DCIT 1(2), MUMBAI v. KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LTD, MUMBAI

ITA 63/MUM/2010 | 2006-2007
Pronouncement Date: 25-11-2011 | Result: Dismissed

Appeal Details

RSA Number 6319914 RSA 2010
Assessee PAN AAACO3983B
Bench Mumbai
Appeal Number ITA 63/MUM/2010
Duration Of Justice 1 year(s) 10 month(s) 19 day(s)
Appellant DCIT 1(2), MUMBAI
Respondent KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 25-11-2011
Date Of Final Hearing 15-11-2011
Next Hearing Date 15-11-2011
Assessment Year 2006-2007
Appeal Filed On 05-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH MUMBAI BEFORE SHRI J. SUDHAKAR REDDY ACCOUNTANT MEMBER A ND SHRI V. DURGA RAO JUDICIAL MEMBER ITA NO. 63/MUM./2010 (ASSESSMENT YEAR : 2006-07 ) DY. COMMISSIONER OF INCOME TAX RANGE-1(3) AAYAKAR BHAVAN 101 M.K. ROAD MUMBAI 400 020 .. APPELLANT V/S KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LTD. 7 TH FLOOR GODREJ COLLSEUM B/H EVERARD NAGAR SION (E) MUMBAI 400 022 PAN AAACO3983B .... RESPONDENT ITA NO. 491/MUM./2010 (ASSESSMENT YEAR : 2006-07 ) KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LTD. 7 TH FLOOR GODREJ COLLSEUM B/H EVERARD NAGAR SION (E) MUMBAI 400 022 PAN AAACO3983B .. APPELLANT V/S DY. COMMISSIONER OF INCOME TAX RANGE-1(3) AAYAKAR BHAVAN 101 M.K. ROAD MUMBAI 400 020 .... RESPONDENT ASSESSEE BY : MR. S.E. DASTUR REVENUE BY : MR. P.K.B. MENON DATE OF HEARING 15.11.2011 DATE OF ORDER 25.11.2011 KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LTD. ITA NO.63 & 491/MUM./2010 2 O R D E R PER J. SUDHAKAR REDDY A.M. THESE CROSS APPEALS ARE DIRECTED AGAINST THE IMPUG NED ORDER DATED 8 TH OCTOBER 2009 PASSED BY THE COMMISSIONER (APPEALS)- II MUMBAI FOR ASSESSMENT YEAR 2006-07 WHEREIN HE HAS PARTLY ALLO WED THE APPEAL AGAINST THE ORDER UNDER SECTION 115WE(3) OF THE INCOME TAX ACT 1961 (FOR SHORT THE ACT ) PASSED BY THE ASSESSING OFFICER. 2. THE ASSESSEE IS A COMPANY AND IS IN THE BUSINESS OF LIFE INSURANCE. IT FILED ITS FRINGE BENEFIT TAX (FOR SHORT FBT ) RETURN UNDER SECTION 115WC ON 29 TH OCTOBER 2006. THE ASSESSING OFFICER PASSED AN ORDE R UNDER SECTION 115WE(3) ASSESSING THE VALUE AT ` 2 88 66 266 AS AGAINST VALUE OF ` 37 71 522 RETURNED BY THE ASSESSEE. THE ASSESSING OFFICER DURING THE SCRUTINY PROCEEDINGS FOUND THAT THE ASSESSEE IN TH E TAX AUDIT REPORT CONTENDED THAT CERTAIN EXPENDITURE LISTED ARE ADMIS SIBLE AS DEDUCTIBLE BUSINESS EXPENSES AND SINCE THERE IS NO PRIVILEGE SERVICES BENEFIT OR IMMUNITY DIRECTLY OR INDIRECTLY TO ITS EMPLOYEES THERE IS NO QUESTION OF COLLECTIVE ENJOYMENT OF BENEFITS BY THE EMPLOYEES A ND THEREFORE THE SAME ARE NOT LIABLE FOR FBT. AFTER QUESTIONING THE ASSES SEE AS TO WHY THESE ARE NOT TO BE BROUGHT TO TAX AND OBTAINING A REPLY THE ASS ESSING OFFICER REFERRED TO THE PROVISIONS OF SECTIONS 115WA(1) AND 115WB(2) A ND ON THE GROUND THAT FRINGE BENEFIT SHALL BE DEEMED TO HAVE BEEN PROVIDE D BY THE EMPLOYER TO THE EMPLOYEE IF THE EMPLOYER INCURRED EXPENDITURE SUCH AS TELEPHONE TRAVEL CONVEYANCE BUSINESS PROMOTION ETC. HELD THAT THE SE EXPENDITURES ARE LIABLE TO TAX FOR FRINGE BENEFITS. THE ADDITIONS MA DE ARE AS FOLLOWS:- VALUE OF FRINGE BENEFIT AS CLAIMED BY THE ASSESSEE 37 71 552 TELEPHONE / FAX 64 90 862 TRAVEL EXP.DOMESTIC & FOREIGN 58 00 471 CONVEYANCE EXPENSES AND CAR HIRE CHARGES 67 69 591 KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LTD. ITA NO.63 & 491/MUM./2010 3 CONFERENCE & MEETING 12 25 030 CLUB MEMBERSHIP 1 03 194 GUEST HOUSE EXPENSES 1 67 128 AGENTS ENTERTAINMENT & REFRESHMENT 6 21 079 ADVERTISEMENT 38 90 359 2 50 94 714 TOTAL VALUE OF FRINGE BENEFIT 2 88 66 266 3. AGGRIEVED THE ASSESSEE CARRIED THE MATTER BEFORE T HE FIRST APPELLATE AUTHORITY. THE COMMISSIONER (APPEALS) GRANTED PART RELIEF. ON THE ISSUE OF EXPENDITURE INCURRED ON OFFICE TELEPHONE AND CONVEY ANCE THE COMMISSIONER (APPEALS) CONCLUDED THAT THE DEEMING PROVISION DOES NOT REFER TO EXPENDITURE WHICH ARE WHOLLY AND NECESSARILY BEING INCURRED FOR BUSINESS OR PROFESSION AND THAT IT ONLY REFERS TO EXPENSES INCU RRED IN THE COURSE OF HIS BUSINESS OR PROFESSION WHICH HAVE AN ELEMENT OF BEN EFIT TO THE EMPLOYEES. HE HELD THAT WHEN THERE IS NO EXPRESS OR IMPLIED BE NEFIT TO THE EMPLOYEE FRINGE BENEFIT TAX IS NOT ATTRACTED. AS FAR AS THE OTHER ADDITIONS ARE CONCERNED THE COMMISSIONER (APPEALS) CONFIRMED THE SAME. IN CASE OF EXPENDITURE ON CONFERENCE AND MEETING THE FIRST AP PELLATE AUTHORITY AGREED WITH THE CONTENTION OF THE ASSESSEE THAT AGENTS AND BROKERS FOR OUTSIDE THE SCOPE OF DEFINITION OF FRINGE BENEFIT CONTAINED IN SECTION 115WB(1) AS THEY ARE NOT EMPLOYEES BUT AS THE ASSESSEE HAD FAILED T O GIVE A BIFURCATION OF THE EXPENDITURE HE UPHELD THE ORDER OF THE ASSESSING O FFICER. AGGRIEVED BOTH THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL B EFORE THE TRIBUNAL. ASSESSEES APPEAL IN ITA NO.491/MUM./2010 4. LEARNED SR. COUNSEL MR. S.E. DASTUR ON BEHALF OF THE ASSESSEE MOVED A PETITION FOR ADMISSION OF ADDITIONAL EVIDEN CE. THE ADDITIONAL EVIDENCE CONSIST OF TRAVEL POLICY AND MOBILE TELEPH ONE EXPENSES POLICY FOLLOWED BY THE ASSESSEE COMPANY. HE SUBMITTED THAT THE ADDITION EVIDENCE GOES TO THE ROOT OF THE MATTER AND SUPPORTS THE CAS E OF THE ASSESSEE THAT NO BENEFIT WHATSOEVER ACCRUES TO THE EMPLOYEE. THE PRO POSITION CANVASSED BY THE SR. COUNSEL ARE (I) FBT CANNOT BE LEVIED UNLE SS THE BENEFITS ARE KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LTD. ITA NO.63 & 491/MUM./2010 4 COLLECTIVE IN NATURE. FOR THIS PROPOSITION HE RELI ED ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN GODREJ PROPERTIES LTD. V/S DCIT (2011) 135 TTJ (MUM.) 426; (II) WHEN THERE IS NO BENEFIT TO THE EM PLOYEE FBT CANNOT BE LEVIED; AND (III) FBT CANNOT BE LEVIED IN RESPECT O F EXPENDITURE INCURRED IN CONNECTION WITH PERSONS WHO ARE NOT EMPLOYEES OF TH E ASSESSEE. HE SUBMITTED THAT THE ADDITIONAL EVIDENCE HAS TO BE AD MITTED AND THE ISSUE IS REQUIRED TO BE RESTORED TO THE FILE OF ASSESSING OF FICER FOR VERIFICATION AS TO WHETHER ANY BENEFIT WHATSOEVER RESULTED TO THE EMPL OYEES IN THE LIGHT OF THE COMPANYS POLICY ON TRAVELLING AND MOBILE TELEPHONE . 5. ON THE ISSUE OF CONFERENCE EXPENSES HE SUBMITTED T HAT THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) SHOULD HAVE A SKED FOR THE SEGREGATION OF EXPENDITURE BETWEEN THE EMPLOYEES AND NON-EMPLOY EES AND ACCORDINGLY DECIDED THE MATTER. 6. ON THE ISSUE OF CLUB EXPENSES HE SUBMITTED THAT PA YMENTS WERE MADE TO LIFE INSURANCE MARKETING AND RESEARCH ASSOCIATIO N I.E. LIMRA AND ACTUARIAL SOCIETY OF INDIA ARE NOT PAYMENTS MADE F OR CLUB MEMBERSHIP AND CANNOT BE SUBJECT TO FBT. 7. LEARNED DEPARTMENTAL REPRESENTATIVE MR. P.K.B. MEN ON ON BEHALF OF THE REVENUE SUBMITTED THAT THE ADDITIONAL EVIDENCE MAY BE ADMITTED AS IT GOES TO THE ROOT OF THE MATTER AND THE ISSUE MAY BE RESTORED TO THE FILE OF ASSESSING OFFICER FOR VERIFICATION. 8. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON A PERUSAL OF THE P APERS ON RECORD WE ADMIT THE ADDITIONAL EVIDENCE WHICH ARE (I) DOMES TIC TRAVEL POLICY FOR BUSINESS TOURS TRAINING AND CONFERENCE AND (II) PO LICY ON MOBILE TELEPHONE EXPENSES. WE FIND THAT MUMBAI BENCH OF THE TRIBUNAL IN GODREJ PROPERTIES LTD. (SUPRA) HELD THAT FBT IS ATTRACTED ONLY IN CAS ES WHERE BENEFITS ARE ENJOYED COLLECTIVELY BY THE EMPLOYEES AND CANNOT BE ATTRIBUTED TO AN INDIVIDUAL EMPLOYEE. KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LTD. ITA NO.63 & 491/MUM./2010 5 9. FBT AS DEFINED IN SECTION 115WB(1) OF THE ACT REA DS AS FOLLOWS:- SECTION 115WB - FRINGE BENEFITS (1) FOR THE PURPOSES OF THIS CHAPTER 'FRINGE BENEF ITS' MEANS ANY CONSIDERATION FOR EMPLOYMENT PROVIDED BY WAY OF (A) ANY PRIVILEGE SERVICE FACILITY OR AMENITY DI RECTLY OR INDIRECTLY PROVIDED BY AN EMPLOYER WHETHER BY WAY OF REIMBURSEMENT OR OTHERWISE TO HIS EMPLOYEES (INCLUDING FORMER EMPLOYEE OR EMPLOYEES); (B) ANY FREE OR CONCESSIONAL TICKET PROVIDED BY THE EMPLOYER FOR PRIVATE JOURNEYS OF HIS EMPLOYEES OR THEIR FAMILY MEMBERS; 1318XA. (C) ANY CONTRIBUTION BY THE EMPLOYER TO AN APPROVED SUPERANNUATION FUND FOR 1318XB EMPLOYEES; 10. SUB-SECTION (2) OF SECTION 115WB IS A DEEMING PROVI SION WHERE CERTAIN EXPENDITURES INCURRED BY THE EMPLOYEE FRINGE BENEF IT ARE DEEMED TO HAVE BEEN PROVIDED BY THE EMPLOYER TO HIS EMPLOYEE. IN O UR OPINION SUB-SECTION (1) OF SECTION 115WB WHICH DEFINES FRINGE BENEFIT UNDER CHAPTER-XII-H CONTROL SUB-SECTION (2) AND ANY EXPENDITURE INCURRE D BY AN EMPLOYER IN THE COURSE OF HIS BUSINESS OR PROFESSION WHICH IS NOT A CONSIDERATION FOR EMPLOYMENT CANNOT BE CONSIDERED AS FRINGE BENEFIT . THUS THE DEEMING PROVISIONS OF SUB-SECTION 2 OF SECTION 115WB APPLI ES ONLY WHEN THE EXPENDITURE IS IN THE NATURE OF CONSIDERED FOR EMPL OYMENT. THUS WHILE RESTORING THE ISSUE BACK TO THE FILE OF ASSESSING O FFICER FOR ADJUDICATION AFRESH WE DIRECT THE ASSESSING OFFICER TO APPLY TH E PROPOSITION OF LAW AS INTERPRETED BY US WHILE DETERMINING THE VALUE OF FR INGE BENEFIT. ON THE ISSUE OF EXPENDITURE INCURRED ON CONFERENCE AND MEETINGS THE ASSESSING OFFICER SHALL CONSIDER BIFURCATION SUBMITTED TO HIM WITH RE SPECT TO THE EXPENDITURE INCURRED ON THE AGENTS AND BROKERS AND PASS APPROPR IATE ORDERS. FRINGE BENEFIT CANNOT ARISE WHEN EXPENDITURE IS INCURRED ON PERSONS WHO ARE NOT EMPLOYEES. ON THE ISSUE OF CLUB MEMBERSHIP FEE THE PAYMENTS MADE TO LIMRA AND ACTUARIAL SOCIETY OF INDIA ARE TO BE EXC LUDED AS THEY ARE NOT PAYMENTS TO CLUBS. WITH THESE OBSERVATIONS WE REST ORE THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR ADJUDICATION AFRESH. KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LTD. ITA NO.63 & 491/MUM./2010 6 11. IN THE RESULT ASSESSEES APPEAL IS ALLOWED FOR STA TISTICAL PURPOSES. REVENUES APPEAL IN ITA NO.63/MUM./2010 GROUND NO.1 READS AS FOLLOWS:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE FRINGE BEN EFIT TAX LEVIED ON TELEPHONE / FAX EXPENSES IN RESPECT OF TELEPHONE S INSTALLED IN THE OFFICE PREMISES IGNORING THE PROVISIONS OF SECT ION 115WC(C) OF THE ACT. 12. THE COMMISSIONER (APPEALS) HELD THAT THE EXPENDITUR E INCURRED ON OFFICE TELEPHONES IS NOT CONSIDERED FOR EMPLOYMENT. WE UPHOLD THE CONCLUSION OF THE COMMISSIONER (APPEALS) VIDE PARA -13 OF HIS ORDER WHICH IS REPRODUCED BELOW HOLDING THAT NO BENEFIT FLOWS TO THE EMPLOYEE BY REASON OF HIS EMPLOYMENT AS FAR AS EXPENDITURE ON OFFICE T ELEPHONE IS CONCERNED. 13. IN THE LIGHT OF THE ABOVE BACKGROUND I AM CONST RAINED TO CONCLUDE EVEN WITHIN THE FRAMEWORK OF DEEMING PROV ISIONS THAT: 1. THE PHRASE CONSIDERATION FOR EMPLOYMENT OCCURR ING IN SUBSECTION 1 OF SECTION 11 5WB HAS NOT BEEN SUPERSE DED BY THE DEEMING PROVISION CONTAINED IN SUB-SECTION 2 OF THE SAID SECTION (EXCEPT WHERE SPECIFICALLY PROVIDED AS IN CLAUSE B OF SUB-SECTION 2). 2. A BENEFIT TO EMPLOYEES COLLECTIVE OR MAY BE IND IVIDUAL MUST NECESSARILY BE ASSOCIATED OR BE INHERENT FOR THE EX PENDITURE TO BE TREATED AS FRINGE BENEFIT. IN THE ABSENCE OF ANY IN HERENT BENEFIT TO EMPLOYEES EVEN UNDER THE DEEMING PROVISIONS FRING E BENEFIT CANNOT BE ASSUMED. 3. DEEMING PROVISIONS CONTAINED IN SUB-SECTION 2 OF SECTION 115 WB CANNOT BE INVOKED MECHANICALLY AND IN RESPECT O F EVERY ITEM OF EXPENDITURE IT IS NECESSARY FIRST TO ASSOCIATE THE BENEFIT TO EMPLOYEES ARISING OUT OF THEIR EMPLOYMENT BEFORE THE EXPENDIT URE CAN BE CATEGORIZED TO BE RESULTING INTO FRINGE BENEFIT TH E EXCEPTION OF CLAUSE B OF SUB-SECTION 2 OF SECTION 115 WB NOTWITHSTANDIN G. ONE CAN NOT. BY THE NOMENCLATURE ALONE CLASSIFY AN EXPENDITURE TO RESULT INTO FRINGE BENEFIT. CONSEQUENTLY WE DISMISS GROUND NO.1 RAISED BY TH E REVENUE. 13. GROUND NO.2 READS AS FOLLOWS:- KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LTD. ITA NO.63 & 491/MUM./2010 7 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE FRINGE BEN EFIT TAX LEVIED ON THE CONVEYANCE INCLUDING CAR HIRE CHARGES IGNORING THE PROVISIONS OF SECTION 115WC(C) OF THE ACT. 14. THE COMMISSIONER (APPEALS) HELD THAT THE EXPENDITUR E UNDER CONSIDERATION ARE DAY-TO-DAY LOCAL TRAVELLING EXPEN DITURE AND TAXI HIRE CHARGES FOR MOVEMENT OF EMPLOYEES DURING THEIR WORK ING HOURS. IT IS NOT CONVEYANCE EXPENSES PAID TO THE EMPLOYEE FOR TRAVEL BETWEEN HIS RESIDENCE AND OFFICE. UNDER THESE CIRCUMSTANCES WE UPHOLD TH E FINDINGS OF THE COMMISSIONER (APPEALS) THAT THE PAYMENT IS NOT CONS IDERED FOR EMPLOYMENT. THUS WE DISMISS GROUND NO.2 RAISED BY THE REVENUE . 15. IN THE RESULT REVENUES APPEAL IS DISMISSED. 16. TO SUM UP ASSESSEES APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH NOVEMBER 2011 SD/- V. DURGA RAO JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI DATED: 25 TH NOVEMBER 2011 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A) MUMBAI CONCERNED; (4) THE CIT MUMBAI CITY CONCERNED; (5) THE DR A BENCH ITAT MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT MUMBAI BENCHES MUMBAI