Adani Retail Ltd, Ahmedabad v. The Dy.CIT., Circle-1,, Ahmedabad

ITA 3269/AHD/2010 | 2006-2007
Pronouncement Date: 25-10-2013 | Result: Allowed

Appeal Details

RSA Number 326920514 RSA 2010
Assessee PAN AABCB5212H
Bench Ahmedabad
Appeal Number ITA 3269/AHD/2010
Duration Of Justice 2 year(s) 10 month(s) 15 day(s)
Appellant Adani Retail Ltd, Ahmedabad
Respondent The Dy.CIT., Circle-1,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 25-10-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 25-10-2013
Date Of Final Hearing 15-10-2013
Next Hearing Date 15-10-2013
Assessment Year 2006-2007
Appeal Filed On 10-12-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMADABAD BEFORE SHRI N. S. SAINI ACCOUNTANT MEMBER AND SHRI KUL BHARAT JUDICIAL MEMBER ITA NO. 3269/AHD/2010 ASSESSMENT YEAR :2006-2007 ADANI RETAIL LTD. ADANI HOUSE SHRIMALI SOCIETY NR. MITHAKHALI SIX ROAD NAVRANGPURA AHMADABAD. V/S . DCTI CIRCLE-(1) AHMEDABAD. PAN NO. A ABCB5212H (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI V. R. CHOKSI A.R. /BY RESPONDENT SHRI O. P. BATHEJA SR. D.R. /DATE OF HEARING 15.10.2013 /DATE OF PRONOUNCEMENT 25.10.2013 O R D E R PER : SHRI N. S. SAINI ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-VI AHMEDABAD DATED 03.09.2010. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS THAT L D. CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER LEVYI NG FRINGE BENEFIT TAX IN RESPECT OF SALES PROMOTION EXPENDITURE CONVEYANCE TOUR AND TRAVEL EXPENDITURE REPAIRS AND MAINTENANCE OF THE VEHICLE AND TELEPHONE EXPENDITURE ETC. 3. THE BRIEF FACTORS OF THE CASE THAT THE ASSESSEE FILED FRINGE BENEFIT TAX RETURN DECLARING RS.36 61 064/- AS VALUE OF FRINGE BENEFIT. HOWEVER THE ASSESSING OFFICER FOUND THAT SALES PROMOTION AND PU BLICITY CONVEYANCE TOURS ITA NO. 3269/AHD/10 A.Y. 2006-07 PAGE 2 AND TRAVELING EXPENSES TELEPHONE AND OTHER ALLOWAN CES AND MOTOR CAR EXPENSES ARE SPECIFICALLY INCLUDED FOR THE PURPOSE OF FRINGE BENEFIT TAX AND SPECIFIC PERCENTAGE IS TREATED AS THE VALUE OF FRIN GE BENEFIT. SINCE THE VALUE IS TO BE DEEMED AS PER THE PROVISIONS OF THE ACT T HE ASSESSING OFFICER ADDED THE VALUE OF FRINGE BENEFIT TAX NOT INCLUDED BY THE ASSESSEE AND MADE ADDITION OF RS.1 11 61 364/- ON ACCOUNT OF THESE EX PENDITURES. 4. ON APPEAL BEFORE THE CIT(A) THE ASSESSEE SUBMIT TED THAT FRINGE BENEFIT TAX IS LEVIED ON THE EMPLOYER IN RESPECT OF FRINGE BENEFIT PROVIDED BY THE EMPLOYER TO HIS EMPLOYEES. IN VIEW OF THIS AN Y EXPENSE WHICH HAD NO DIRECT OR INDIRECT RELATION TO HIS EMPLOYEES WILL N OT BE COVERED BY THE PROVISIONS. THE ASSESSING OFFICER HAS TAXED THESE EXPENSES WHICH HAVE NO NEXUS WITH EMPLOYEES. SINCE THESE EXPENSES ARE NO T FOR THE BENEFIT OF EMPLOYEES THERE SHOULD NOT BE ANY FRINGE BENEFIT T AX ON SUCH EXPENSES. IT WAS FURTHER SUBMITTED THAT IN THE ACCOUNTS THE EXP ENSES MAY HAVE NOMENCLATURE OF THE EXPENSES SIMILAR TO THE ONE MEN TIONED FOR THE PURPOSE OF FRINGE BENEFIT TAX BUT ONE HAS TO SEE WHETHER THERE IS ANY BENEFIT TO THE EMPLOYEE FROM SUCH EXPENSES. 5. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE HELD THAT IT WAS NOT IN DISPUTE THAT ASSESSEE WAS COVERE D BY THE PROVISIONS OF FRINGE BENEFIT TAX. HE OBSERVED THAT FRINGE FRINGE BENEFIT WAS LEVIED IN RESPECT OF FRINGE BENEFIT PROVIDED OR DEEMED TO HAV E BEEN PROVIDED BY THE EMPLOYER 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 INCURRED ANY EXPENSES OR MADE ANY PAYMENTS FOR THE PURPOSES ITA NO. 3269/AHD/10 A.Y. 2006-07 PAGE 3 MENTIONED IN CLAUSE A TO CLAUSE Q. THE VALUE OF TH E FRINGE BENEFIT WAS TO BE WORKED OUT BY APPLYING A PERCENTAGE GIVEN IN SEC TION 115WC. THESE TWO SECTIONS DO NOT HAVE 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 BENEFITS ARE ALSO DEEMED AT A PARTICULAR PERCENTAGE THERE IS HARDLY ANY DISCRETI ON EITHER WITH ASSESSEE OR TAX DEPARTMENT TO REDUCE THE LEVY OF FRINGE BENEFIT TAX. SINCE THE PROVISIONS AND SECTIONS ARE VERY CLEAR AND THERE IS NO ROOM FOR ANY CONFUSION THE LINKING OF THE EXPENSES TO THE BENEFIT OF EMPLO YEE IS NOT NECESSARY. ANY EXPENSES WHICH ARE DIRECTLY INCURRED FOR THE PURPOS E OF EMPLOYEE IS WHOLLY TAKEN FOR THE PURPOSE OF FRINGE BENEFIT TAX. HOWEV ER OTHER EXPENSES IN THE NATURE OF ENTERTAINMENT SALE PROMOTION CONVEYANCE TRAVELLING GIFTS ETC. MAY HAVE PARTIAL BENEFIT TO THE EMPLOYEES AND THERE FORE ONLY A PART IS TREATED AS FRINGE BENEFIT. SINCE SECTION CLEARLY DEFINED THE FRINGE BENEFIT NO FURTHER ADJUSTMENT TO THE ITEMS OF EXPENSES DEBITED IN PROF IT AND LOSS ACCOUNT IS PERMITTED AND ACCORDINGLY ASSESSING OFFICER IS JUST IFIED IN APPLYING THE RATES APPLICABLE TO PARTICULAR EXPENSE GIVEN IN THE ACT T O ARRIVE AT THE VALUE OF FRINGE BENEFIT AND CONFIRMED THE ACTION OF THE A.O. 6. LD. A.R. OF THE ASSESSEE FILED A COPY OF THE DEC ISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF DESAI BROTHERS LTD. VS. ADDITIONAL CIT IN ITA NO. 168/PN/2009 A.Y. 2006-07 ORDER DATED 31.10.2012 AND SUBMITTED THAT THE TRIBUNAL HAS HELD THAT THE PROVISIONS OF SECTION 11 5WB(2) OF THE ACT WAS NOT APPLICABLE IN RESPECT OF EXPENSES WHICH ARE NOT INC URRED ON EMPLOYEES OR OTHER FAMILY MEMBERS. HE ALSO PLACED RELIANCE ON T HE DECISION OF THE ITA NO. 3269/AHD/10 A.Y. 2006-07 PAGE 4 BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. TOYOTA KRILOSKAR MOTOR PVT. LTD. VS. ACIT IN ITA NO.88/BANG/2011 A.Y. 200 8-09 ORDER DATED 11.05.2011 WHERE IT WAS HELD THAT EXPENDITURE IN T HE NATURE OF SALES PROMOTION CONVEYANCE TOURS AND TRAVELS AND GIFT H AS NO ELEMENT OF EMPLOYERS BENEFIT AND IS A LEGITIMATE BUSINESS EXP ENDITURE INCURRED BY THE ASSESSEE IN THE COURSE OF ITS BUSINESS. THE IMPUGN ED EXPENDITURE WAS PAID TO THIRD PARTIES AND NOT TO EMPLOYEES. SINCE THE EXPENDITURE DOES NOT RESULT IN ANY BENEFIT TO EMPLOYEES THE SAME WAS NOT LIABL E TO FRINGE BENEFIT TAX. ON THE OTHER HAND LD. SR. D.R. RELIED ON THE ORDER OF LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HA S INCURRED SALES PROMOTION EXPENSES PUBLICITY EXPENSES CONVEYANCE EXPENSES TOURS AND TRAVELS EXPENSES TELEPHONE AND OTHER ALLOWANCES M OTOR CAR INCLUDED FOR THE PURPOSE OF FRINGE BENEFIT TAX AND SPECIFIC PERCENTA GE IS TREATED AS THE VALUE OF FRINGE BENEFIT INCLUDED RS.1 11 61 364/- IN THE VALUE OF FRINGE BENEFIT FOR THE PURPOSE OF FRINGE BENEFIT TAX WHICH WAS CONFIR MED IN APPEAL TO THE LD. CIT(A). THE LD. A.R. OF THE ASSESSEE HAS RELIED ON THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN CASE OF DESAI BROTHERS LTD. VS. ADDITIONAL CIT (SUPRA) AND BANGALORE BENCH OF THE TRIBUNAL IN CASE OF M/S. TOYOTA KRILOSKAR MOTOR PVT. LTD. VS. ACIT (SUPRA) WHEREIN IT WAS HELD THAT PROVISIONS OF FRINGE BENEFIT TAX CANNOT BE INVOKED IN RESPECT OF EXPENSE S WHICH ARE NOT INCURRED ON EMPLOYEES OR THEIR FAMILY MEMBERS. IT HAS ALSO BEEN HELD BY THE TRIBUNAL IN CASE OF M/S. TOYOTA KRILOSKAR MOTOR PVT. LTD. VS. ACIT (SUP RA) THAT ITA NO. 3269/AHD/10 A.Y. 2006-07 PAGE 5 EXPENDITURE IN THE NATURE OF SALES PROMOTION CONVE YANCE TOURS AND TRAVELS AND GIFTS WHICH HAS NO ELEMENT OF EMPLOYEES BENEFI T AND WHICH IS LEGITIMATE BUSINESS EXPENDITURE INCURRED BY THE ASSESSEE IN TH E COURSE OF CARRYING ON ITS BUSINESS. THE SAME WAS NOT LIABLE TO FRINGE BENEFI T. WE FIND THAT IN THE INSTANT CASE ALSO THE ASSESSEE HAS FILED DETAILS OF EXPENDITURE BEFORE THE ASSESSING OFFICER WHICH HAVE ALSO BEEN FILED BEFORE US AT PAGES 6 TO 14 OF THE PAPER BOOK. FURTHER THE ASSESSING OFFICER HAS ALSO SUMMARIZED THIS EXPENDITURE IN THE ASSESSMENT ORDER AT PAGE NO.2 AN D PARA NO.2 AS UNDER: SR. NO. NATURE OF EXP./PAYMENT AMOUNT PERCENTAGE % FRINGE BENEFIT VALUE 1 S ALES P ROMOTION & PUBLICITY ADVT. & PUBLICITY 2548442 20% 509688 SALES PROMOTION & PUBLICITY 505991 20% 101198 DEFERRED REVENUE EXPENSES 42039905 20% 8407981 2 CONVEYANCE TOUR & TRAVEL (INCLUDING FOREIGN TRAVEL) AS PER THE BALANCE SHEET INCLUDING HOTEL CHARGES 4235784 20% 847157 3 MISC. REPAIRS & MAINT. (VEHICLES) 139737 20% 27947 CAR DEPRECIATION 154449 20% 30890 4 OTHER ALLOWANCES 2729799 20% 545960 5 USE OF TELEPHONE (INCLUDING MOBILE PHONE) MOBILE EXPENSE 1879074 20% 375815 TELEPHONE & TELEX EXPENSES A/C. 1573591 20% 314718 TOTAL 55806772 11161354 WE FIND THAT THE ASSESSING OFFICER HAS ESTIMATED FR INGE BENEFIT AMOUNT AT 20% OF THE EXPENDITURE AS OBSERVED FROM THE ABOVE T ABLE. HE HAS NOT ITA NO. 3269/AHD/10 A.Y. 2006-07 PAGE 6 BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE ABO VE EXPENDITURE GAVE ANY BENEFIT TO THE EMPLOYEES OF THE ASSESSEE COMPANY. IN ABSENCE OF ANY SUCH NEXUS BEING PROVED BY THE ASSESSING OFFICER IN OUR CONSIDERED OPINION LEVY OF FRINGE BENEFIT TAX ON THE ABOVE STATED EXPENDITU RE IS NOT WARRANTED. IN VIEW OF THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN CASE OF DESAI BROTHERS LTD. VS. ADDITIONAL CIT (SUPRA) AND BANGALORE BENCH OF THE TRIBUNAL IN CASE OF M/S. TOYOTA KRILOSKAR MOTOR PVT. LTD. VS. ACIT (SUP RA) WE THEREFORE DELETE THE LEVY OF FRINGE BENEFIT TAX ON RS. 1 11 61 364/- AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON FRIDAY THE 25 TH OF OCTOBER 2013 AT AHMADABAD. SD/- SD/- ( KUL BHARAT ) (N. S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ) ) 12( / DR ITAT AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ 8/ 1 ': ) 12( ;