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

ITA 870/AHD/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6066 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-06-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 21-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VARTIK R CHOKSI
• Keywords: Gift; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA NO.870/AHD/2011 A.Y. 2007-08 ADANI ENTERPRISES LTD., ADANI HOUSE, NR. MITHAKHALI CIRCLE, NAVRANGPURA, AHMEDABAD. PAN: AABCA 2804L VS DCIT, CIRCLE (1), AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : MISS SURABHI SHARMA, SR.D.R., ASSESSEE(S) BY : SHRI VARTIK R. CHOKSI, A.R. / DATE OF HEARING : 19/06/2014 / DATE OF PRONOUNCEMENT: 27/06/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FRO M THE ORDER OF LEARNED CIT(A)-VI, AHMEDABAD, DATED 13.01.2011. THE GROUNDS RAISED BY THE ASSESSEE ARE NARRATIVE. HOWEVER, THE ONLY IS SUE IS IN RESPECT OF LEVY OF FRINGE BENEFIT TAX. THROUGH THESE GROUNDS A PPELLANT HAS CHALLENGED THE EXPENDITURE DID NOT RELATE TO ANY BE NEFIT TO THE EMPLOYEES. THE APPELLANT HAS CHALLENGED THE LEVY OF FRINGE BEN EFIT TAX ON THE VALUE OF FRINGE BENEFIT OF RS.1,08,04,610/-. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.115WE(3) OF IT ACT DATED 30 TH DECEMBER, 2009 ARE THAT THE ASSESSEE COMPANY IS IN THE BUSINESS OF EXPORT AND I MPORT ON VARIOUS COMMODITIES. THE AO HAS HELD, IS AS UNDER: ITA NO.870/AHD/2011 ADANI ENTERPRISE LTD. VS. DCIT CIRCLE-(1), AHMEDAB AD. A.Y. 2007-08. - 2 - 3. ON VERIFICATION OF DETAILS, IT IS SEEN THAT THE ASSESSEE HAS FILED ITS REVISED RETURN FOR EMPLOYEE RELATED FRINGE BENEFIT AT RS 3, 00,75,700/- . HOWEVER, IT IS SEEN THAT NON-EMPLOYEE RELATED FRINGE BENEFIT AS PE R PROVISIONS OF THE ACT WORK OUT TO RS 1,08,04,611/-, WHICH IT HAS CLAIMED AS NON TAXABLE IN THE REVISED RETURN. THE STAND OF THE ASSESSEE IS NOT AC CEPTABLE, AS THE AMOUNT IS TAXABLE AS PER PROVISIONS OF LAW, WHICH HAS ALSO DU LY BEEN WORKED OUT BY THE AUDITOR OF THE ASSESSEE COMPANY. AFTER VERIFICATION OF THE DETAILS, THE FRINGE BENEFIT VALUE IS ASSESSED AT RS.4,08.80,312/-. ASSESSED U/S 115WE(3) OF THE INCOME TAX ACT, 1961 A T A TOTAL VALUE OF FRINGE BENEFIT OF RS.4,08,80,312/-. CALCULATE THE TAX PAYA BLE. ISSUE NOTICE OF DEMAND AND CHALLAN, AFTER GIVING CREDIT OF PREPAID TAXES. ITNS 150 FORMS PART OF THIS ORDER. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, THE ACTION OF THE AO WAS CONFIRMED BY LEARNED CIT(A ) AS FOLLOWS: 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSE SSMENT ORDER AND APPELLANT'S SUBMISSION. IT IS NOT IN DISPUTE THAT APPELLANT IS COVERED BY T HE PROVISIONS OF FRINGE BENEFIT TAX. IT IS LEVIED IN RESPECT OF FRINGE BENEFIT PROVIDED OR DEEMED TO HAVE BEEN PROVIDED BY AN EMPL OYER TO HIS EMPLOYEES. AS PER SECTION 115WB(2) FRINGE BENEFIT IS DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES IF EMPLOYER HAS INCUR RED 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 D ISCRETION OR COMPUTATION METHOLOGY 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 PARTICULAR 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 CLE AR AND THERE IS NO ROOM FOR ANY CONFUSION, THE LINKING OF THE EXPENSES TO THE B ENEFIT 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 PROMO TION, CONVEYANCE, TRAVELLING, GIFTS ETC. MAY HAVE PARTIAL BENEFIT TO THE EMPLOYEES AND THEREFORE, ONLY A PART IS TREATED AS FRINGE BENEFIT, SINCE, SE CTION CLEARLY DEFINED THE VALUE OF FRINGE BENEFIT, NO FURTHER ADJUSTMENT TO T HE ITEMS OF EXPENSES DEBITED IN PROFIT AND LOSS ACCOUNT IS PERMITTED AND ACCORDI NGLY ASSESSING OFFICER IS JUSTIFIED IN APPLYING THE RATES GIVEN IN THE ACT TO ARRIVE AT THE VALUE OF FRINGE BENEFIT. 4. HEARD BOTH THE SIDES. AT THE OUTSET, OUR ATTENTI ON HAS BEEN DRAWN ON THE CONCISED GROUNDS, WHEREIN THE NATURE OF THE EXPENDITURE WAS EXPLAINED, RELEVANT PORTION IS REPRODUCED BELOW: ITA NO.870/AHD/2011 ADANI ENTERPRISE LTD. VS. DCIT CIRCLE-(1), AHMEDAB AD. A.Y. 2007-08. - 3 - 2. IN LAW AND IN THE FACTS AND IN CIRCUMSTANCES O F THE CASE, LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT FRINGE BENEFIT TAX I S NOT LIABLE TO BE PAID BY THE APPELLANT IN RESPECT OF THE FOLLOWING ITEMS OF EXPENDITURE AS THEY HAVE BEEN INCURRED ONLY WITH RELATION TO NON-EMPLOYEES A ND ARE BEING PURELY FOR THE BUSINESS PURPOSES OF THE APPELLANT S. NO . NATURE OF EXP. / PAYMENT [NON EMPLOYEE RELATED EXPENSES] AMOUNT PERCENT- AGE (%) FRINGE BENEFIT TAX 1 CONFERENCE (OTHER THAN FEE FOR PARTICIPATION BY THE EMPLOYEE IN ANY CONFERENCE) 5,62,007 20% 1,12,401 2 SALES PROMOTION EXPENSES 2,31,01,033 20% 46,20,207 3 CONVEYANCE 2,96,66,486 20% 59,33,297 4 TRAVELING EXPENSES OTHERS 27,74,110 5% 1,38,705 TOTAL 5,61,03,636 1,08,04,610 4.1 IN THE LIGHT OF THE FACTS, WE HAVE BEEN INFORME D THAT IN THE CASE OF ARVIND BRANDS LTD., ITAT C BENCH AHMEDABAD IN ITA NO.3249/AHD/2010 FOR A.Y. 2006-07 VIDE AN ORDER DAT ED 2.5.2014, THE ISSUE IS RESTORED BACK TO THE FILE OF THE AO WITH C ERTAIN DIRECTIONS, RELEVANT PORTION IS REPRODUCED BELOW: W E HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE DISPUTE IN THE PRESENT CASE IS WITH RESPECT TO CHARGING OF FBT ON SALES PROMOTION EXPENSES WHICH THE ASSESSEE CLAIMS TO HAV E INCURRED IN RELATION TO NON-EMPLOYEE AND WERE PURELY FOR THE PURPOSE OF BUS INESS. IN THE PRESENT CASE, THERE IS NO FINDING OF A.O OR CIT(A) AS TO WH ETHER THE EXPENSES WHICH HAVE BEEN INCURRED WERE FOR EMPLOYEES OR NON-EMPLOY EES AND WHETHER THE EXPENSES WERE FOR THE PURPOSE OF BUSINESS. WE FURTH ER FIND THAT IN THE CASE OF INTAS PHARMACEUTICALS LTD. (SUPRA), THE CO-ORDINATE BENCH OF TRIBUNAL, RELYING ON THE DECISION IN THE CASE OF ARVIND FASHI ONS LTD. VS. DCIT, REMITTED THE MATTER TO THE FILE OF A.O BY HOLDING AS UNDER:- 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE ORDER OF THE TRIBUNAL IN ARVIND FASHIONS LTD. VS. DCIT (SUPRA). WE FIND THAT THE DECISION OF THE ITAT, AHMEDABAD BENCH IN ARVIND FASHIONS LTD. VS. DCIT (S UPRA) HAS HELD THAT THE PROVISION OF 'FBT' COULD NOT BE INVOKED IN RESPECT OF THE ITA NO.870/AHD/2011 ADANI ENTERPRISE LTD. VS. DCIT CIRCLE-(1), AHMEDAB AD. A.Y. 2007-08. - 4 - EXPENSES WHICH WERE NOT INCURRED ON EMPLOYEES OR TH EIR FAMILY MEMBERS. THE TRIBUNAL IN THIS CASE HAS REFERRED TO THE DECISIONS OF THE CO-ORDINATE BENCH OF THE ITAT, AHMEDABAD, PUNE AND BANGALORE, WHICH HAVE SIMILARLY HELD THAT THE 'FBT' COULD NOT BE INVOKED ON EXPENSES WHICH WERE NOT INCURRED ON THE EMPLOYEES O R THEIR FAMILY MEMBERS. HOWEVER, WE FIND THAT THERE IS NO CLEAR CU T FINDING RECORDED BY THE AO OR THE CIT(A) IN THEIR ORDER THAT WHETHER THE ADDITION MADE WERE RELATING TO THE EXPENDITURE IN RELATION TO NON -EMPLOYEES AND FOR THE BUSINESS PURPOSE OF THE ASSESSEE. THE CLAIM OF THE ASSESSEE WAS THAT THE EXPENSES WERE NOT RELATED TO ITS EMPLOYEES AND WERE INCURRED ONLY IN RELATION TO NON-EMPLOYEES AND FOR BUSINESS PURPOSE OF THE ASSESSEE COMPANY. IN THESE FACTS, WE ARE OF THE VIE W THAT IT SHALL BE IN THE INTEREST OF JUSTICE TO RESTORE THE ISSUE IN THE GROUNDS OF THE APPEAL OF THE ASSESSEE FOR ALL THREE YEARS TO THE FILE OF THE AO WITH DIRECTION TO DECIDE THE SAME DE NOVO IN ACCORDANCE WITH LAW AFTE R PROVIDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE I N THE LIGHT OF DECISIONS OF THE ITAT, AHMEDABAD BENCH IN ARVIND FA SHIONS LTD. VS. DCIT (SUPRA). THE AO IS FURTHER DIRECTED TO RECORD A CLEAR FINDING THAT WHETHER THE EXPENSES IN QUESTION WERE INCURRED WITH RELATION TO NON- EMPLOYEES FOR THE BUSINESS PURPOSE OF THE ASSESSEE AS CLAIMED BY THE ASSESSEE-COMPANY. IN CASE THE EXPENSES ARE FOUND TO HAVE BEEN INCURRED BY THE ASSESSEE WITH RELATION TO NON-EMPLO YEES AND FOR THE BUSINESS PURPOSE OF THE ASSESSEE, THE DECISION IN A RVIND FASHIONS LTD. VS. DCIT (SUPRA) SHALL APPLY TO THE CASE OF THE ASS ESSEE. NEEDLESS TO SAY THAT ANY DECISION OF THE HON'BLE GUJARAT HIGH C OURT IN THE WRIT PETITION PENDING BEFORE THE HON'BLE HIGH COURT, AS MENTIONED BY THE CIT(A) IN ITS APPELLATE ORDER, SHALL BE BINDING ON THE AUTHORITIES. WE DIRECT ACCORDINGLY. IN THE PRESENT CASE AS NOTED ABOVE, SINCE THERE IS NO FINDING AS TO WHETHER THE EXPENSES WERE INCURRED FOR THE BENEFIT OF EMPLOYEES OR NON-EMPLOYEES AND WHETHER THE EXPENSES WERE FOR THE PURPOSE OF BUSINE SS AND SINCE THE ISSUE IN THE PRESENT APPEAL IS IDENTICAL TO ISSUE BEFORE TRI BUNAL IN THE CASE OF INTAS PHARMA (SUPRA), WE FOLLOWING THE ORDER OF THE CO-OR DINATE BENCH IN THE CASE OF INTAS PHARMA (SUPRA) AND FOR THE SIMILAR REASONS GIVEN THEREIN, ALSO REMIT THE ISSUE TO THE FILE OF A.O TO DECIDE THE ISSUE AF RESH AFTER RECORDING A CLEAR FINDING AND AFTER GIVING A REASONABLE OPPORTUNITY O F HEARING TO THE ASSESSEE. WE THUS DIRECT/ ACCORDINGLY. 4.2 LIKEWISE IN THE CASE OF MUNDRA PORT AND SPECIAL ECONOMICS LTD., ITAT C BENCH IN ITA NO.3234/AHD/2010 FOR A.Y. 200 7-08 VIDE ORDER DATED 09.05.2014 HAS HELD THAT THE ISSUE WAS SIMILA R WITH THE FACTS OF INTASK PHARMACEUTICALS LTD. (ITA NO.3086, 3087 & 30 88/AHD/2010) ORDER DATED 03.03.2014; HENCE FOLLOWING THAT ORDER REMITTED THE ISSUE ITA NO.870/AHD/2011 ADANI ENTERPRISE LTD. VS. DCIT CIRCLE-(1), AHMEDAB AD. A.Y. 2007-08. - 5 - BACK TO THE FILE OF THE AO. SINCE, THE RESPECTED CO -ORDINATE BENCHES HAVE CONSISTENTLY RESTORED THE ISSUE BACK TO THE FI LE OF THE AO FOR DE NOVO CONSIDERATION WITH FEW DIRECTIONS; THEREFORE, ON TH E SAME LINES WE HEREBY RESTORE THIS ISSUE BACK TO THE AO TO BE DECIDED ACC ORDINGLY AS PER LAW, NEEDLESS TO SAY AFTER PROVIDING AN ADEQUATE OPPORTU NITY OF HEARING TO THE ASSESSEE. RESULTANTLY, GROUNDS RAISED BY THE ASSESS EE ARE ALLOWED FOR STATISTICAL PURPOSE ONLY. 5. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE ONLY. SD/- SD/- (ANIL CHATURVEDI) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 27/06/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD