Aero Enterprises, New Delhi V. JCIT, New Delhi

ITA 805/DEL/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0151 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 07-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: ANSHUL GUPTA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : A , NEW DELHI BEFORE SMT.DIVA SINGH, J.M. AND SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER I.T.A.NO. 805 /DEL/201 3 A.Y. 200 9 - 10 AERO ENTERPRISES 5408, SADAR THANA ROAD DELHI 110 006 VS. JCIT, RANGE 39 NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH.ANSHUL GUPTA, C.A. DEPARTMENT BY : MS.Y.KAKKAR, DR ORDER PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER THE APPEAL WAS ORIGINALLY DISPOSED OF ON 27.8.2013. LATER M.A. WAS FILED AND THE APPEAL WAS RECALLED VIDE M.A.NO.54/DEL/14 ( IN ITA NO. 805/DEL/2013) ORDER DT. 02 ND FEBRUARY,2015 ON A LIMITED ISSUE WHICH IS AS FOLLOWS. 5. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AND PERUSED RELEVANT MATERIAL PLACED BEFORE US. WE FIND THAT IN THE SYNOPSIS FURNISHED BY THE ASSESSEE AT THE TIME OF HEARING, I T HAD TAKEN THE ARGUMENT THAT THE FBT HAD BEEN PAID ON TRAVELLING, CONVEYANCE AND TELEPHONE EXPENSES, THEREFORE, NO DISALLOWANCE CAN BE MADE ON THE GROUND OF PERSONAL USE. THE ASSESSEE HAD ALSO RELIED UPON SEVERAL DECISIONS OF ITAT. IT SEEMS THAT IT HAS E SCAPED THE KNOWLEDGE OF THE BENCH WHILE PASSING THE ORDER. WE, THEREFORE, RECALL THE ORDER OF THE ITAT WITH REFERENCE TO GROUND NO.1 OF THE ASSESSEE S APPEAL AND DIRECT THE REGISTRY TO FIX THE APPEAL FOR HEARING FOR READJUDICATION OF GROUND NO.1 AFRESH. HENCE THIS APPEAL IS BEFORE US. 2. WE HAVE HEARD SHRI ANSHUL GUPTA, THE LD.COUNSEL FOR THE ASSESSEE AND MS.KAKKAR, D.R. ON BEHALF OF THE REVENUE. ITA 805/DEL/2013 A.Y. 2009 - 10 AERO ENTERPRISES, NEW DELHI 2 3. THE DISALLOWANCE IN THIS CASE HAS BEEN MADE ON THE GROUND THAT THE EXPENSES IN QUESTION ARE PERSONAL IN NATURE. THIS IS EVIDENT FROM PARA 3, PAGE 2 OF THE ASSESSMENT ORDER WHICH READS AS FOLLOWS. 3. EXPENSES OF PERSONAL NATURE: THE ASSESSEE HAS CLAIMED EXPENSES OF RS.1,34,864/ - ON STAFF WELFARE, RS.2,22,850/ - ON SALES PROMOTION, RS.4,89,943/ - ON TRAVE LLING AND CONVEYANCE AND RS.2,61,189/ - ON TELEPHONE. IT IS A MATTER OF COMMON KNOWLEDGE THAT ALL THESE EXPENSES HAVE ELEMENTS OF PERSONAL NATURE. THUS 10% OF THESE EXPENSES I.E. RS.1,10,885/ - IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME ON ESTIMATE B ASIS. 4. THE MEMBAI H BENCH OF THE TRIBUNAL IN ITA 2397/MUM/2010 FOR THE A.Y. 2006 - 07 IN THE CASE OF HANSRAJ MATHURDAS VS. I T O DT. 16 TH SEPTEMBER, 2011 AT PARA 17 HELD AS FOLLOWS. 17. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE HAS TAKEN US THROUGH THE CBDT CIRCULAR NO. 8/2005 DATED 29 - 08 - 2005 GIVING EXPLANATORY NOTES ON THE PROVISIONS RELATING TO FRINGE BENEFIT TAX AS INTRODUCED BY THE FINANCE ACT , 2005 AND INVITED OUR ATTENTION TO THE RELEVANT PORTION THEREOF TO EXPLAIN THE OBJECT BEHIND LEVYING FRINGE BENEFIT TAX. AS INDICATED IN THE SAID CIRCULAR, THE FRINGE BENEFIT TAX HAS BEEN INTRODUCED AS A SURROGATE TAX ON EMPLOYER WITH THE OBJECTS OF RESOLVING THE PROBLEMS IN TAXING SOME PERQUISITES/FRINGE BENEFITS IN THE HANDS OF THE EMPLOYEES IN TERMS OF SECTION 17 . FURTHER, AS EXPLAINED IN PARA NO. 3.2 OF THE CIRCULAR, T HE SCOPE OF THE TERM 'FRINGE BENEFITS PROVIDED' IS DEFINED IN SECTION 115WB(1 ) TO MEAN ANY CONSIDERATION FOR EMPLOYMENT PROVIDED BY WAY OF ANY PRIVILEGE, SERVICE FACILITY OR AMENITY, DIRECTLY OR INDIRECTLY, PROVIDED BY AN EMPLOYER, WHETHER BY WAY OF REIMBURSEMENT OR OTHERWISE, TO HIS EMPLOYEES. MOREOVER, AS CLARIFIED IN THE SAID CIRCULAR WHILE ANSWERING FREQUENTLY ASKED QUESTION NO. 15, FRINGE BENEFIT IS DEEMED TO HAVE BEEN PROVIDED IF THE EMPLOYER HAS INCUR RED EXPENSES FOR ANY OF THE PURPOSES REFERRED TO IN THE RELEVANT PROVISIONS AND THERE IS NO REQUIREMENT TO SEGRAGATE SUCH EXPENSES BETWEEN THOSE INCURRED FOR OFFICIAL PURPOSES AND PERSONAL PURPOSES. IT WAS FURTHER CLARIFIED WHILE ANSWERING QUESTION NO. 81 THAT WHEN EXPENDITURE ON RUNNING AND MAINTENANCE OF MOTOR CARS IS LIABLE TO FRINGE BENEFIT TAX, THE EMPLOYEES WILL NOT BE LIABLE TO INCOME TAX ON THE PERQUISITE VALUE OF MOTOR CAR PROVIDED BY THE EMPLOYER. AS RIGHTLY CONTENDED BY THE LEARNED COUNSEL FOR TH E ASSESSEE, CIRCULAR NO. 8/2005 DATED 29 - 08 - 2005 ISSUED BY THE BOARD EXPLAINING THE PROVISIONS RELATING TO FRINGE BENEFIT TAX THUS MAKES IT CLEAR THAT FRINGE BENEFIT TAX IS LEVIED ON THE EXPENSES ITA 805/DEL/2013 A.Y. 2009 - 10 AERO ENTERPRISES, NEW DELHI 3 INCURRED BY THE EMPLOYER IRRESPECTIVE OF WHETHER THE SAME AR E INCURRED FOR OFFICIAL OR PERSONAL PURPOSES. IN OUR OPINION, ONCE FRINGE BENEFIT TAX IS LEVIED ON SUCH EXPENSES AS HAS BEEN DONE IN THE PRESENT CASE, IT FOLLOWS THAT THE SAME ARE TREATED AS FRINGE BENEFITS PROVIDED BY THE ASSESSEE AS EMPLOYER TO ITS EMPLO YEES AND THE SAME HAVE TO BE APPROPRIATELY ALLOWED AS EXPENSES INCURRED WHOLLY AND EXCLUSIVELY INCURRED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. IN THAT VIEW OF THE MATTER, WE DELETE THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT (APPEALS) OUT OF CONVEYANCE AND TELEPHONE EXPENSES AND ALLOW GROUND NO. 4 AND 5 OF THE ASSESSEE'S APPEAL. 4.1. THE EXPENDITURE IN QUESTION WAS DISALLOWED ON THE GROUND THAT THERE WOULD HAVE BEEN AN ELEMENT OF PERSONAL NATURE, THE ABOVE CITED DECISION SQU ARELY APPLIES AND THIS GROUND OF APPEAL IS TO BE ALLOWED. 4.2. NOW MERE PAYMENT OF FBT, DOES NOT GRANT LICENSE TO CLAIM DEDUCTION OF BOGUS PAYMENT. AS IN THE PRESENT CASE THE GENUINENESS OF THE EXPENDITURE HAS NOT BEEN DOUBTED, WE ALLOW THIS GROUND OF THE ASSESSEE . 5. IN THE RESULT ASSESSEE S APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JUNE, 2015. SD/ - SD/ - [ DIVA SINGH ] [J. SUDHAKAR REDDY] JUDICIAL MEMBER ACCOUNTANT MEMBER DT. THE 30 TH JUNE, 2015 MANGA ITA 805/DEL/2013 A.Y. 2009 - 10 AERO ENTERPRISES, NEW DELHI 4 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES