Apeejay Tea Limited, Kolkata v. DCIT, C.C.- III, Kolkata, Kolkata

ITA 556/KOL/2010 | 2006-2007
Pronouncement Date: 07-01-2011

Appeal Details

RSA Number 55623514 RSA 2010
Assessee PAN AACCA1955F
Bench Kolkata
Appeal Number ITA 556/KOL/2010
Duration Of Justice 9 month(s) 19 day(s)
Appellant Apeejay Tea Limited, Kolkata
Respondent DCIT, C.C.- III, Kolkata, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 07-01-2011
Appeal Filed By Assessee
Bench Allotted B
Tribunal Order Date 07-01-2011
Assessment Year 2006-2007
Appeal Filed On 18-03-2010
Judgment Text
THE INCOME-TAX APPELLATE TRIBUNAL B BENCH : KO LKATA [ BEFORE HONBLE SHRI B.R. MITTAL JM AND HONBLE S HRI C. D. RAO AM ] ITA NO. 556 (KOL) OF 2010 : ASSESSMENT YEAR : 2006 -07 APEEJAY TEA LIMITED -VS .- DY. COMMISSIONER OF INCOME TA X KOLKATA [PAN : AACCA 1955 F] CC-III KOLKATA. [APPELLANT] [RESPONDENT] APPELLANT BY : SHRI MANISH TI WARI RESPONDENT BY : SHRI P. KOLHE PER B. R. MITTAL J. M. THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT Y EAR 2006-07 AGAINST ORDER OF LD. CIT(A) CENTRAL-I KOLKATA DATED 10.12.2009 ON THE FOLLOWING GROUNDS :- (1) THAT THE LD. CIT(A) HAVING ADMITTED THAT FRIN GE BENEFIT TAX IS AN ADDITIONAL TAX CHARGED IN RESPECT OF FRINGE BENEFIT S PROVIDED TO EMPLOYEES HAS ERRED IN CONFIRMING THE ACTION OF ASS ESSING OFFICER WHO CONSIDERED 100% SUCH BENEFITS PROVIDED BY THE E MPLOYER INSTEAD OF 40% IN TERMS OF RULE 8 OF INCOME TAX ACT 1962. (2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT(A) IS WRONG IN CONFIRMING THE ACTION OF ASSESSING OFFI CER WHO REJECTED THE REVISED COMPUTATION OF TAXABLE FRINGE BENEFIT BY EXCLUDING 60% OF THE EXPENDITURE AS RELATABLE TO AG RICULTURAL ACTIVITIES. (3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE LD. CIT(A) IS WRONG AND UNJUSTIFIED IN CONFIRMING ORDER U/S. 115WE(3) OF INCOME TAX ACT 1961 WHEREIN THE VALUE OF FRINGE BE NEFIT WAS COMPUTED AT RS.77 75 460/-. 2. THE RELEVANT FACTS ARE THAT THE ASSESSEE DERIVES INCOME FROM SALE OF TEA GROWN AND MANUFACTURED BY IT. THERE IS NO DISPUTE THAT ITS IN COME IS LIABLE TO BE TAXED UNDER THE INCOME TAX ACT TO THE EXTENT OF 40% AS PER RULE 8 OF INCOME TA X RULES 1962 AS BUSINESS INCOME. THEREFORE THE REMAINING 60% INCOME REPRESENTS AGRI CULTURAL INCOME AND IS NOT LIABLE TO TAX FOR ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE F ILED RETURN FOR FRINGE BENEFIT TAX (FBT) DECLARING INCOME OF FRINGE BENEFIT OF RS.73 41 825/ -. THE RETURN WAS PROCESSED U/S. 115WE(1). SUBSEQUENTLY A NOTICE U/S. 115WE(2) WAS ISSUED AS IT WAS NOTICED THAT AUDITOR HAD CALCULATED ITA NO. 556/KOL/20 10 2 VALUE OF FRINGE BENEFIT OF RS.77 64 782/- IN LIEU O F THE VALUE OF RS.73 41 825/- DECLARED BY THE ASSESSEE IN ITS RETURN. 3. ON BEHALF OF THE ASSESSEE A REVISED COMPUTATION OF FRINGE BENEFIT TAX WAS FILED AND ARGUED THAT 40% OF RS.77 64 782/- I.E. RS.31 05 913 /- SHOULD BE TAXABLE IN VIEW OF RULE 8 OF INCOME TAX RULES 1962. THE ASSESSING OFFICER DID N OT FIND MERIT IN THE CONTENTION OF THE ASSESSEE AND VIDE PARA 5 HELD THAT RULE 8 DOES NOT APPLY TO TAXABLE VALUE OF FRINGE BENEFIT. PARA 5 OF ASSESSING OFFICERS ORDER READS AS UNDER :- IT IS OBSERVED THAT THE LD. A.R. HAS TAKEN RECOUR SE TO RULE-8 OF THE I.T. RULES 1962 FOR COMPUTATION OF TAXABLE VA LUE OF FRINGE BENEFIT OF RS.31 05 913/-. IT IS PERTINENT TO NOTE THAT RULE 8 HAS ITS APPLICATION FOR APPORTIONMENT OF INCOME BETWEEN THE AGRICULTURAL AC TIVITY AND THE NON- AGRICULTURAL ACTIVITY. THE SAID RULE-8 DOES NOT PRE SCRIBE ANY METHODOLOGY FOR BIFURCATION OF EXPENSES BETWEEN DIFFERENT ACTIV ITIES CARRIED ON BY THE ASSESSEE. THE FBT U/S. 115WA IS CHARGEABLE ON THE F RINGE BENEFITS DEFINED U/S. 115WB. THE FRINGE BENEFITS BASICALLY I NCLUDE CERTAIN EXPENSES INCURRED BY THE ASSESSEE TO PROVIDE CERTAI N PRIVILEGE FACILITY OR AMENITIES TO ITS EMPLOYEES. THEREFORE IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND HAVING REGARD TO THE PROVISIONS OF SEC TION 115WA TO 115WL OF THE INCOME TAX ACT 1961 THE APPLICATION OF RUL E-8 AS CLAIMED BY THE LD. A/R DOES NOT APPEAR TO BE CONVINCING. RATHER THE LD. A/R HAS FAILED TO ESTABLISH THE CLAIM FOR APPLICATION OF RULE-8 FO R DETERMINATION OF TAXABLE VALUE OF FRINGE BENEFITS. THE ASSESSING OFFICER ALSO CONSIDERED THAT INTEREST OF RS.53 390/- PAID ON CAR LOAN WAS NOT CONSIDERED EVEN BY THE AUDITOR. THEREFORE THE ASSE SSING OFFICER CONSIDERED THE TOTAL VALUE OF FRINGE BENEFITS AT RS.77 64 782/- AND CALCULATED TA X AS PER SECTION 115WE(3) OF THE INCOME TAX ACT. BEING AGGRIEVED THE ASSESSEE FILED APPEAL BEFO RE THE LD. CIT(A). 4. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSES SING OFFICER. HENCE THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 5. ON BEHALF OF THE ASSESSEE IT WAS CONTENDED THAT THE ASSESSEE PROVIDED FRINGE BENEFITS TO ITS EMPLOYEES IN COURSE OF HIS BUSINESS ACTIVITIES AND INCURRED EXPENSES. THEREFORE RULE-8 WILL ALSO APPLY TO VALUE OF FRINGE BENEFIT. HE SUBMITTED THAT FRINGE BENEFITS IS IN FACT AN ADDITIONAL INCOME TAX AND THEREFORE ONLY 40% OF IT IS TO BE C HARGED TO TAX AS PER RULE 8 OF THE INCOME TAX RULES. HE SUBMITTED THAT THE ASSESSEE INCURRED EXPE NDITURE DURING THE COURSE OF HIS BUSINESS ITA NO. 556/KOL/20 10 3 ACTIVITY AND SINCE 60% INCOME REPRESENTS AGRICULTUR AL INCOME CONSEQUENTLY 60% OF EXPENDITURE IS ALSO TO BE CONSIDERED AS EXPENDITURE FOR AGRICUL TURAL PURPOSES. HE SUBMITTED THAT GROUNDS OF APPEAL TAKEN BY THE ASSESSEE BE DECIDED IN ITS FAVO UR. 6. ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESEN TATIVE REFERRED TO SECTION 115WA AND SUBMITTED THAT FRINGE BENEFIT TAX IS CHARGED TO TAX ON THE PRIVILEGES PROVIDED BY THE EMPLOYER- ASSESSEE TO ITS EMPLOYEE. HE SUBMITTED THAT FRINGE BENEFITS FOR THE PURPOSE OF CHARGE TO FRINGE BENEFIT TAX ARE STATED IN SECTION 15WB OF THE INCOM E TAX ACT. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHER REFERRED TO SUB-SECTION (2) OF SECTION 115WA AND SUBMITTED THAT IT IS A NON-OBSTANTE SECTION AND EVEN IF NO INCOME-TAX IS P AYABLE BY AN EMPLOYER THE FRINGE BENEFIT TAX IS PAYABLE ON THE FRINGE BENEFITS PROVIDED OR D EEMED TO BE PROVIDED BY AN EMPLOYER TO ITS EMPLOYEES. THE LD. DEPARTMENTAL REPRESENTATIVE PLAC ED RELIANCE ON THE FOLLOWING TWO DECISIONS OF THE AUTHORITY OF ADVANCE RULING :- (1) SINGAPORE TOURISM BOARD [2008] 307 ITR 34 (AAR ) (2) POPULATION COUNCIL INC. [2006] 286 ITR 243 (AA R) 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES AND THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE AL SO CONSIDERED THE RELEVANT PROVISIONS I.E. SECTION 115WA 115WB & 115WE OF THE INCOME TAX ACT. WE OBSERVE THAT AN EMPLOYER ASSESSEE IS LIABLE TO PAY FRINGE BENEFIT TAX U/S. 1 15WA OF THE INCOME TAX ACT IN RELATION TO FRINGE BENEFITS PROVIDED BY HIM TO ITS EMPLOYEES. S UB-SECTION (2) OF SECTION 115WA STARTS WITH A NON OBSTANTE CLAUSE AND STATES THAT NOTHWITHSTAND ING THAT NO INCOME-TAX IS PAYABLE BY AN EMPLOYER TO ITS TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT THE TAX ON FRINGE BENEFITS SHALL BE PAYABLE BY SUCH AN EMPLOYE R. THEREFORE AN EMPLOYER IS LIABLE TO PAY FRINGE BENEFIT TAX EVEN WHEN NO INCOME-TAX IS PAYAB LE BY AN EMPLOYER ON HIS TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE I NCOME TAX ACT. THEREFORE THE CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE THAT VALUE OF FRINGE BENEFIT SHOULD BE COMPUTED BY APPLYING RULE 8 OF INCOME TAX RULE HAS NO MERIT AS FRINGE BENEFIT TAX IS NOT PAYABLE ON THE INCOME OF AN ASSESSEE BUT ONLY FRING E BENEFITS PROVIDED BY AN EMPLOYER TO ITS EMPLOYEES. IN VIEW OF THE ABOVE WE AGREE WITH THE LD. DEPARTMENTAL REPRESENTATIVE THAT THE CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE HAS NO MERIT AND ACCORDINGLY ITA NO. 556/KOL/20 10 4 WE UPHOLD THE ORDER OF THE LD. CIT(A) BY REJECTING GROUNDS OF APPEAL TAKEN BY THE ASSESSEE. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE COURT ON 07. 01. 2011. SD/- SD/- [ C. D. RAO ] [ B. R. MITTAL ] ACCOUNTANT MEMBER JUDICIA L MEMBER DATED : 07. 01. 2011. COPY FORWARDED TO THE - 1. APEEJAY TEA LIMITED APEEJAY HOUSE 15 PARK STREET KOLKATA-700 016. 2. DY. COMMISSIONER OF INCOME TAX CC-III 18 RABINDR A SARANI KOLKATA-700 001. 3. CIT(A)- (4) CIT- 5. D.R. I.T.A.T. KOLKATA. [TRUE COPY] BY ORDER DEPUTY/ASSISTANT REGISTRAR (KKC) I.T.A.T. KOLKATA.