Adani Wilmar Ltd, Ahmedabad V. The Dy.CIT.,Circle-1, Ahmedabad

ITA 866/AHD/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6935 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 21-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Keywords: Gift

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI ANIL CHATURVEDI , A.M. & SHRI KUL BHARAT, J.M. ) I. T. A. NO. 866 / AHD/ 20 1 1 (A SSESSMENT YEAR: 2007 - 08) ADANI WILMAR LIMITED FORTUNE HOUSE, NR. NAVRANGPURA RLY. CROSSING, NAVRANGPURA, AHMEDABAD V/S THE D.C.I.T., CIRCLE - 1, AHMEDABAD (APPELLA NT) (RESPONDENT) PAN: AABCA 8056D APPELLANT BY : SHRI VARTIK CHOKSHI, A.R. RESPONDENT BY : SHRI M.K. SINGH, SR. D.R. ( )/ ORDER DATE OF HEARING : 15 - 12 - 2014 DATE OF PRONOUNCEMENT : 19 - 12 - 2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) - VI, AHMEDABAD DATED 13.01.2011 FOR A.Y. 2007 - 08. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURING/REFINING AND TRADING OF EDIBLE OIL , SEEDS AND CAKES. ASSESSEE FILED THE RETURN OF INCOME OF FRINGE BENEFIT ON 06.10.2007 DECLARING VALUE OF FRINGE BENEFIT OF RS. 1,23,99,655/ - . THE CASE WAS S ELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S. 115WE(3) OF THE ACT VIDE ORDER DATED 29.12.2009 AND THE FRINGE BENEFIT VALUE WAS ASSESSED AT RS. 1,51,94,689/ - . ITA NO 866/AHD/20 11 . A.Y. 2007 - 08 2 AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A) W HO VIDE ORDER DATED 13.01.2011 DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF CIT(A) ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS FILED THE GROUNDS O F APPEAL WHICH WERE LATER CONCIS ED AND THE CONCISE GROUNDS READS AS UNDER: - 1. IN LA W AND IN THE FACTS AND IN CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ADDITION OF THE FRINGE BENEFIT VALUE OF RS. 27,95,037/ - EVEN THOUGH THE CORRESPONDING EXPENDITURES HAVE NOT BEEN INCURRED FOR THE BENEFI T OF EMPLOYEES OF THE APPELLANT COMPANY. 2. IN LAW AND IN THE FACTS AND IN CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT FRINGE BENEFIT TAX IS NOT LIABLE TO BE PAID BY THE APPELLANT IN RESPECT OF THE FOLLOWING ITEMS OF EXPENDITURE A S THEY HAVE BEEN INCURRED ONLY WITH RELATION TO NON - EMPLOYEES AND ARE BEING PURELY FOR THE BUSINESS PURPOSES OF THE APPELLANT S. NO. NATURE OF EXP. / PAYMENT [NON EMPLOYEE RELATED EXPENSES] AMOUNT PERCENT AGE (% ) VALUE OF FBT FRINGE BENEFIT TAX 1 RECRUITMENT EXPENSES (TRAVELLING REIMBURSEMENT) 5,13,534 5% 25,677 8,643 2 GUEST HOUSE EXPENSES (FBT) 24,04,326 20% 4,80,865 1,61,859 3 TRAVELING EXP. FOREIGN (OTHERS)(FBT) 5,35,028 5% 26,751 9,005 4 CAR HIRE CHARGES (FBT) 3,18,148 20% 63,630 21,418 5 TRAVELLING EXP. (O T HERS)(FBT) 14,89,975 5% 74,499 25,076 6 ENTERTAINMENT EXPENSES OTHERS(FBT) 4,48,836 20% 89,767 30,216 7 SALES PROMOTION CONSUMER OFFER 28,99,592 20% 5,79,918 1,95,201 8 SALES PROMOTION EXPENSES - OTHER 27,40,341 20% 5,48,068 1,84,480 ITA NO 866/AHD/20 11 . A.Y. 2007 - 08 3 9 COGS SCHEME MATERIAL CONSUMED AT VARIOUS BRANCHES 45,29,308 20% 9,05,862 3,04,913 TOTAL 1,58,79,088 27,95,037 9,40,809 3. THE LEARNED CIT (A) ERRED IN LAW AND IN THE FACTS AND IN CIRCU MSTANCES OF THE CASE BY INCORRECTLY APPLYING THE PROVISIONS OF SECTION 115WB (2) OF THE INCOME TAX ACT, 1961 AND THEREBY LEVYING FBT ON EXPENDITURE WHICH HAD NO DIRECT/INDIRECT CONNECTION TO THE EMPLOYEES OF THE APPELLANT COMPANY WHICH IS PRECONDITION AS T O INVOKE FBT AS PER THE PROVISIONS OF THE ACT AND ALSO THE LEGISLATIVE INTENT AS EXPLAINED BY THE BUDGET SPEECH IN THE EXPLANATORY NOTES. ABOVE REFERRED ALL EXPENDITURE WAS INCURRED PURELY FOR BUSINESS EXPEDIENCY MATTERS AND WAS INCURRED FOR BUSINESS PURPO SES ONLY. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND AND/OR ALTER THE GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 4. BEFORE US, LD. A.R. SUBMITTED THAT THE ONLY ISSUE IS WITH RESPECT TO LEVY OF FRINGE BENEFIT TAX (FBT). D URING THE COURSE OF ASSESSMENT PROCEEDINGS AND ON PERUSING 3CD REPORT A.O NOTICED THAT THE TOTAL FRINGE BENEFIT DETERMINED WAS RS. 1,51,94,689/ - BUT EXPENSES ON WHICH FBT PAID WAS RS. 1,23,99,655/ - AND THUS ON THE DIFFERENCE OF RS. 27,95,037/ - FBT WAS NOT PAID. A.O WAS OF THE VIEW THAT IN VIEW OF THE PROVISIONS OF SUB - SECTION 2 OF SUB - SECTION115WB BEING DEEMING PROVISION, ASSESSEE WAS LIABLE TO TAX ON THE ENTIRE VALUE OF EXPENSES STATED IN FORM 3CD. HE ACCORDINGLY CONSIDERED THE DIFFERENCE VALUE OF RS. 27,9 5,034/ - TO BE THE SUM OF WHICH ASSESSEE WAS LIABLE FOR FBT. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO UPHELD THE ORDER OF A.O BY HOLDING AS UNDER: - 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER AND APPELL ANT'S SUBMISSION. IT IS NOT IN DISPUTE THAT APPELLANT IS COVERED BY THE PROVISIONS OF FRINGE BENEFIT TAX. IT IS LEVIED IN RESPECT OF FRINGE BENEFIT PROVIDED OR DEEMED TO HAVE BEEN PROVIDED BY AN EMPLOYER TO HIS EMPLOYEES. AS PER SECTION 115WB(2) FRINGE BEN EFIT IS DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES IF EMPLOYER HAS INCURRED ANY EXPENSES OR MADE ANY PAYMENT FOR THE PURPOSES MENTIONED IN CLAUSE - A TO CLAUSE - Q. THE VALUE OF THE FRINGE BENEFIT IS TO BE WORKED OUT BY APPLYING A PERCENTAGE GIVEN IN SECTION 115WC. THESE TWO SECTIONS DO NOT GIVE ANY DISCRETION OR COMPUTATION METHODOLOGY THROUGH WHICH THE BENEFIT ACCRUED ONLY TO EMPLOYEES ARE TO BE TAKEN. SINCE THIS IS A DEEMING PROVISION AND VALUE OF FRINGE BENEFIT ARE ALSO DEEMED AT A PARTIC ULAR PERCENTAGE, THERE IS HARDLY ANY DISCRETION EITHER WITH APPELLANT OR WITH THE TAX DEPARTMENT TO REDUCE THE LEVY OF FRINGE BENEFIT TAX. SINCE, THE PROVISION AND SECTIONS ARE VERY CLEAR AND THERE IS NO ROOM ITA NO 866/AHD/20 11 . A.Y. 2007 - 08 4 FOR ANY CONFUSION, THE LINKING OF THE EXPENSES TO THE BENEFIT OF EMPLOYEE IS NOT NECESSARY. ANY EXPENSES WHICH IS DIRECTLY INCURRED FOR THE PURPOSE OF EMPLOYEE, IS FULLY TAKEN FOR THE PURPOSE OF FRINGE BENEFIT TAX. HOWEVER, OTHER EXPENSES IN THE NATURE OF ENTERTAINMENT, SALE PROMOTION, CONVEYANCE , TRA VELLING, GIFTS ETC. MAY HAVE PARTIAL BENEFIT TO THE EMPLOYEES AND THEREFORE, ONLY A PART IS TREATED AS FRINGE BENEFIT. SINCE, SECTION CLEARLY DEFINED THE VALUE OF FRINGE BENEFIT, NO FURTHER ADJUSTMENT TO THE ITEMS OF EXPENSES DEBITED IN PROFIT AND LOSS ACC OUNT IS PERMITTED AND ACCORDINGLY ASSESSING OFFICER IS JUSTIFIED IN APPLYING THE RATES GIVEN IN THE ACT TO ARRIVE AT THE VALUE OF FRINGE BENEFIT. 5. AGGRIEVED BY THE A FORESAID ORDER OF CIT(A) , ASSESSEE IS NOW IN APPEAL BEFORE US . 6. BEFORE US, LD. A.R. REITER ATED THE SUBMISSIONS MADE BEFORE A.O AND CIT(A) AND FURTHER SUBMITTED THAT THE BASIC CONDITION FOR LEVY OF FBT IS THAT THE EXPENSES SHOULD BE INCURRED ON EMPLOYEES AND IT CANNOT BE INVOKED ON EXPENSES WHICH ARE INCURRED ON NON EMPLOYEES AND ARE FOR BUSINES S PURPOSES. HE ALSO PLACED RELIANCE ON THE DECISIONS IN THE CASE OF ALEMBIC LTD. VS. DCIT ITA NO. 3421 & 3422/AHD/2010 , ADANI RETAIL LTD. VS. DCIT ITA NO. 3269/AHD/2010 AND IN CASE OF ARVIND FASHIONS LTD. AND ARVIND PRODUCTS LTD. VS. DCIT ITA NO. 3508 & 3 509/AHD/2010 , AND IN THE CASE OF DESAI BROTHERS LTD. VS. ACIT ITA NO. 168/PN/2009. LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O AND CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. BEFORE US IT IS ASSESSEE S SUBMIS SION THAT THE EXPENSES WHICH HAVE NOT BEEN INCURRED ARE IN RELATION TO NON EMPLOYEES AND ARE FOR PURELY FOR THE PURPOSES OF BUSINESS. HOWEVER, WE FIND THAT THERE IS NO FINDING OF A.O OR CIT(A) AS TO WHETHER THE EXPENSES WHICH HAVE BEEN INCURRED WERE FOR EM PLOYEES OR NON EMPLOYEES AND WHETHER THE EXPENSES WERE FOR THE PURPOSE OF BUSINESS. WE ARE OF THE VIEW THAT IN THE INTEREST OF JUSTICE, THE MATTER NEEDS TO BE RESTORED TO THE FILE OF A.O SO AS TO DECIDE THE ISSUE DE NOVO IN ACCORDANCE WITH LAW AND AFTER PR OVIDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE A.O IS FURTHER DIRECTED TO RECORD A CLEAR FINDING THAT WHETHER THE EXPENSES IN QUESTION WERE INCURRED WITH RELATION TO NON EMPLOYEES AND FOR THE BUSINESS PURPOSE OF THE ASSE SSEE AS CLAIMED BY T HE ITA NO 866/AHD/20 11 . A.Y. 2007 - 08 5 ASSESSEE AND IN LIGHT OF THE DECISION S RELIED UPON BY ASSESSEE . THUS THIS GROUND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 19 - 12 - 201 4 . SD/ - SD/ - (KUL BHARAT ) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD