KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LTD., MUMBAI V. D.C.I.T.-1(2), MUMBAI

ITA 8314/MUM/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0948 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 08-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S PADMAJA
• Assessee Lawyers: CHETAN DESAI
• Keywords: Depreciation; Business expenditure

Judgement Text

1 8314 KMOMLIL AY - 08 - 09 , INCOME TAX APPELLATE TRIBUNAL,MUMBAI - A BENCH , , BEFORE S/SH. I P BANSAL,JUDICIAL MEMB ER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.8314/MUM/2011, / ASSESSMENT YEAR - 2008 - 09 M/S. KOTAK M AHINDRA OLD MUTUAL LIFE INSURANCE LIMITED 7TH FLOOR, BLDG. NO.4, INFINITY IT PARK, G EN. A.K. VAIDYA MARG, DINDOSHI, MALAD(E)MUMBA I - 400 097 PAN: AAACO 3983 B VS DCIT - 1(2) ,AAYKAR BHAVAN,M K ROAD, MUMBAI - 20 ( / ASSESSEE ) ( / RESPONDENT ) /ASSESSEE BY :SHRI CHETAN DESAI / REV ENUE BY :MS. S. PADMAJA / DATE OF HEARING : 08 - 04 - 2015 / DATE OF PRONOUNCEMENT : 08 - 04 - 2015 , 196 1 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJEDRA,A . M . - CHALLENGING THE ORDER DT.9/9/2011 OF THE CIT(A) - 2,MUMBAI,ASSESSEE - COMPANY HAS RAISED FOLLOWING GROUNDS OF APPEAL: GROUND NO. I - FBT IS NOT CHARGEABLE WHEN THERE IS NO FRINGE BENEFIT PROVIDED TO THE EMPLOYEES 1. THE COMMISSIONER OF INCOME TAX (APPEALS) - 2 ('HEREINAFTER REFERRED AS TO THE CIT(A)'') ERRED IN HOLDING THAT EXPENDITURE OF RS. 10,76,61,312 / - INCURRED BY THE APPELLANT ON MOBILE/RESIDENTIAL TELEPHONE, TRAVEL, CONFERENCE & MEETING , GUEST HOUSE, AND AGENTS TRAINING WAS LIABLE TO LEVY OF FRINGE BENEFIT TAX (FBT). 2. THE APPELLANT THEREFORE, PRAYS THAT THE SAID AMOUNT BE EXCLUDED FROM THE LEVY OF FBT AS CLAIMED BY APPELLANT. GROUND NO. II RESIDENTIAL TELEPHONE, MOBILE PHONE INSTRUMENT & MOBILE PHONE EXPENSES 1. THE CIT(A) ERRED IN HOLDING THAT EXPENDITURE OF RS. 1,4962,994/ - INCURRED BY THE APPELLANT ON RESIDENTIAL TELEPHONE, MOBILE PHONE INSTRUM ENT COST AND MOBILE PHONE WAS LIABLE TO LEVY OF FRINGE BENEFIT TAX AS THESE EXPENSES DID NOT RESULT IN ANY BENEFIT TO THE EMPLOYEES. . 2. THE APPELLANT THEREFORE, PRAYS THAT THE SAID AMOUNT BE EXCLUDED FROM THE LEVY OF FBT AS CLAIMED BY APPELLANT. GROUND NO. I I I - TRAVEL EXPENSES (DOMESTIC & FOREIGN) 2 8314 KMOMLIL AY - 08 - 09 1. THE CIT(A) ERRED IN HOLDING THAT EXPENDITURE OF RS. 4,00,65,999/ - INCURRED BY THE APPELLANT ON DOMESTIC AND FOREIGN TRAVE LING WAS LIABLE TO THE LEVY OF FRINGE BENEFIT TAX AS TH ESE EXPENSES DID NOT RESULT I N ANY BENEFIT TO THE EMPLOYEES. 2. IN THE ALTERNATIVE AND WITHOUT PREJUDICE TO THE ABOVE THE BENEFIT, IF ANY, WAS NOT COLLECTIVE IN NATURE AND THEREFORE DID NOT FALL WITHIN THE SCOPE OF FBT. 3. THE APPELLANT THEREFORE, PRAYS THAT THE SAID AMOUNT BE EXCLU DED FROM THE LEVY OF FBT AS CLAIMED BY APPELLANT. GROUND NO. IV TRAVELLING EXPENSES - HOTEL BOARDING & LODGING 1. THE CIT(A) ERRED IN HOLDING THAT EXPENDITURE OF RS. 1,60,56,885/ - INCURRED BY THE APPELLANT ON TRAVELLING - HOTEL BOARDING & LODGING WAS LIABLE TO THE LEVY OF FBT AS THIS EXPENSE DID NOT RESULT IN ANY BENEFIT TO THE EMPLOYEES. 2. IN THE ALTERNATIVE AND WITHOUT PREJUDICE TO THE ABOVE THE BENEFIT, IF ANY, WAS NOT COLLECTIVE IN NATURE AND THEREFORE DID NOT FALL WITHIN THE SCOPE OF FBT. 3. THE APPE LLANT THEREFORE, PRAYS THAT THE SAID AMOUNT BE EXCLUDED FROM THE LEVY OF FBT AS CLAIMED BY APPELLANT. GROUND NO . V - CONFERENCE & MEETING 1. THE CIT(A) ERRED IN HOLDING THAT EXPENDITURE OF RS. 3,11,61,947/ - INCURRED BY THE APPELLANT ON CONFERENCE AND MEETI NG WAS LIABLE TO THE LEVY OF FBT AS THESE EXPENSE S DID NOT RESULT IN ANY BENEFIT TO THE EMPLOYEES. 2. THE APPELLANT THEREFORE, PRAYS THAT THE SAID AMOUNT BE EXCLUDED FROM THE LEVY OF FBT AS CLAIMED BY APPELLANT. GROUND NO . V I GUEST HOUSE EXPENSES 1. TH E CIT(A) ERRED IN HOLDING THAT EXPENDITURE OF RS. 17,27,723/ - INCURRED BY THE APPELLANT ON GUEST HOUSE WAS LIABLE TO THE LEVY OF FBT AS THESE EXPENSE S DID NOT RESULT IN ANY BENEFIT TO THE EMPLOYEES. 2. THE APPELLANT THEREFORE, PRAYS THAT THE SAID AMOUNT BE EXCLUDED FROM THE LEVY OF FBT AS CLAIMED BY APPELLANT. GROUND NO . V II AGENTS ENTERTAINMENT & REFRESHMENT 1. THE CIT(A) ERRED IN HOLDING THAT EXPENDITURE OF RS. 36,85,764/ - INCURRED BY THE APPELLANT ON LIFE AGENTS TRAINING AND LIFE AGENTS ENTERTAINMENT W AS LIABLE TO THE LEVY OF FBT AS THESE EXPENSE S DID NOT RESULT IN ANY BENEFIT TO THE EMPLOYEES. 2. THE APPELLANT THEREFORE, PRAYS THAT THE SAID AMOUNT BE EXCLUDED FROM THE LEVY OF FBT AS CLAIMED BY APPELLANT. 2. ASSESSEE - COMPANY,ENGAGED IN THE BUSINESS OF LIFE INSURANCE AND ANNUITY, FILED ITS RETURN OF FRINGE BENEFIT TAX (FBT) ON 28/09/2008 , DISCLOSING THE VALUE OF F RINGE B ENEFIT (FB) TO THE EXTENT OF RS.4,14,64,837/ - .THE AO COMPLETED THE ASSESSMENT U/S.1 15WE(3) ON 30/11/2010 DETERMINING THE TOTAL VALUE OF FB AT RS.8.25 CRORES. FROM THE TAX AUDIT REPORT THE AO FOUND THAT THE ASSESSEE HAD COMPUTED FB ON THE FOLLOWING EXPENSES SN. NATURE EXPENSES EXP AMOUNT RS. % OF EXPENSES VALUE OF F RINGE B ENEFITS 1 EMPLOYEE STOCK OPTION 3,28,91,159 100% 3,28,91,159 2 EN TERTAINMENT 4,71,602 20% 94,320 3 EMPLOYEE WELFARE 3,18,60,191 20% 63,72,038 3 8314 KMOMLIL AY - 08 - 09 4. REPAIR RUNNING (INCLUDING FUEL), MAINTENANCE OF MOTOR CARS AND THE AMOUNT OF DEPRECIATION THEREON 84,92,627 20% 16,98,525 5. FESTIVAL CELEBRATIONS 4,96,364 50% 2,48,182 6. CLUB FACILITIES 3,21,223 50% 1,60.612 TOTAL VALUE OF FRINGE BENEFIT 7,45,33,166 4,14,64,836 AS REGARDS REMAINING VALUE OF FB AMOUNTING TO RS.7.13 CRORES IT WAS STATED THAT THE VALUE OF THE FOLLOWING BENEFITS WAS NOT LIABLE FOR FBT : SN. NATURE EXPENSES EXP AMOUNT RS. % OF EXPENSES VALUE OF FB 1 T ELEPHONE/FAX/TELEX EXPENSES - OFFICE LANDLINES 33,541,306 20% 6,708,261 2 TELEPHONE EXP. - MOBILE PHONES & RESIDENTIAL PHONES 14,962,994 20% 2,992,599 3 TRAVEL EXPENSES DOMESTIC & FOREIGN 40,065,999 5% 2,003,300 4 HOTEL, BOARDING AND LODGING FACILITIES 16,056,885 20% 3,211,377 5 CONVEYANCE EXPENSES 94,116,443 20% 18,823,289 6. CONFERENCE & MEETING 31,161,947 20% 6,232,289 7. GUEST HOUSE EXPENSES 17,27,723 20% 345,544 8. AGENTS ENTERTAINMENT AND REFRESHMENT 3, 685,764 20% 737,153 9. ADVERTISEMENT 151,379,407 20% 30,275,881 TOTAL 386,698,468 71,329,793 IT WAS CONTENDED BY THE ASSESSEE THAT THE ABOVE EXPENDITURE WAS ADMISSIBLE AS DEDUCTIBLE BUSINESS EXPENDITURE, THAT SAME WERE NOT PRIVILEGED/SERVICES/BENEFIT/ AMENITY DIRECTLY OR INDIRECTLY TO ITS EMPLOYEES THAT SAME WERE NOT LIABLE FOR FBT. HOWEVER, THE AO DID NOT AGREE WITH THE ASSESSEE AND HELD THAT FBT WAS PRESUMPTIVE TAX, THAT A PRESUMPTIVE METHOD WAS APPLIED TO CERTAIN HEAD OF EXPENDITURE. FINALLY, HE HELD THAT EXPENSES INCURRED ON TELEPHONE, MOBILE PHONE, TRAVEL, CONVEYANCE, GUEST HOUSE, ENTERTAINMENT AND REFRESHMENT, CONFERENCES, AMOUNTING TO RS.7.13CRORES WAS LIABLE TO TAX FOR FB. 4 8314 KMOMLIL AY - 08 - 09 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER,HE HELD THAT SIMILAR ISSUE WERE DECIDED BY THE THEN FAA WHILE DECIDING THE APPEALS FILED FOR THE AYS 2006 - 07 AND 2007 - 08, THAT HE HAD HELD THE E XPENDITURE ON TELEPHONE AND CONVEYANCE EXPENSES INCURRED FOR THE EMPLOYEES FOR BUSINESS, INCLUDING CAR H IRE COULD NOT BE TREATED AS FB, THAT FOR THE OTHER ITEMS OF EXPENDITURE THE DECISION OF THE AO WAS TO BE CONFIRMED. 4. BEFORE US,AUTHORISED REPRESENTATIV E (AR) CONTENDED THAT IN THE CASE OF THE ASSESSEE AS WELL AS OTHER GROUP CONCERNS THE TRIBUNAL HAD RESTORED THE MATTER TO THE FILE OF THE AO. HE RELIED ON THE ORDERS OF THE TRIBUNAL FOR EARLIER YEARS (ITA NO.63/MUM/2010 AY2006 - 07 DT.25.11.2011; ITA NO..5251 /MUM/2010 - AY2007 - 08 DT.11.4.2012) DELIVERED IN A SSESSEE S OWN CASE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT WHILE DECIDING THE APPEAL FOR THE A Y 2006 - 07 THE TRIBUNAL HAS HELD, AT PARA NO.10 OF THE ITS ORDER, AS UNDER : - '10. SUB - SECTION (2) OF SECTION 115WB IS A DEEMING PROVISION WHERE CERTAIN EXPENDITURES INCURRED BY THE EMPLOYEE, FRINGE BENEFIT ARE DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEE. IN OUR OPINION, SUB - SECTION (2) OF SECTION 115WB WHICH DEFIN ES 'FRINGE BENEFIT' UNDER CHAPTER - XII - H, CONTROL SUB - SECTION (2) AND ANY EXPENDITURE INCURRED BY AN EMPLOYER IN THE COURSE OF HIS BUSINESS OR PROFESSION, WHICH IS NOT A CONSIDERATION FOR EMPLOYMENT, CANNOT BE CONSIDERED AS 'FRINGE BENEFIT'. THUS, THE DEEMI NG PROVISIONS OF SUB - SECTION 2 OF SECTION 115WB, APPLIES ONLY WHEN THE EXPENDITURE IS IN THE NATURE OF CONSIDERED FOR EMPLOYMENT. THUS, WHILE RESTORING THE ISSUE BACK TO THE FILE OF AO FOR ADJUDICATION AFRESH, WE DIRECT THE AO TO APPLY THE PROPOSITION OF L AW AS INTERPRETED BY US WHILE DETERMINING THE VALUE OF FRINGE BENEFIT. ON THE ISSUE OF EXPENDITURE INCURRED ON CONFERENCE AND MEETINGS, THE AO SHALL CONSIDER BIFURCATION SUBMITTED TO HIM WITH RESPECT TO THE EXPENDITURE INCURRED ON THE AGENTS AND BROKERS AN D PASS APPROPRIATE ORDERS. 'FRINGE BENEFIT' CANNOT ARISE WHEN EXPENDITURE IS INCURRED ON PERSONS WHO ARE NOT EMPLOYEES. ON THE ISSUE OF CLUB MEMBERSHIP FEE, THE PAYMENTS MADE TO LIMRA AND ACTUARIAL SOCIETY OF INDIA, ARE TO BE EXCLUDED AS THEY ARE NO PAYMENTS TO CLUBS. WITH THESE OBSERVATIONS, WE RESTORE THE ISSUE BACK TO THE FILE OF AO FOR ADJUDICATION AFRESH.' RESPECTFULLY, FOLLOWING THE ABOVE WE ARE REMITTING BACK THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION.EFFECTIVE GROUND O F APPEAL,FILED BY THE ASSESSEE, IS ALLOWED FOR STATISTICAL PURPOSES. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS STATISTICALLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH ,APRIL,2015. 8 TH APRIL, 015 SD/ - SD/ - ( /I P BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 08 .04.2015 JV. 5 8314 KMOMLIL AY - 08 - 09 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUAR D FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.