ADDL.C.I.T. RG.2(3), MUMBAI V. TATA MOTORS LTD., MUMBAI

ITA 8297/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9321 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 08-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GIRIJA DAYAL
• Assessee Lawyers: DINESH VYAS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT (MZ) AND SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER I.T.A. NO. 8297/M/2011 ASSESSMENT YEAR: 2008-2009 ACIT-2(3), ROOM NO. 556, AAYAKAR BHAVAN, MUMBAI 400 020. VS. M/S. TATA MOTORS LTD., BOMBAY HOUSE, 24, HOMI MODY STREET, MUMBAI 400 001. PAN: AAACT2727Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GIRIJA DAYAL, CIT - DR RESPONDENT BY : SHRI DINESH VYAS, AR DATE OF HEARING: 21.11.2012 DATE OF OR DER:23.11.2012 O R D E R PER D. KARUNAKARA RAO, AM: THIS IS APPEAL FILED BY THE REVENUE ON 8.12.2011 IS AGAINST THE ORDER OF CIT (A)-6, MUMBAI DATED 26.9.2011 FOR THE ASSESSMENT YE AR 2008-2009. 2. IN THIS APPEAL, REVENUE HAS RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) ERRED IN HOLDING THAT EXPENSES OF RS. 50.97 CRORE WHICH ARE ON ACCOUNT OF SALES PROMOTION CANNOT BE CHARGED UNDER FBT WITHOUT APPRECIATING THAT SALES PROMOTION EXPENSES IS TO BE INCLUDED IN THE VALUE OF TAXABLE FRINGE BENEFITS AS PROVIDED U/S 115WB (2) OF THE I.T. ACT. 2. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE DECISION OF THE CIT (A) MAY BE SET ASI DE AND THAT OF THE AO RESTORED. 3. AT THE OUTSET, SHRI DINESH VYAS, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE ISSUE RELATES TO TAXABILITY OF SALES PROMOTION EXPENSES OF RS. 50.97 CRORES UNDER THE PROVISIONS RELATING TO FBT (FRINGE BENEFIT TAX) U/S 115WB (2) OF THE I.T. ACT . THE REVENUE IS OF THE OPINION THAT THE SAID AMOUNTS ARE TO BE INCLUDED IN THE VALUE OF FBT AS PROVIDED UNDER SECTION 115-WB (2) OF THE INCOME TAX ACT. IN THIS REGARD, LD COUNSEL FILED A PAPER BOOK CONSISTING A COUPLE O F DECISIONS I.E. H.V. 2 TRANSMISSIONS LIMITED VS. ACIT, ITA NO.7927/MUM/201 0 (AY: 2007-2008) ORDER DATED 9.11.2012 AND ANOTHER DECISION OF THE TRIBUNA L IN THE CASE OF DCIT VS. M/S. TATA ASSET MANAGEMENT LTD, ITA NO. 2735/MUM/2011 (A Y: 2006-2007) AND ITA NO. 2736/MUM/2011 (AY: 2007-2008) ORDER DATED 25.4.2012 FOR THE PROPOSITION THAT THE EXPENDITURE NOT INCURRED IN CONNECTION WITH THE EMP LOYEES OF THE COMPANY IS OUTSIDE THE SCOPE OF THE PROVISIONS RELATING TO FBT . 4. ON THE OTHER HAND, LD DR FAIRLY RELIED ON THE OR DER OF THE AO. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE ORDE RS OF THE REVENUE AUTHORITIES AS WELL AS THE DECISIONS FILED BEFORE U S. SO FAR AS THE DECISION OF THE TRIBUNAL IN THE CASE OF H.V. TRANSMISSIONS LIMITED VS. ACIT (SUPRA) IS CONCERNED, WE FIND PARA 4 IS RELEVANT FOR THE PROPOSITION THAT WHEN THERE IS NO DIRECT OR INDIRECT BENEFIT ACCRUED TO THE EMPLOYEES OF THE ASSESSEE, T HE PROVISIONS OF FBT CANNOT BE INVOKED. IN THIS CASE, BRAND PROMOTION EXPENSES WERE THE SU BJECT MATTER AND TRIBUNAL GRANTED RELIEF TO THE ASSESSEE AS PER THE CONTENTS OF PARA 4 WHICH READS AS UNDER: 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AS PER THE SETTLED LAW, FBT IS LEVIABLE WI TH REGARD TO THE PAYMENTS THAT RESULT IN SOME BENEFIT TO THE EMPLOYEES OF THE ASSESSEE. IF THE INCURRED EXPENDITURE DOES NOT BENEFIT THE EMPLOYEES COLLECTI VELY, PROVISIONS OF FBT CANNOT BE INVOKED. IF ON THE TOUCHSTONE OF THIS PR INCIPLE CASE UNDER CONSIDERATION IS TESTED IT BECOMES CLEAR THAT ADDIT ION MADE BY THE AO TO THE VALUE OF THE FB (FRINGE BENEFIT) CANNOT BE ENDORSED . THOUGH THE AO AND THE FAA HAVE HELD THAT EXPENSES INCURRED BY THE ASSESSE E UNDER THE HEAD HOTEL EXPENSES AND CAR EXPENSES WERE INCURRED FOR EMPLOY EES, YET THEY HAVE NOWHERE REFERRED TO ANY MATERIAL ON THE BASIS OF WH ICH THEY ARRIVED AT THE SAID CONCLUSION. THE FACT OF BENEFIT TO EMPLOYEES HAS NOT BEEN ESTABLISHED, THEREFORE, IN OUR OPINION VALUE OF CAR EXPENSES AND HOTEL EXPENSES CANNOT BE ADDED TO THE FB VALUE DECLARED BY THE ASSESSEE-COMP ANY. AS FAR AS VALUES OF BRAND PROMOTION EXPENSES ARE CONCERNED THEY CANN OT BE TREATED AS FB TO THE EMPLOYEES. IN CIRCULAR NO.8 DATED 29.8.2005, CBDT HAS CLARIFIE D THAT FOR LEVY OF FBT EMPLOYER-EMPLOYEE RELATIONSHIP I S THE BASIC CONDITION . IN THE CASE UNDER CONSIDERATION PAYMENT HAD BEEN PAID TO ANOTHER GROUP CONCERN. THUS, THERE IS NO DIRECT OR INDIRECT BENEFIT HAS ACCRUED TO THE EMPLOYEES OF THE APPELLANT COMPANY. THEREFORE, IN OUR OPINION, FBT CANNOT BE LEVIED ON BRAND PROMOTION EX PENSES. CASES RELIED UPON BY THE AR ALSO SUPPORT THE SUBMISSIONS MADE BY HIM. RESPECTFULLY FOLLOWING THE DECISIONS DELIVERED BY THE BANGALORE AND MUMBAI BENCH OF THE TRIBUNAL IN THE CASES M/S. TAYOTA KIRLOSKAR MOTOR P . LTD. (SUPRA), KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LTD., (SUPRA) AN D M/S. TATA ASSET MANAGEMENT LTD. (SUPRA), WE DECIDE ALL THE THREE EF FECTIVE GROUNDS OF THE 3 APPEAL IN FAVOUR OF THE ASSESSEE-COMPANY. WE FIND THAT ISSUES UNDER CONSIDERATION HAVE BEEN DECIDED IN FAVOUR OF THE AP PELLANT BY THE SAID DECISIONS. 6. FURTHER, WE HAVE ALSO PERUSED THE OTHER DECISION FILED BEFORE US IN THE CASE OF M/S. TATA ASSET MANAGEMENT LTD (SUPRA) AND PARA 12 IS RELEVANT IN THIS REGARD FOR THE SIMILAR PROPOSITION. FOR THE SAKE OF COMPLETEN ESS OF THE ORDER, THE SAID PARA IS REPRODUCED AS UNDER: 12. WE HAVE HEARD THE SUBMISSIONS OF THE LD DR, WHO RELIED ON THE ORDER OF THE AO. WE ARE OF THE VIEW THAT THE REASONS ASS IGNED BY THE CIT (A) ARE CORRECT AND DO NOT CALL FOR ANY INTERFERENCE. WE A RE OF THE VIEW THAT THE CHARGE TO FRINGE BENEFIT TAX IS DEPENDENT ON ENJOYM ENT OF BENEFIT COLLECTIVELY BY THE EMPLOYEES AND THIS IS TOTALLY MISSING IN THE PRESENT CASE OF BRAND EQUITY PAYMENT AND HENCE CANNOT BE SUBJECTED TO FBT . EVEN THE CBDTS CIRCULAR NO.8, DATED 29.8.2005 CLARIFIES IN REPLY T O QUESTION NO.2 AS TO WHETHER EMPLOYER-EMPLOYEE RELATIONSHIP WAS A PRE-RE QUISITE FOR THE LEVY OF FBT BY REPLYING IN THE AFFIRMATIVE. IN THE PRESENT CASE, AS RIGHTLY HELD BY THE CIT (A), THE PAYMENT HAS BEEN MADE FOR BUSINESS PRO MOTION TO ANOTHER GROUP COMPANY, WITHOUT THERE BEING ANY BENEFIT ACCR UING TO ANY OF THE EMPLOYEES OF THE ASSESSEE. THUS THE VERY BASIS FOR LEVY OF FBT, NAMELY THE COLLECTIVE ENJOYMENT OF SOME BENEFIT BY THE EMPL OYEES IS MISSING. THEREFORE, FRINGE BENEFIT TAX WOULD NOT B E LEVIABLE UNLESS BENEFIT ACCRUES COLLECTIVELY TO THE EMPLOYEES OF THE ASSESS EE. WE, THEREFORE, FIND NO MERIT IN GROUND NO.3 RAISED BY THE REVENUE. CONSEQ UENTLY, GROUND NO.3 RAISED BY THE REVENUE IS DISMISSED. 7. FROM THE ABOVE JUDICIAL PRONOUNCEMENTS, IT IS EV IDENT THAT THE EXPENDITURE ON ACCOUNT OF SALES PROMOTION CANNOT BE BROUGHT UNDER FBT PROVISIONS AS THEY ARE NOT INCURRED BY THE EMPLOYEES OF THE COMPANY. THEREFOR E, PARA 5.2 OF THE IMPUGNED ORDER ALSO JUSTIFIES THAT THE FBT CANNOT BE LEVIED EXCEPT IN RESPECT OF PAYMENTS MADE FOR THE BENEFICIAL TO THE EMPLOYEE DIRECTLY OR INDIRECTLY. IN THE PRESENT CASE, THE EXPENDITURE BEING FOR THE SALES PROMOTION, THE SAME WAS SPENT FOR THE DIRECT OR INDIRECT BENEFIT OF THE EMPLOYEES OF THE COMPANY. T HEREFORE, THE DECISION GIVEN BY THE CIT (A) IN HIS ORDER IS FAIR AND IT DOES NOT CA LL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED . 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF NOVEMBER, 2012. SD/- SD/- (D. MANMOHAN) (D. KARUNAKARA RAO) VICE PRESIDENT ACCOUNTANT MEMBER DATE : 23.11.2012 4 AT :MUMBAI OKK COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR E, BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI