEASED TELEPHONE L INES....... ITA NO. 775/D/11 6 (K) . (L) . (M) .. (N) . (O) . (P) .. (Q) 8. FROM THE ABOVE, IT IS EVIDENT THAT EXPENSES INCU RRED ON USE OF TELEPHONE (INCLUDING MOBILE PHONE) SHALL NOT INCLUDE THE EXPENDITURE ON LEASED TELEPHONE LINES. IN OTHE R WORDS, THE EXPENDITURE ON LEASED TELEPHONE LINES HAS BEEN EXCL UDED FROM THE PURVIEW OF FRINGE BENEFITS AS PROVIDED IN CLAUSE (J) OF SUB-SECTION (2) OF SEC. 115WB OF THE ACT. IN THE P RESENT CASE, THE ASSESSEE HAS INCURRED EXPENSES ON TELEPHONE LIN K WHICH ARE IN THE NATURE OF EXPENSES INCURRED ON THE LEASE D TELEPHONE LINES AS SO OBSERVED AND HELD BY THE LD. CIT(A) IN HIS ORDER AGAINST WHICH THE LD. DEPARTMENTAL REPRES ENTATIVE HAS NOT MADE ANY COMMENT EXCEPT MERELY RELYING ON T HE AOS ORDER. IN THIS VIEW OF THE MATTER, WE, THEREFORE, UPHELD THE ORDER OF CIT(A) IN DELETING THE ADDITION OF RS. 26, 56,792/- BEING 20% OF TOTAL EXPENSES INCURRED TOWARDS TELEPH ONE LINK EXPENSES. THE ORDER OF LD. CIT(A) IS THUS, UPHELD. ITA NO. 775/D/11 7 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT IMMEDIATELY AFTER THE HEARING WAS OVER ON 13.12.201 1 . SD/- SD/- (G.D. AGGRAWAL) (C.L. SETHI ) VICE PRESIDENT JU DICIAL MEMBER DATED: 13.12.2011 *KAVITA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR ITA NO. 775/D/11 8 ITA NO. 775/D/11 9