Tata Global Beverage Limited Kolkata v. Acit Cir 4 Kolkata Kolkata

1 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 In The Income Tax Appellate Tribunal Bench B Kol Kata Before Honble Shri N V Vasudevan Jm Dr Arjun Lal Saini Am Ita No 1866 Kol 2014 Assessment Year 2006 07 Tata Global Beverages Ltd Versus A C I T Cir Cle 4 Kolkata Kolkata Pan Aabct 0602 K Appellant Respondent Ita No 1867 Kol 2014 Assessment Year 2007 08 Tata Global Beverages Ltd Versus D C I T Cir Cle 4 Kolkata Kolkata Pan Aabct 0602 K Appellant Respondent Ita No 1868 Kol 2014 Assessment Year 2008 09 Tata Global Beverages Ltd Versus Addl C I T Circle 4 Kolkata Kolkata Pan Aabct 0602 K Appellant Respondent Ita No 1869 Kol 2014 Assessment Year 2009 10 Tata Global Beverages Ltd Versus D C I T Cir Cle 4 Kolkata Kolkata Pan Aabct 0602 K Appellant Respondent Ita No 1870 Kol 2014 Assessment Year 2009 10 Tata Global Beverages Ltd Versus Addl C I T Circle 4 Kolkata Kolkata Pan Aabct 0602 K Appellant Respondent For The Appellant Shri Kanchun Kaushal Fca Shri Piyush Chawla Fca For The Respondent Shri S Dasgupta Addl Cit Dr Date Of Hearing 07 12 2017 Date Of Pronouncement 13 12 2017 2 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 Order Per N V Vasudevan Jm Ita Nos 1866 To 1868 And 1870 Kol 2014 Are Appeal S Filed By The Assessee Against Four Different Orders All Dated 18 07 2014 Of Cit A 4 Kolkata Relating To A Y 2006 07 2007 08 2008 09 And 2009 10 All Thes E Appeals Arise Out Of Orders Passed U S 115 We 3 Of The Income Tax Act 1961 Ac T I E Assessment Under Chapter Xiih Of The Act I E Income Tax On Fring E Benefits 2 Fringe Benefit Tax Fbt Was Introduced As Part Of Finance Act 2005 As An Additional Income Tax And Came Into Force From April 1 2005 The Term F Ringe Benefits Means Any Consideration For Employment Pr Ovided By Way Of Any Privilege Service Facility Or Amenity Provided By The Employ Er To The Employees Fringe Benefit Tax Is To Be Levied On The Employer In Respect Of Fringe Benefits Provided Deemed To Be Provided By The Employer To H Is Employees During Any Financial Year Commencing On Or After 1 4 2005 Fr Inge Benefit Tax Is Payable At The Rate Of 30 Of The Value Of Fringe Benefits Computed In The Ma Nner Prescribed Under The Section 115 Wc Direct Fringe Benefit As Classified Under Section 1 15 Wb 1 Are Any Privilege Service Facility Or Amenity Which Is Directly Or Indirectly Provided By An Employer To His Employees Including Former Employee Or Employees Any Free Or Concessional Tickets Provided By The Em Ployer For Private Journeys To Employees Or Their Family Members Any Contribution By The Employer Towards An Approve D Superannuation Fund For Employees Any Reimbursement Which Is Directly Or Indirectly Made By The Employer To Employees For Any Purpose Indirect Or Deemed Fringe Benefits Are The Fringe Benefits Are Deemed To Have Been Provide D If The Employer Incurs Any Expenditure Or Makes Any Payment In The Course Of B Usiness Or Profession This 3 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 Includes Any Activity Whether Or Not Such Activity Is Carried On With The Object Of Deriving Income Profits Or Gains Any Expenditure Incurred Or Payment Made For The Following Constitutes Deemed Fringe Benefit Entertainment Hospitality Conference Sales Promotion Including Publicity Employee Welfare Conveyance Tours And Travel Hotel Boarding Lodging Repair Running And Maintenance Of Cars Repair Running And Maintenance Of Aircraft Use Of Telephone Maintenance Of Any Accommodation In The Nature Of G Uest House Festival Celebrations Health Club Any Other Club Gifts Scholarship To Employees Children Consumption Of Fuel Other Than Industrial Fuel Ita No 1866 Kol 2014 A Y 2006 07 3 Ground Nos 1 And 1 1 Raised By The Assessee Rea D As Follows 1 0 That On The Facts And In The Circumstances Of The Case The Learned Cit A Erred In Confirming The Action Of The Learned Asses Sing Officer In Subjecting To Fringe Benefit Tax An Amount Of Rs 13 68 522 B Eing 20 Of The Medical Expenses Of Rs 68 42 608 Incurred By Appellant 1 1 That On The Facts And In The Circumstances Of T He Case The Learned Cit Ca Failed To Appreciate That Reimbursement Of Medical Expenses To Employees Falls Within The Meaning Of Alary And Any Expenditure In Curred For The Purposes Of Salary Does Not Fall Within The Purview Of Fringe Benefit Tax Under The Provisions Of Section 115 Wb Of The Act 4 The Assessee Is A Company It Is Engaged In The Business Of Cultivating Manufacturing And Sale Of Tea For A Y 2006 07 The Assessee Filed Return Of Income Disclosing Fringe Benefit Of Rs 8 16 26 00 000 I N The Assessment Of Value Of Fringe Benefit For The Purpose Of Levy Of Fbt U S 115 We 3 Of The Act The Ao Noticed That The Assessee Incurred A Sum Of Rs 68 42 608 Towar Ds Medical Reimbursement Of Its 4 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 Employees The Assessee Had Not Considered The Abov E Expense For The Purpose Of Fringe Benefit Tax On The Ground That Medical Expen Ses So Reimbursed Falls Within The Meaning Of Salary As Defined U S 17 Of The Act And Hence Is Not Liable To Fringe Benefit Tax In Annexure Ii Form No 3 Cb Which Is The Form O F Auditors Report U S 44 Ab Of The Act In Note No 2 The Assessee Had Explained That T He Medical Reimbursement To Employees Of Rs 68 42 608 Was The Basic Exemption Limit Of Rs 15 000 Which Is Not Chargeable To Tax U S 17 1 Of The Act In The H Ands Of The Employee Note No 2 Reads As Follows Note No 2 Does Not Include Any Sum Paid By The C Ompany For Expenditure Actually Incurred By The Employees For Medical Trea Tment Not Exceeding Rs 15000 Per Employee In The Previous Year As In The Opinion Of The Company Such Reimbursement Comes Within The Meaning Of Sal Ary As Defined In Clause 1 Of Section 17 Of The Income Tax Act 1961 5 Section 17 1 Iv States That Salary Includes Perquisites Section 17 2 Defines Perquisite And Has Six Clauses Clause Vi Lays D Own That Perquisite Includes Vi The Value Of Any Other Fringe Benefit Or Amenity Excluding The Fringe Benefits Chargeable To Tax Under Chapter Xii H As May Be Prescribed Proviso To Clause Vi Of Sec 17 2 Has Five Sub Cl Auses And Sub Claluse V Lays Down As Follows Provided That Nothing In This Clause Shall Apply To V Any Sum Paid By The Employer In Respect Of Any Expenditure Actually Incurred By The Employee On His Medical Treatment O R Treatment Of Any Member Of His Family Other Than The Treatment Refer Red To In Clauses I And Ii So However That Such Sum Does Not Exceed Fi Fteen Thousand Rupees In The Previous Year Medical Reimbursement Would Be Perquisite Within T He Meaning Of Sec 17 2 V Of The Act Whether We Consider The Same As Falling Within The Meaning Of Fringe Benefit Or Amenity Within The Meaning Of Clause Vi To Sec 17 2 Of The Act Proviso V To Clause Vi Of Sec 17 2 Of The Act Excludes Medical Treatment Expenditure Provided By The Employer To The Employe E From The Purview Of Taxation Upto Rs 15000 Per Annum The Sum Of Rs 68 42 608 Is Admittedly The Sum Total Of The Basic Exemption Of Rs 15 000 Per Employee Allowed Under The Act In The Hands Of The Employee And Is Not Taxed Thou Gh The Sum Of Rs 15 000 Is The 5 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 Basic Exemption Yet It Is In The Nature Of Perquisi Te Provided To The Employee Individually And Not Collectively Therefore The A Ssessee Did Not Consider The Aforesaid Sum As Fringe Benefit The Ao Did Not Agr Ee With The Submissions Made By The Assessee As Above And He Considered 20 Of The Aforesaid Expenses As Value Of Fringe Benefit For The Purpose Of Levying Of Fringe Benefit Tax 6 Before Cit A The Assessee Apart From Reiterat Ing The Submissions Made Before The Ao Brought To The Notice Of Cit A The Memorandum Explaining The Provisions Of The Finance Bill 2005 Which Introduced Fbt Wh Erein It Was Stated As Follows Therefore It Is Proposed To Adopt A Two Pronged A Pproach For The Taxation Of Fringe Benefits Under The Income Tax Act Perquisites Which Can Be Directly Attributed To The Employees Will Continue To Be Taxed In Their Hands In Accordance With The Existing Provisi Ons Of Section 17 2 Of The Income Tax Act And Subject To The Method Of Valuation Outlined In Rule 3 Of The Income Tax Rule S Emphasis Ours Attention Was Drawn To The Budget Speech Of The Fin Ance Minister At Para 160 Reported In 273 Itr St 25 At Page 56 Wherein I T Was Observed As Follows I Have Looked Into The Present System Of Taxing Pe Rquisites And I Have Found That Many Perquisites Are Disguised As Fringe Benefits And Escape Tax Neither The Employer Nor The Employee Pays Any Tax On These Benefits Which Are Certainly Of Considerable Material Value At Present Where The Benefits Are Fully Attributable To The Employee The Y Are Taxed In The Hands Of The Employee That Position Will Continue In Ad Dition I Now Propose That Where The Benefits Are Usually Enjoyed Collect Ively By The Employees And Cannot Be Attributed To Individual Employees T Hey Shall Be Taxed In The Hands Of The Employer Emphasis Ours It Was Submitted That The Benefit In This Case Is C Learly Identifiable With An Employee And The Same In The Nature Of Perquisite Of The Con Cerned Employee Reference Was Made To The Provisions Of Section 115 Wb 3 Which Reads As Follows For The Purposes Of Sub Section 1 The Privileg E Service Facility Or Amenity Does Not Include Perquisites In Respect Of Which Tax Is Paid Or Payable By The Employee Or Any Benefit Or Amenity In The Nature Of Free Or Subsidized Transport Or Any Such Allowance Provided By The Employer To His Employees For Journeys By The Employees From Their Residence To The Place Of Work Or Such Place Of Work To The Place Of Resid Ence Emphasis Ours 6 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 It Was Argued That Medical Reimbursement Was Charg Eable To Tax In The Hands Of The Individual Employee As Salary Being A Perquisite And The Fact The Sum In Question Is Exempt Perquisite By Virtue Of Sub Clause Vi Of P Roviso To Clause V Of Sec 17 2 Of The Act Does Not Take The Medical Reimbursement Out Of The Ambit Of Sec 1115 Wb 3 Of The Act Therefore The Sum In Question Cannot Be Considered As Fringe Benefit The Assessee Submitted That Even Though The Said Amount S Are Exempted Under The Relevant Provisions Of The Act Tax Is Payable By Reason Of Charging Provision And Therefore Under The Provisions Of Section 115 Wb 3 The Said Amount Being Liable To Tax In Hands Of Employees Even Though In The Quantificatio N Of Tax Paid The Said Amount Is Not To Be Included The Said Amount Cannot Be Inclu Ded In Computation Of Fbt 7 The Assessee Also Brought To The Notice Of Cit A The Circular No 8 Of 2005 Issued By Cbdt Dated 28 09 2005 Clarifying On Various Aspe Cts Of Fbt In Which The Following Clarifications Were Given On Several Aspe Cts Of Fringe Benefit Tax Answer 44 47 69 And 104 Are Given Below Whether Payment Of Leave Travel Concession Or Assis Tance To Employees Is Liable To Fbt 44 The Value Of Any Travel Concession Or Assistanc E Received By An Employee Normally Fall Within The Meaning Of Salary As Def Ined In Clause 1 Of Section 17 Of The Income Tax Act These Benefits Are Taxabl E Under The Head Salaries Subject To The Exemption Under Clause 5 Of Sectio N 10 Of The Income Tax Act Accordingly It Would Not Be Liable To Fbt However If The Leave Travel Concession Assistance Is Not Included In Salary A S Defined In Section 17 Will Be Classified As An Expense For The Purposes Referred To Clause F Of Sub Section 2 Of Section 115 Wb And Will Accordingly Be Liable To Fbt Whether Expenditure Incurred By Way Of Allowance To The Employees Of The Nature Referred To In Sub Clause Ii Of Clause 14 Of Section 10 And Specified In Sub Mile 2 Of Mile 2 Bb Like Children Education Allowance Transport Allowance Rs 800 Granted To Employees Which Are Exempt In The Hands Of The Employee Liable To Fbt 47 The Allowances Granted To The Employees Of Th E Nature Referred To In Sub Clause Ii Of Clause 14 Of Section 10 And Specif Ied In Sub Rule 2 Of Rule 2 Bb Of Income Tax Rules Are Neither Contributions To An Approved Superannuation Fund Nor Represent The Cost Of Free And Concessiona L Tickets For Private Journeys 7 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 Of Employees Or Their Family Members These Allowan Ces Fall Within The Meaning Of Salary As Defined In Clause 1 Of Sec Tion 17 Of The Income Tax Act And Any Expenditure Incurred For The Purposes Of S Alary Does Not Fall Within The Scope Of Sub Section 2 Of Section 115 Wb The Refore The Allowances Of The Nature Referred To In Sub Clause Ii Of Clause 14 Of Section 10 Fall Outside The Scope Of Clauses B And C Of Sub Section 1 As Well As Sub Section 2 Of Section 115 Wb Whether Medical Reimbursement Up To Rs 15 000 Exe Mpt In The Hands Of The Employees And Medical Reimbursement Over Rs 1 5 000 Taxed As Perquisite In The Hands Of The Employee Is Liable To Fbt 69 At Present If Any Sum Is Paid By The Employer For Expenditure Actually Incurred By The Employee For Medical Treatment In A N Unapproved Hospital And It Exceeds Rs 15 000 During The Year Uch Sum Is Salary As Defined In Clause 1 Of Section 17 Of The Income Tax Act And Liable To Income Tax In The Hands Of The Employee There Is No Change In This Position Since Such Sum Is Taxable In The Hands Ofthe Employee The Same Is Not Liable To Fbt However If Any Sum Is Paid By The Employer For Exp Enditure Actually Incurred By The Employee For Medical Treatment In An Unappro Ved Hospital And It Does Not Exceed Rs 15 000 During The Year Such Sum Doe S Not Fall Within The Meaning Of Salary As Defined In Clause 1 Of Sec Tion 17 Of The Income Tax Act And Not Liable To Income Tax In The Hands Of The Em Ployee There Is No Change In This Position Since Such Sum Is Not Taxable In The Hands Of The Employee The Same Is Liable To Fbt Whether Expenditure Incurred By The Employer For Th E Purposes Of Providing Free Or Subsidized Transportfor Journeys To Employeesfrom Their Residence To The Place Of Work Or Such Place Of Wor K To The Place Of Residence Would Attract Fbt 104 The Free Or Subsidized Transport Provided To E Mployees For Journeys From Their Residence To The Place Of Work Or Such Place Of Work To The Place Of Residence Is In Lieu Of Conveyance Transportation A Llowance Which Is Not Liable To Fbt Accordingly The Expenditure Incurred By Th E Employer For The Purposes Of Providing Free Or Subsidized Transport For Journeys To Employees From Their Residence To The Place Of Work Or Such P Lace Of Work To The Place Of Residence Will Not Be Liable To Fbt 8 It Was Submitted That With Regard To The Treat Ment Of Medical Reimbursement Of Rs 15 000 Per Employee For The Purpose Of Fbt In Qu Estion No 69 The Cbdt Has Clarified That If The Amount Paid By Employer To Em Ployee Is Less Than Rs 15 000 Then It Does Not Fall Within The Definition Of Sala Ry As Per Section 17 1 Of The Act And 8 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 Accordingly The Same Is Subjected To The Levy Of Fb T In Other Words As Per The Clarification Issued By The Cbdt Payments Made By The Employer To Meet The Costs Of Medical Treatment Of Employees Or Their Family M Embers To The Extent Taxable In The Hands Of The Employees Would Not Be Subjected T O Fbt However The Exempt Portions Of Such Medical Reimbursements In The Hand S Of The Employees By Virtue Of Proviso To Section 17 2 Of The Act Would Be Subjec Ted To Fbt At The Hands Of The Employer However With Respect To Queries Relatin G To Fbt On Leave Travel Concession Ltc Leave Travel Allowance Lta And With That Relating To The Allowances Exempted U S 10 14 Ii Of The Act In Question 44 47 And 104 The Cbdt Has Taken A Contradictory Approach While Deali Ng With The Charge Of Fbt With Regard To The Aforesaid Expenses The Cbdt Has Clar Ified That These Allowances Fall Within The Meaning Of Salary As Defined In Clause 1 Of Section 17 Of The Income Tax Act Though Not Taxable Because Of Specific Exempti On And Any Expenditure Incurred For The Purposes Of Salary Does Not Fall Within Th E Scope Of Sub Section 2 Of Section 115 Wb Thus It Was Argued That There Was An Appare Nt Contradiction In The Approach Of The Cbdt Itself In The Matter Of The Application Of Fbt On Allowances Reimbursements Made By The Employer To The Employee S Which Are Exempt From Income Tax In The Hands Of The Employees Under Expr Ess Exemption Provisions It Was Argued That Like Ltc Lta And Other Allowances Med Ical Re Imbursement Also Forms Part Of Salary As Per The Provisions Of Section 17 2 Of The Act However By Way Of Specific Dispensation Provided In The Said Sub Sec Tion By Way Of Proviso The Same Is Not Taxable In The Hands Of The Employee Thus App Lying The Same Analogy Which The Cbdt Has Adopted For Non Applicability Of Fbt On Lt A Ltc And Other Allowances Where They Form Part Of Salary But Are Exempted By Way Of Specific Exemption Expenses On Account Of Medical Reimbursement Should Also Not Be Liable To Fbt 9 The Assessee Placed Reliance On The Decision O F The Honble Mumbai Itat G Bench In The Case Of Grindwell Norton Ltd Vs Acit Ita No 6551 Mum 2011 Order Dated 23 4 2014 Wherein While Dealing With Identica L Issue It Was Held That Medical Expenses Were Directly Attributable To Each Employe E Distinctly And Were Not In The 9 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 Nature Of Collective Benefit Enjoyed By The Employe Es The Honble Itat Observed That Medical Reimbursement Was To Be Treated As A P Erquisite U S 17 2 Of Income Tax Act 1961 Though A Threshold Limit Of Exemption Was Provided Under Clause V At Rs 15 000 Accordingly The Itat Held That Reimburseme Nt Of Medical Expenditure Did Not Constitute Fringe Benefit As Defined In Sec 11 5 Wb Of The Act In The Said Ruling The Itat Also Referred To Co Ordinate Bench Ruling Of Honble Mumbai Itat In Bosch Ltd And Godrej Properties 2011 135 Itj 426 Mum Dealing With Similar Issue Wherein It Was Held It Is Only A Case Where A Ben Efit Above A Certain Specified Amount Only Is Liable To Be Taxed In The Hands Of T He Employee Such Case In Our Humble Opinion Does Not Constitute Fringe Benefit As Defined In S 115 Wb Of The Act 10 The Cit A However Did Not Agree With The Afor Esaid Submissions Made On Behalf Of The Assessee The Cit A Relied On The Answer To Question No 69 Given In The Cbdt Circular No 8 2005 And Concluded That Because The E Xempt Portion Of Rs 15 000 Of Medical Reimbursement Is Exempt In The Hands Of The Assessee The Same Has To Be Considered As Fringe Benefit And Chargeable To Frin Ge Benefit Tax The Following Are The Conclusions Of Cit A On This Aspect 3 2 I Have Examined The Assessment Order As Well As Facts Relevant Details Documents Of The Appellant It Is Observed That The Cbdt Vide Question No 69 Of The Circular No 8 2005 Dated 29 08 2005 Has Clarif Ied That Where Any Sum Paid By The Employer For Expenditure Actually Incurred B Y The Employee For Medical Treatment In An Unapproved Hospital Does Not Exceed Rs 15 000 During The Year Such Sum Does Not Fall Within The Meaning Of Salar Y As Defined In Clause 1 Of Section 17 Of The Income Tax Act And Is Therefore N Ot Liable To Income Tax In The Hands Of The Employee Since Such Sum Is Not Taxab Le In The Hands Of The Employee The Same Is Liable To Fbt The Cbdt Circ Ular Being Very Clear There Cannot Be Any Scope Of Interpretation This Ground Of Appeal Is Dismissed 11 Aggrieved By The Order Of Cit A The Assessee Has Raised Ground No 1 And 1 1 Before The Tribunal 12 We Have Heard The Submissions Of The Ld Couns El For The Assessee And The Learned Dr The Learned Counsel For The Assessee Reiterate D Submissions Made Before Cit A 10 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 And Relied On The Order Of The Honble Itat Mumbai In The Case Of M S Grindwell Norton Ltd Supra The Ld Dr Relied On The Order Of Cit A 13 We Have Given Careful Consideration To The Riv Al Submissions We Are Of The View That The Issue In Question Is Squarely Covered By T He Decision Of The Honble Mumbai Bench In The Case Of M S Grindwell Norton Ltd Vs Acit Supra In The Case Before The Honble Itat Mumbai The Issue Was As To Whethe R A Sum Of Rs 15 000 Which Is Exempt Prerequisite In The Hands Of The Employee Sh Ould Be Considered As Expenditure Towards Fringe Benefit For Levying Of Fringe Benefi T Tax This Was The Issue That Was Considered By The Tribunal The Tribunal In Para 9 1 After Referring To Circular No 8 2005 Held That The Circular Was Contrary To Le Gislative Intention And The Expenditure In Question Cannot Be Considered As Fri Nge Benefit The Tribunal After Referring To Sec 115 Wb 3 And The Memorandum Explai Ning The Provisions Of Fbt Held That Where Perquisites Benefits Which Are Fully Attribu Table To The Employee And Are Taxed In Their Hands That Would Be Continu Ed To Be Taxed Under The Existing Provisions Of Section 17 2 Of The Act Only In Case Where The Benefits Are Usually Enjoyed Collectively By The Employees And C Annot Be Attributed To An Individual Employee They Shall Be Taxed In The Han Ds Of The Employer The Tribunal After Referring To Sec 115 Wb 3 Of The Act Held That In Sub Section 3 Of Section 115 Wb It Is Made Clear That Section 115 Wb 1 A Does Not Include Such Perquisite In Respect Of Which Tax Is Paid Or Payab Le By The Employees Held That Even Though Tax Is Not Payable On The Basic Exempti On Limit Of Rs 15000 On Medical Reimbursement Yet The Nature Of The Medical Reimbursement Was Perquisite Chargeable To Tax In The Hands Of The Em Ployee The Tribunal It Was Not A Case Where The Attribution Of Personal Benefi Ts Directly To An Employee Poses Problem Or A Case Where It Is Not Feasible To Tax T He Benefit In Question In The Hands Of The Employee It Is Only A Case Where A Be Nefit Above A Certain Specified Amount Only Is Liable To Be Taxed In The Hands Of T He Employee The Tribunal Held That Such Case Does Not Constitute Fringe Benefit A S Defined In Section 115 Wb Of The Act Respectfully Following The Aforesaid Decision We Ho Ld That The Sum Of 11 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 Rs 68 42 608 Cannot Be Considered As The Value Of Fringe Benefit For The Purpose Of Determining The Value Of Fringe Benefit For Levying Of Fringe Benefit Tax Ground No 1 And 1 1 Are Allowed 14 Ground No 2 Raised By The Assessee Reads As Fo Llows 2 0 That On The Facts And In The Circumstances Of The Case The Learned Cit Ca Erred In Confirming The Action Of The Learned Asses Sing Officer In Attributing Additional 10 Of The Composite Participation Fees As Expenditure Liable To Fringe Benefit Tax Without Giving Any Cogent Reasons And O N A Mere Assumption Surmise And Conjecture 15 During The Previous Year Relevant To The Asse Ssment Year Under Consideration The Appellant Incurred An Amount Of Rs 66 82 748 Tow Ards Employees Participation Fees For Training Seminar Etc The Said Participation F Ees Paid Was A Composite Fee Paid To The Organizers Which Primarily Was Towards Conducti Ng The Program Along With Fees For Hall Coordinator And Speakers However Since The Said Composite Fees Also Included Some Charges For Boarding Food Expenses The Assessee In Absence Of Any Break Up Suo Motto Considered 10 Of The Total Exp Enditure Amounting To Rs 6 68 275 As Attributable Towards Such Expenses An D Accordingly Computed The Value Of Fringe Benefits Liable To Fbt A Per The Provisio Ns Of Section 115 Wb 2 C Of The Act The Relevant Statutory Provision Applicable R Eads Thus 115 Wb 2 The Fringe Benefits Shall Be Deemed To Have Been P Rovided By The Employer To His Employees If The Employer Has In The Course Of His Business Or Profession Including Any Activity Whether Or Not S Uch Activity Is Carried On With The Object Of Deriving Income Profits Or Gains In Curred Any Expense On Or Made Any Payment For The Following Purposes Namely C Conference Other Than Fee For Participation By The Employees In Any Conference Explanation For The Purposes Of This Clause Any Expenditure On Conveyance Tour And Travel Including Foreign Travel On Hote L Or Boarding And Lodging In Connection With Any Conference Shall Be Deemed To B E Expenditure For The Purposes Of Conference 12 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 It Can Be Seen From Clause C Above That Expenses Incurred By The Employer On Paying Fees For Conference To Be Attended By The Em Ployee Is Covered But To The Extent The Fee Is Attributable To Fee For Participation It Is Outside The Ambit Of Clause C 16 The Assessing Officer In His Order U S 115 We 3 Was Of The View That The Estimation By The Assesssee Of 10 Of The Conferenc E Fee As Attributable To Food And Boarding Was Less And He Held That 30 Of The Confe Rence Should Be Attributable As Relating To Food And Beverages And Accordingly Has Added An Amount Of Rs 1 33 655 Towards This Expenditure As Liable To Fbt 17 Before Cit A The Assessee Relied On Clarific Ation Issued By The Cbdt In Its Circular 8 2005 Dated 29 08 2005 Vide Question No 55 Which Reads Thus Whether Expenditure In The Nature Of Fee For Parti Cipation By The Employees In Any Conference Is Liable To Fbt 55 In Terms Of The Provisions Of Clause C Of Su B Section 2 Of Section 115 Wb Expenditure In Of Fee For Participation By Th E Employees In Any Conference Is Not Liable To Fbt However If The P Articipation Fee Includes Any Expenditure Of The Nature Referred To In Clauses A B And D To P Of Sub Section 2 Of Section 115 Wb Such Expenditure Will Be Liable To Fbt The Assessee Submitted That In Its Case The Organi Zers Offered One Lump Sum Fee For Participation Which Included Amount On Account Of F Ood Lodging Hence No Segregation Of Expenses On Account Of Lodging Food Was Possible The Participation Fees Mainly Constituted Fees For Conducting The Pr Ogramme With Fees For Hall Coordinator Speakers Etc And The Element Of Charge S For Lodging Food Was Very Nominal Since The Employees Stay Was In The Organiz Ers Campus And Not In Any Hotel Thus Attribution Of 10 Of The Total Participation Fees Towards These Expenses By The Assessee Was Fair And Reasonable It Was Submitted That The Ao On Pure Surmise And Assumption Has Considered 30 Of The Fees Of The Fe Es As Attributable Towards Fooed And Lodging It Was Submitted That The Said Attribu Tion By The Assessing Officer Was 13 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 Excessive And Unreasonable The Assessee Submitted That The Amount Considered By The Assessee As Liable To Fbt On Account Of Partici Pation Fees Should Be Accepted 18 The Cit A However Did Not Agree With The Afor Esaid Submissions Of The Assessee And He Held That 20 Of The Aforesaid Participation Fee Should Be Taken As Fringe Benefit Liable To Fringe Benefit Tax The Following Were His Conclusions 4 2 I Have Examined The Assessment Order As Well A S Facts Relevant Details Documents Of The Appellant The Assessing Officer I N His Order Has Increased The Quantum Of Attribution From 10 To 30 As Relating To Food And Beverages However In Computing The Amount Of Fringe Benefit Liable To Fbt He Has Considered 20 Of The Composite Fees Instead Of 30 As Relating To Food And Beverages 4 3 It Is Also Observed That While Considering Simi Lar Issue In Subsequent Assessment Year The Assessing Officer Has Consider Ed 20 Of Total Composite Participation Fees As Amount Attributable On Accoun T Of Food And Beverages Liable To Fbt The Said Attribution Being Reasonable 20 Of The Total Participation Fees Is Considered As Amount Attributable On Account Of Food And Beverages Liable To Fbt Under The Provisions Of Section 115 Wb 2 E A Nd G Hence Lsallowance Of Rs 1 33 655 Is Sustained This Ground Of Appea L Is Dismissed 19 Aggrieved By The Order Of Cit A The Assessee Has Raised Ground No 2 Before The Tribunal 20 We Have Heard The Rival Submissions The Ld C Ounsel For The Assessee Apart From Reiterating The Submissions As Were Made Before Cit A Further Brought To Our Notice That Cbdt Circular No 8 2005 In Answer To Question No 11 Has Explained The Meaning To Be Attributed To The Purpose For Which Expenditu Re Is Incurred By An Employer When Considering Whether The Expenditure Results In A Fr Inge Benefit To The Employee For The Purpose Of Fbt Provisions As Follows What Is The Meaning Of The Word Purposes In The T Erm For The Following Purposes Referred To In Sub Section 2 Of Sectio N 115 Wb 11 The Word Purposes In The Term For The Follo Wing Purposes Referred To In Sub Section 2 Of Section 115 Wb Refers To The Prox Imate Purpose And Not The Distant Purpose For Example If Expenditure Is Inc Urred On Travel For Discussing 14 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 An Advertisement Plan For A Product Such Expenditu Re Shall Be Construed To Have Been Incurred For The Proximate Purpose Of Travelli Ng And Not The Ultimate Purpose Of Advertisement And Accordingly Liable To Fbt It Was Submitted By Him That It Was Not Disputed Th At The Sum In Question Was A Composite Fee And There Existed No Break Up Of The Fee It Is A Fee Paid For The Purpose Of Participation In A Conference It May Be True Th At Boarding And Food Will Be Provided Incidentally But The Main Purpose Was Participation Of The Employee In The Conference Was To Gain Knowledge And Not The Purpose Of Enjoyi Ng The Benefit Of Food And Lodging The Ld Dr Relied On The Order Of Cit A A Nd Submitted That In The Absence Of Any Break Up Given By The Assessee Attribution Of 2 0 Of The Composite Fee As Towards Food And Beverages As Estimated By The Cit A Has T O Be Upheld 21 We Have Given A Very Careful Consideration We Are Of The View That The Provision Of Section 115 Wb 2 C Of The Act Which We Have Ex Tracted In The Earlier Paragraphs Excludes From The Definition Of Fringe Benefit Expe Nditure By Way Of Payment By The Employer Of Any Sum For The Employee Attending Conf Erence Fee Paid For Participation By The Employees Is However Excluded And Not Considered As Fringe Benefit The Statutory Provisions Are Silent Where The Fee For Participation By The Employee In Any Conference Is A Composite Fee Which Comprises Of Expenses Set Out In Explanation To Section 115 Wb 2 C Of The Act From A Reading Of The Aforesaid Explanation It Can Be Concluded That It Is Only In Case Where Expenditure On Conveyance Tour And Travel And Hotel Or Boarding O R In Connection With Any Conference That Can Be Considered As Expenditure In Curred For The Purpose Of Conference Where The Fee For Participation Is Not A Composite Fee With Bifurcation The Main Purpose Of Participation By The Employee I N Conference Is To Gain Knowledge And Boarding And Food Will Be Provided Incidentally But The Main Purpose Was Participation Of The Employee In The Conference Was To Gain Knowledge And Not The Purpose Of Enjoying The Benefit Of Food And Lodging The Cbdt Circular No 8 2005 In Answer To Q No 11 Has Clarified That One Has To Go By The Primary Purpose Of The Expenditure In The Case Of Composite Fee It Is D Ifficult To Apportion The Component Of 15 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 Expenditure On Food And Lodging And A Proportionate Expenditure For Participation In Conference By The Employee Keeping In Mind The Spi Rit Of Fbt As Explained In The Cbdt Circular We Are Of The View That In The Case Of Composite Fee Paid For Participation Of Employee In A Conference The Same Should Not Be Considered As Fringe Benefit And There Is No Question Of Resorting To A Pportionment Of Those Expenses In Our View In The Given Facts And Circumstances Appor Tionment Of The Total Expenditure As Done By The Assessee Was Just And Proper There Is No Basis For The Assessee Ao Or The Cit A In Concluding That A Percentage Of Compo Site Fee Is Attributable To Food And Lodging Since We Have Concluded That In The Case O F Composite Fee Paid With No Bifurcation The Expenditure On Fee Paid For Partic Ipation Of An Employee In A Conference Or Seminar Will Have To Be Not Regarded As Fringe Benefit We Accept The Contention Of The Assessee And Hold That 10 Of The Composite Participation Fee Be Treated As Expenditure Liable To Fringe Benefit Tax 22 Ground No 3 Raised By The Assessee Reads As Fo Llows 3 0 That On The Facts And In The Circumstances Of The Case And Without Prejudice To The Grounds Mentioned Above The Appel Lant Being In The Business Of Plantation And Manufacturing Of Tea Was Liable To Pay Fringe Benefit Tax Only On 40 Of The Value Of Fringe Benefit Arrived At On Ap Plication Of Rule 8 Of The Income Tax Rules 1962 23 This Ground Has Not Been Raised By The Assesse E Before Ao Or Cit A It Was Submitted That This Ground Is A Legal Ground It Wa S Argued That The Legal Ground Which Can Be Decided On The Basis Of Facts Available On R Ecord Has To Be Admitted It Was Submitted That The Same Should Be Permitted To Be R Aised The Ld Counsel Relied On The Decision Of The Honble Supreme Court In The Case O F Ntpc 229 Itr 283 Sc In This Regard The Ld Dr Opposed The Prayer Made By The L D Counsel For The Assessee And Submitted That This Issue Was Not Raised Either Bef Ore Ao Or Cit A And The Same Should Not Be Permitted To Be Raised The Ld Couns El For The Assessee Placed Reliance On The Decision Of The Honble Calcutta High Court In The Case Of Apeejay Tea Ltd 2015 62 Taxman Com 131 Cal Wherein The Honble Calcutta High Court Took A 16 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 View That Rule 8 Of The It Rules 1962 Which Has T O Be Applied For Determining Income Of A Company Engaged In The Business Of Grow Ing And Manufacturing Of Tea And In Which Only 40 Of The Composite Income From The Business Of Growth And Manufacture Of Tea Is Considered As Taxable Is Also Applicable While Valuing The Fringe Benefit For The Purpose Of Levy Of Fbt In The Case Of Such Companies 24 We Have Considered The Rival Submissions And A Re Of The View That Since Both The Grounds Of Appeal Raised By The Assessee Have Been Adjudicated In Favour Of The Assessee There Is No Necessity To Adjudicate This Ground Of Appeal The Issue Is Left Open For The Present And The Ground Is Dismissed As Not Adjudicated 25 In The Result Ita No 1866 Kol 2014 Is Partly A Llowed I Ta No 1867 Kol 2014 A Y 2007 08 26 Ground No 1 And 1 1 Gr No 3 4 Raised By Th E Assessee Reads As Follows 1 0 That On The Facts And In The Circumstances Of The Case The Learned Cit A Erred In Confirming The Action Of The Learned Asses Sing Officer In Subjecting To Fringe Benefit Tax An Amount Of Rs 20 41 559 B Eing 20 Of The Medical Expenses Of Rs 1 02 07 796 Incurred By Appellant 1 1 That On The Facts And In The Circumstances Of T He Case The Learned Cit A Failed To Appreciate That Reimbursement Of Medical Expenses To Employees Falls Within The Meaning Of Salary And Any Expenditure Incurred For The Purposes Of Salary Does Not Fall Within The Purview Of Fringe Benefit Tax Under The Provisions Of Section 115 Wb Of The Act 3 0 That On The Facts And In The Circumstances Of The Case The Learned Cit A Erred In Confirming The Action Of The Learned Asses Sing Officer In Attributing Additional 10 Of The Composite Participation Fees As Expenditure Liable To Fringe Benefit Tax Without Giving Any Cogent Reasons And O N A Mere Assumption Surmise And Conjecture 4 0 That On The Facts And In The Circumstances Of The Case And Without Prejudice To The Grounds Mentioned Above The Appel Lant Being In The Business Of Plantation And Manufacturing Of Tea Was Liable To Pay Fringe Benefit Tax Only On 17 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 40 Of The Value Of Fringe Benefit Arrived At On Ap Plication Of Rule 8 Of The Income Tax Rules 1962 27 These Grounds Are Identical To Ground No 1 And 1 1 Gr No 2 3 Raised By The Assessee For A Y 2006 07 For The Reasons Stated Wh Ile Adjudicating The Said Ground We All Ground No 1 And 1 1 2 And Dismiss Gr No 3 As Not Calling For Any Adjudication 28 Ground No 2 And 2 1 Reads As Follows 2 0 That On The Facts And In The Circumstances Of The Case The Learned Cit A Erred In Confirming The Action Of The Learned Asses Sing Officer In Subjecting To Fringe Benefit Tax An Amount Of Rs 15 65 793 Be Ing 20 Of The Medical Insurance Premium Of Rs 78 28 963 Incurred By App Ellant 2 1 That On The Facts And In The Circumstances Of T He Case The Learned Cit A Failed To Appreciate That The Medical Insurance Pre Mium Paid By The Appellant On Behalf Of The Employees Falls Within The Meaning Of Salary And Any Expenditure Incurred For The Purposes Of Salary Does Not Fall Within The Purview Of Fringe Benefit Tax Under The Provisions Of Section 115 Wb O F The Act 29 The Issue That Arises For Consideration In Gro Und No 2 And 2 1 Is As To Whether Medical Insurance Premium Paid In Respect Of A Poli Cy Of Medical Insurance In The Name Of An Employee Can Be Considered As A Fringe B Enefit For The Purpose Of Levying Of Fringe Benefit Tax Section 17 1 Iv States That Salary Includes Perquisites Section 17 2 Defines Perquisite And Has Six Clauses Clause V I Lays Down That Perquisite Includes Vi The Value Of Any Other Fringe Benefit Or Amenity Excluding The Fringe Benefits Chargeable To Tax Under Chapter Xii H As May Be Prescribed Proviso To Clause Vi Of Sec 17 2 Has Five Sub Cl Auses And Sub Claluse V Lays Down As Follows Provided That Nothing In This Clause Shall Apply To Iii Any Portion Of The Premium Paid By An Employer I N Relation To An Employee To Effect Or To Keep In Force An Insurance On The Heal Th Of Such Employee Under Any Scheme Approved By The Central Government 42 A Or The Insurance Regulatory And Development Authority Established Under Sub Sec Tion 1 Of Section 3 Of The 18 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 Insurance Regulatory And Development Authority Act 1999 41 Of 1999 For The Purposes Of Clause Ib Of Sub Section 1 Of Section 36 Premium Paid On Insurance Policy For An Employee W Ould Be Perquisite Within The Meaning Of Sec 17 2 V Of The Act Whether We Cons Ider The Same As Falling Within The Meaning Of Fringe Benefit Or Amenity Within The Meaning Of Clause Vi To Sec 17 2 Of The Act Proviso Iii To Clause Vi Of Sec 17 2 Of The Act Excludes Such Expenditure From The Purview Of Taxation 30 The Arguments Advanced In This Regard Are Almo St Identical To The Expenditure On Medical Reimbursement Upto Rs 15 000 Whether Shou Ld Be Considered As Expenditure On Providing Fringe Benefit For The Purpose Of Fbt The Same Reasoning Given While Dealing With The Reimbursement Of Medical Expenses Will Equally Apply To This Expenditure Also 31 The Cit A On This Issue Has Held That The Exp Enditure In Question Is Liable To Levying Of Fringe Benefit Tax For The Following Rea Sons 3 3 I Have Examined The Assessment Order As Well As Facts Relevant Details And Documents Of The Appellant Company Similar Issue W As Involved In A Y 2006 07 Wherein In View Of The Cbdt Circular No 8 2005 Dated 29 08 2005 I Have Decided That Expenses Incurred On Medical Reimburse Ment Below Rs 15 000 Was Liable To Fbt There Being No Change In Facts The A Ddition Is Confirmed 3 4 It Is Further Observed That The Appellant Has Made Similar Claim On Account Of Medical Insurance Premium As Not Liable To Fbt It Is Observed That The Cbdt Vide Question No 70 Of The Circular No 8 2005 Dat Ed 29 08 2005 Has Clarified That Expenditure By The Employer On Group Health In Surance Or Group Medical Insurance Or Group Life Insurance Is For The Purpos Es Of Employee Welfare And Therefore Falls Within The Scope Of Clause E Of Sub Section 2 Of Section 115 Wb Of The Income Tax Act Accordingly Such Expe Nditure Is Liable To Fbt However If Such Expenditure Is A Statutory Obligat Ion The Same Would Not Be Liable To Fbt In The Instant Case Since The Contr Ibution To Medical Insurance Is Contractual And Not Statutory The Same Is Liable T O Fbt The Cbdt Circular Being Very Clear There Cannot Be Any Scope Of Inte Rpretation These Grounds Of Appeal Are Dismissed 19 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 32 We Are Of The View That The Reasoning Containe D In Para 3 4 Of The Cit A S Order Referred To Above Is Not Correct The Case Of Grou P Life Insurance Is A Collective Benefit Whereas In The Present Case We Are Concerned Will Individual Policy Of Medical Insurance In The Name Of Individual Employee The Reason Given By The Cit A In Para 3 3 Is The Same As The Reasons For Treating Me Dical Reimbursement As Fringe Benefit We Have Already Held That Such Expenditur E Will Not Be In The Nature Of Fringe Benefit For The Reasons Given While Deciding Grou Nd No 1 And 1 1 In A Y 2006 07 We Are Of The View That Expenditure In Question Can Not Be Considered As A Fringe Benefit Gr No 2 2 1 Is Accordingly Allowed 33 In The Result Ita No 1867 Kol 2014 Is Partly A Llowed Ita Nos 1868 And 1870 Kol 2014 A Y 2008 09 And 200 9 10 34 Ground Nos Of Appeal Raised In These Appeals R Ead As Follows 1 0 That On The Facts And In The Circumstances Of The Case The Learned Cit A Erred In Confirming The Action Of The Learned Asses Sing Officer In Subjecting To Fringe Benefit Tax An Amount Of Rs 16 98 080 Be Ing 20 Of The Medical Expenses Of Rs 84 90 403 Incurred By Appellant 1 1 That On The Facts And In The Circumstances Of T He Case The Learned Cit A Failed To Appreciate That Reimbursement Of Medical Expenses To Employees Falls Within The Meaning Of Salary And Any Expenditure Incurred For The Purposes Of Salary Does Not Fall Within The Purview Of Fringe Benefit Tax Under The Provisions Of Section 115 Wb Of The Act 2 0 That On The Facts And In The Circumstances Of T He Case The Learned Cit A Erred In Confirming The Action Of The Learned Asses Sing Officer In Subjecting To Fringe Benefit Tax An Amount Of Rs 19 18 302 Be Ing 20 Of The Medical Insurance Premium Of Rs 95 91 509 Incurred By App Ellant 2 1 That On The Facts And In The Circumstances Of T He Case The Learned Cit A Failed To Appreciate That The Medical Insurance Pre Mium Paid By The Appellant On Behalf Of The Employees Falls Within The Meaning O F Salary And Any Expenditure Incurred For The Purposes Of Salary Does Not Fall Within The Purview Of Fringe Benefit Tax Under The Provisions Of Section 1 I 5 Wb O F The Act 3 0 That On The Facts And In The Circumstances Of T He Case The Learned Cit A Erred In Confirming The Action Of The Learned Asses Sing Officer In Attributing Additional 10 Of The Composite Participation Fees As Expenditure Liable To Fringe 20 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 Benefit Tax Without Giving Any Cogent Reasons And O N A Mere Assumption Surmise And Conjecture Ita No 1870 Kol 2014 A Y 2009 10 1 0 That On The Facts And In The Circumstances Of The Case The Learned Cit A Erred In Confirming The Action Of The Learned Asses Sing Officer In Subjecting To Fringe Benefit Tax An Amount Of Rs 15 91 000 Be Ing 20 Of The Medical Expenses Of Rs 79 55 000 Incurred By Appellant 1 1 That On The Facts And In The Circumstances Of T He Case The Learned Cit A Failed To Appreciate That Reimbursement Of Medical Expenses To Employees Falls Within The Meaning Of Salary And Any Expenditure Incurred For The Purposes Of Salary Does Not Fall Within The Purview Of Fringe Benefit Tax Under The Provisions Of Section 115 Wb Of The Act 2 0 That On The Facts And In The Circumstances Of T He Case The Learned Cit A Erred In Confirming The Action Of The Learned Asses Sing Officer In Subjecting To Fringe Benefit Tax An Amount Of Rs 26 13 540 Be Ing 20 Of The Medical Insurance Premium Of Rs 1 30 67 698 Incurred By A Ppellant 2 1 That On The Facts And In The Circumstances Of T He Case The Learned Cit A Failed To Appreciate That The Medical Insurance Pre Mium Paid By The Appellant On Behalf Of The Employees Falls Within The Meaning O F Salary And Any Expenditure Incurred For The Purposes Of Salary Does Not Fall Within The Purview Of Fringe Benefit Tax Under The Provisions Of Section 1 I 5 Wb O F The Act 3 0 That On The Facts And In The Circumstances Of T He Case The Learned Cit A Erred In Confirming The Action Of The Learned Asses Sing Officer In Attributing Additional 10 Of The Composite Participation Fees As Expenditure Liable To Fringe Benefit Tax Without Giving Any Cogent Reasons And O N A Mere Assumption Surmise And Conjecture 35 These Grounds Are Identical To Ground Nos 1 T O 3 Raised By The Assessee In A Y 2007 08 For The Reasons Stated While Adjudicat Ing Ground Nos 1 To 3 In A Y 2007 08 The Same Are Allowed 36 In The Result Ita Nos 1868 And 1870 Kol 2014 A Re Allowed Ita No 1869 Kol 2014 A Y 2009 10 21 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 37 This Is An Appeal By The Assesse Against The O Rder Dated 23 01 2014 Of Cit A 4 Kolkata Relating To A Y 2009 10 This Appeal Arise S Out Of Order Of Assessment Passed U S 143 3 Of The Act 38 Grounds Of Appeal Raised By The Assessee Read As Follows 1 A That On The Facts And In The Circumstances Of The Case The Learned Cit Appeals Erred In Confirming The Action Of The Lea Rned Assessing Officer In Disallowing A Sum Of Rs 1 60 96 045 Under Secti On 14 A Of The Act Read With Rule 8 D Of The Income Tax Rules 1962 1 B That On The Facts And In The Circumstances Of The Case The Learned Cit Appeals While Confirming The Action Of The Learne D Assessing Officer In Disallowing A Sum Of Rs 1 60 96 045 Failed To A Ppreciate That No Expenses Over And Above The Amount Quantified By The Appellant Wa S Actually Incurred In Earning Dividend Income 1 C That On The Facts And In The Circumstances Of Th E Case The Learned Cit Appeals Erred In Confirming The Action Of The Lea Rned Assessing Officer In Disallowing A Sum Of Rs 1 60 96 045 Without Appr Eciating That The Learned Assessing Officer Arbitrarily Applied Rule 8 D Based On Mere Surmises And Conjectures And Without Providing Any Cogent Reason As To How The Amount Of Rs 19 82 000 Quantified By The Appellant Was Incorre Ct 1 D That On The Facts And In The Circumstances Of T He Case And Without Prejudice To Grounds Taken Herein Above The Learned Cit App Eals Erred In Confirming The Action Of The Learned Assessing Officer In Disa Llowing Rs 1 60 96 045 Under Section 14 A Read With Rule 8 D Without Appreciating That Strategic Investments Made Purely For Business Purposes Ought To Have Bee N Excluded In Computing Expenses Disallowable Under Rule 8 D 2 Iii Of The I Ncome Tax Rules 1 E That On The Facts And In The Circumstances Of The Case And Without Prejudice To The Grounds Taken Herein Above The Learned Cit Appeals Erred In Confirming The Action Of The Learned Assessing Offi Cer In Disallowing Rs 1 60 96 045 Under Section 14 A Read With Rule 80 W Ithout Appreciating The Fact That Only Those Investments On Which Dividend Incom E Was Actually Earned Ought To Have Been Considered For Computing Disallowance Under Rule 8 D 2 Iii Of The Income Tax Rules 22 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 39 Though The Assessee Has Raised Several Grounds Of Appeal The Only Issue To Be Decided In This Appeal Is As To The Correctness Of The Quantum Of Disallowance Of Expenditure Incurred To Earn Exempt Income In Terms Of Sec 14 A Of The Act Read With Rule 8 D 2 Iii Of The Rules 40 The Assessee Is A Company Engaged In The Growi Ng And Manufacturing Of Tea The Assessee Was In Receipt Of Exempt Dividend Income O F Rs 35 49 38 602 During The Relevant Previous Year It Is The Claim Of The Asse Ssee That In Earning Such Exempt Income No Direct Expenses Were Incurred By The Ass Esee However While Filing The Return Of Income The Assessee Identified And Suo M Otto Offered An Amount Of Rs 19 82 000 As Indirect Expenses Attributable To E Arning Exempt Income Which Has To Be Disallowed U S 14 A Of The Act While Computing To Tal Income 41 In The Course Of Assessment Proceedings The Assessee Provided Workings Of Arriving At The Amount Of Rs 19 82 000 Which Was Offered To Tax U S 14 A The Copy Of The Said Workings Is Annexed To This Order As Annexure 1 It Was Submitted By The Assessee Before The Ao That No Direct Expenditure W As Incurred By The Assessee In Earning Dividend Income Majority Of The Investment S Have Been Made By The Assessee In Past Years And Have Been Carried Forwar D Year After Year Majority Of The Investments Are Strategic Investments In Group Comp Anies For The Purpose Of Expansion Of Business And The Assessee Does Not Tra De In These Investments With The Purpose Of Earning Capital Gains Or Dividend Accor Dingly No Direct Expenditure Has Been Incurred In Respect Of These Investments Howe Ver Considering The Fact That Some Of The Managerial Staff Time Were Spent On Investme Nt Related Work Of The Company The Assessee Has Suo Motto Offered A Portion Of Sal Ary Of Such Employees Amounting To Rs 19 82 000 As Expenses Incurred In Earning E Xempt Dividend Income 42 The Ao Applied The Provisions Of Rule 8 D 2 Iii Of The Rules And Disallowed A Sum Of Rs 1 60 96 045 0 50 Of The Average Value Of Investments Of Rs 361 56 09 000 As Expenditure Incurred To Earn E Xempt Income And Added The Same To The Total Income Of The Assessee 43 Before Cit A The Assessee Submitted That It Had Suo Motto Identified And Disallowed The Expenses Which Could At Best Be Attr Ibutable To Management Of These 23 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 Investments And Thus Said To Be Incurred For The P Urpose Of Earning Exempt Dividend Income It Was Argued That The Assessing Officer Fa Iled To Appreciate The Facts And Circumstances Of The Case Of The Assessee And Faile D To Bring Any Evidence Record To Substantiate That The Assessee Had Incurred Expense S In Earning Exempt Income Over And Above Identified And Offered By The Assessee I T Was Pointed Out That The Assessing Officer Has Also Not Provided Any Basis O R Reasons For Rejecting The Assessees Calculation Or Holding It To Be Inapprop Riate It Was Submitted That The Assessing Officer Arbitrarily Proceeded To Apply Ru Le 8 D On Mere Surmise Assumption And Conjecture Reliance Was Placed On T He Following Decisions Wherein It Has Been Held That Where The Assessing Officer Did Not Bring Any Evidence On Record To Establish That Any Expenditure Had Been Incurred By Assessee For Earning Exempt Income Disallowance U S 14 A Read With Rule 8 D Cou Ld Not Be Made Dcit Vs Ashish Jhunjhunwala 2013 I T A No 1809 Kol 2012 Kol Citvs Hero Cycles Ltd 2010 323 Itr 518 Punj H Ar Acit Vs Sil Investment Ltd 2012 54 Sot 54 Delh I Priya Exhibitors P Ltd Vs Acit 2012 54 Sot 3 56 Delhi Raj Sri Production Pvt Ltd Ts 570 Itat 2013 Mum It Was Submitted That Since The Assessing Officer H As Failed To Discharge His Onus Of Establishing The Fact That Expenditure Over And Abo Ve Identified By The Assessee Was Incurred In Earning Dividend Income The Action Of The Assessing Officer In Applying Rule 8 D Is Baseless And Should Be Struck Down Reli Ance In This Regard Is Also Placed On Following Decisions Wherein It Has Been Held Tha T Provision Of Rule 8 D Comes Into Play Only When The Ao Records A Finding That He Is Not Satisfied With The Assessees Method And The Said Rule Cannot Be Arbitrarily Appl Ied By The Assessing Officer Without Showing How The Assesses Method Of Calculat Ion Of Disallowance U S 14 A Is Incorrect Assistant Commissioner Of Income Tax Circle 10 Ko Lkata V Champion Commercial Co Ltd 2013 152 Ttj 241 Kolkata Commissioner Of Income Taxvs Consolidated Photo Finvest Ltd 2012 211 Taxman 184 Delhi High Court Maxopp Investments Limited Vs Cit 2012 347 Itr 272 Delhi 24 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 Dcit Vs Jindal Photo Limited Ita No 814 Del 2011 Auchtel Products Ltd Vs Assistant Commissioner Of Income Tax Circle 6 1 Mumbai 2012 52 Sot 39 Mum Raj Shipping Agencies Ltd Vs Acit 2013 38 Taxman Com 345 Mum Dcit Vs Allied Investments Housing P Ltd 2013 Itat Chennai Reiaxo Footwears Ltd Vs Addl Cit 2012 50 Sot 10 2 Delhi It Was Argued That Since The Assessing Officer Has Failed To Record A Finding That The Assessees Method Is Incorrect And Not Satisfactory The Action Of The Assessing Officer In Applying Rule 8 D Is Erroneous And Accordingly S Hould Be Struck Down 44 Without Prejudice To The Above Submission It Was Submitted That Out Of The Total Investments Majority Of The Investments Were Made By The Assessee In Subsidiaries Associate Companies And Joint Venture S Which Were In The Nature Of Strategic Investments In Group Companies For The Pu Rpose Of Expanding The Business Of The Assessee Majority Of Such Investments Have Bee N Made By The Assessee In Past Years And The Same Are Long Term In Nature It Was Pointed Out That The Assessee Has Neither Made These Investments To Earn Capital Gain S Nor To Earn Dividend But Out Of Business Expediency To Expand Its Business Accordi Ngly The Said Strategic Investments Should Not Fall Under The Purview Of Ru Le 8 D 2 Iii And Expenditure Incurred If Any In Connection With Such Strategic Investments Should Not Be Disallowed Under Rule 8 D 2 Iii Reliance In This Regard Was Placed On The Decision Of The Chennai Tribunal In The Case Of Eih Associa Ted Hotels Limited Vs Dy Cit 2012 I T A No 1503 Mds 2012 Chennai Wherein T He Tribunal Has Held As Under We Are Of The Considered Opinion That The Investme Nts Made By The Assessee In The Subsidiary Company Are Not On Account Of Inves Tment For Earning Capital Gains Or Dividend Income Such Investments Have Be En Made By The Assessee To Promote Subsidiary Company Into The Hotel Industry A Perusal Of The Order Of The Cit Appeals Shows That Out Of Total Investmen T Of Rs 64 18 19 775 Rs 63 31 25 715 Is Invested In Wholly Owned Subsidi Ary This Fact Supports The Case Of The Assessee That The Assesee Is Not Into T He Business Of Investment And The Investments Made By The Assessee Are On Accoun T Of Business Expediency Any Dividend Earned By The Assessee From Investment In Subsidiary Company Is Purely Incidental Therefore The Investment Made B Y The Assessee In Its Subsidiary Are Not To Be Reckoned For Dis Allowance U S 14 A R W R 8 D The Assessing Officer Is Directed To Re Compute The Ave Rage Value Of Investment 25 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 Under The Provisions Of Rule 8 D After Deleting Inve Stments Made By The Assessee In Subsidiary Company Accordingly This G Round Of Appeal Of The Assessee Is Partly Allowed And That Of The Revenue Is Dismissed It Was Pointed Out That In The Case Of The Assessee Also Out Of Total Investment Considered By The Ao For Calculating Average Value Of Investment Investments Of Rs 83318 07 Lacs Were In The Nature Of Strategic I Nvestments And Have Been Made By The Assessee In Subsidiaries Associate Companies A Nd Joint Ventures For The Purpose Of Expanding Business And Not With The Intention Of Ea Rning Exempt Income The Dividend Income Earned If Any Is Only Incidental A Ccordingly No Disallowance Is Called For Under Section 14 A Of The Act R W Rule 8 D 2 Iii 45 The Cit A However Did Not Agree With The Subm Issions Made By The Assessee And He Confirmed The Order Of The Ao By Observing A S Follows 3 3 I Have Gone Through The Submissions Filed By The Appellant Though The Appellant Has Suo Moto Disallowed Salary Expenses Of Various Employees It Cannot Be Denied That Various Administrative Expens Es Must Have Been Incurred In Managing The Investment And Earning Dividend Inc Ome Accordingly The Assessing Officer Was Correct In Applying Rule 80 2 Iii And Disallowing 0 5 Of The Average Value Of Investment Of Rs 1 60 96 0 45 For Computing Disallowance U S 14 A Of The Act 3 4 As Regard The Reliance Placed By The Appellant On The Decision Of Rei Agro Ltd 2013 35 Taxmann Com 404 Kolkata Trib In Holding That Only Those Investments On Which Dividend Has Been Earned By Th E Appellant Should Have Been Considered For Computing 0 5 Of Average Value Of Investments And Not All Investments On Which No Dividend Has Been Earned Du Ring The Relevant Financial Year The Same Is Misplaced In View Of The Recent C Bdt Circular No 5 Dated 11 02 2014 Where In It Has Been Clarified That Disallo Wance U S 14 A In Respect Of Expenses Is Required To Be Made Eve If No Exempt In Come Is Earned From Investments During The Year Accordingly Disallowa Nce Made By The Assessing Officer Stands Confirmed 46 Aggrieved By The Order Of Cit A The Assessee Is In Appeal Before The Tribunal 47 The Learned Counsel For The Assessee Reiterate D Submissions Made Before The Ao The Learned Dr Relied On The Order Of The Cit A We Have Heard The Rival Submissions 26 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 48 Though The Assessee Has Placed Reliance On Sev Eral Judicial Pronouncements We Are Of The View That The Decision Of The Honble De Lhi High Court Rendered In The Case Of H T Media Ltd Vs Pr Cit 2017 85 Taxman Com 113 Delhi Would Be Appropriate To The Facts And Circumstances Of The P Resent Case In The Aforesaid Decision The Honble Delhi High Court Had Laid Down The Law With Regard To Disallowance U S 14 A Of The Act As Follows In Order To Disallow This Expense The Assessing Of Ficer Had To First Record On Examining The Accounts That He Was Not Satisfied W Ith The Correctness Of The Assessees Claim Of Rs 3 Lakhs Being The Administr Ative Expenses This Was Mandatorily Necessitated By Section 14 A 2 Read Wit H Rule 80 I A Of The Rules Para 35 In The Assessment Order The Assessing Officer Re Cords That In Answer To The Query Posed By The Assessing Officer Requiring It T O Produce Calculation For Disallowances The Assessee Submitted That They Ha Ve Not Incurred Any Expenditure For Earning The Dividend Income There After The Assessing Officer Records That It Has Considered The Submissions Of T He Assessee And Found Not To Be Acceptable Thereafter The Assessing Officer Proce Eded To Deal With The Said Provisions Of Section 14 A And Rule 8 D And Observed That Making Of Investment Maintaining Or Continuing Investment And Time Of Ex It From Investment Are Well Informed And Well Coordinated Management Decisions That In Relation To Earning Of Income Are Embedded In Indirect Expenses It Is Then Stated That The Provisions Of Sub Section 2 Of Section 14 A And Ru Le 8 D Of The Rules Are In Operation And Therefore Will Strictly Be Adhered T O By The Assessee Thereafter Discussing Section 14 A I Read With Rule 80 And Ref Erring To The Decision Of The Bombay High Court In Godrej Boyce Mfg Co Ltd V Cit 2010 328 Itr 81 194 Taxman 203 The Assessing Officer Simply Sta Ted That He Was Satisfied That The Assessee Had Incurred Expenses To Manage Its In Vestments Which May Yield Exempt Income And Assessee Grossly Failed To Calcu Late Such Expenses In A Reasonable Manner To Ascertain The True And Correct Picture Of Its Income And Expenses It Is Viewed That The Above Observations Of The A Ssessing Officer In The Assessment Order Are Of A Broad General Nature Not With Particular Reference To The Facts Of The Case On Hand There Being Concurrent Findings Of Both The Commi Ssioner Appeals As Well As The Tribunal On This Aspect Is Not Agreeable The C Ommissioner Appeals Disallowed The Exempt Expenses By Merely Repeating What The Assessing Officer Had Stated About The Cost That Is Built Into So Cal Led Passive Investments And Simply Recorded That The Assessing Officer Was Boun D To Rule 8 D And Therefore 27 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 Was Justified In Determining Administrative Costs A T 0 5 Per Cent Here Again The Commissioner Appeals Failed To Note That Without The Mandatory Requirement Under Section 14 A And Rule 8 D Of The Rules Of Sati Sfaction Being Recorded Being Met The Question Of Applying Rule 8 D 1 Did Not Ar Ise The Tribunal In Its Order Recorded The Submission Of The Assessee That The Assessing Officer Did Not Record Any Satisfaction A Bout The Assessee Not Properly Offering Expenditure Incurred In Relation To The Ex Empt Income At Rs 3 Lakhs The Tribunal Reproduced The Contents Of The Assessment Order Which Contains General Observations Regarding Earning Of Exempt Income Th Is Cannot Be Accepted As A Recording By The Assessing Officer Of Satisfaction Regarding The Claim Of The Assessee After Examining Its Accounts Again The T Ribunal In Its Order Simply Reproduced The Assessment Order Where Again No Re Asons Have Been Provided But Only A Conclusion Has Been Reached That The Ass Essing Officer Was Satisfied That The Assessee Had Incurred Expenses To Manage I Ts Investments Which May Yield Exempt Income And Assessee Grossly Failed To Calculate Such Expenses In A Reasonable Manner To Ascertain The True And Correct Picture Of Its Income And Expenses Consequently On The Aspect Of Administrative Exp Enses Being Disallowed Since There Was A Failure By The Assessing Officer To Com Ply With The Mandatory Requirement Of Section 14 A 2 Read With Rule 8 D 1 A Of The Rules And Record His Satisfaction As Required There Under The Ques Tion Of Applying Rule 8 D 2 Iii Of The Rules Did Not Arise 49 In The Present Case Neither The Ao Nor Cit A Has Given Any Reason Why They Are Not Agreeing With The Claim Of The Assessee A Sum Of Rs 90 82 000 Is The Expenses That Have To Be Disallowed U S 14 A Of The Act By Th E Assessee Suo Motto In The Present Case The Ao Has Merely Observed That The Me Mbers Of The Staff Utilising The Infrastructure Of The Company For Carrying Out The Job Of Portfolio Management Of The Company Cannot Be Ruled Out This Observation In Ou R View Will Not Be Sufficient To Invoke The Provision Of Rule 8 D 2 Iii Of The Rul Es The Cit A After Making A Reference To Several Decisions And Arguments Put Fo Rth By The Assessee Has Without Any Consideration To Those Submissions Followed The S Ame Pattern As That Of The Ao It Was The Stand Of The Assessee That No Direct Expens Es Have Been Incurred By The Assessee In Earning The Dividend Income It Was Als O The Plea Of The Assessee That The Majority Of The Investment Were Made By The Assesse E In The Past Years And Have Been Carried Forward Year After Year It Was Also Pleade D By The Assessee That Major 28 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10 Investments Are Strategic Investments In Group Comp Anies For The Purpose Of Expansion Of The Business And The Assessee Does Not Trade In These Investments With The Purpose Of Earning Capital Gains Or Dividend The A Ssessee Has Also Explained That Considering That The Some Managerial Time Has Been Spent On Portfolio Related Work A Sum Of Rs 19 82 000 Was Offered As Expenses Incur Red In Earning Exempt Dividend Income These Submissions Of The Assessee Have Neit Her Been Dealt With By The Revenue Authorities In Our View Found To Be Not Co Rrect In These Circumstance We Are Of The View That The Disallowance Made By The Ao An D Confirmed By The Cit A Cannot Be Sustained The Same Is Directed To Be Del Eted And Ground Of Appeal Are Allowed 50 In The Result Ita No 1869 Kol 2014 Is Allowed 51 In The Result Ita No 1866 1867 Kol 2014 Are Partly Allowed While Ita No 1868 1870 Kol 2014 Are Allowed Ita No 1869 K Ol 2014 Is Allowed O Rder Pronounced In The Open Court On 13 12 2017 Sd Sd Dr Arjun Lal Saini N V Vasudevan Accountant Member Judicial Member Dated 13 12 2017 Rg Sr Ps Copy Of The Order Forwarded To 1 Tata Global Beverages Ltd 1 Bishop Lefroy Road Kolkata 700029 2 A C I T Circle 4 Kolkata Addl C I T Circl E 4 D C I T Circle 4 Kolkata 3 Cit A Iv Kolkata 4 Cit Ii Kolkata 5 Cit Dr Kolkata Benches Kolkata True Copy By Order Senior Private Secretary Head Of Office D D O Itat Kolkata Benches 29 Ita Nos 1866 1868 1870 1869 Kol 2014 Tata Global Beverages Limited A Y 2006 07 To 2009 10