Fringe Benefits Tax is Allowable as Deduction in Computing Book Profit as per Section 115JB of Income Tax Act: ITAT [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that according to CBDT vide Circular No. 8/2005, the fringe benefit tax is an allowable deduction in computing book profit as per Section 115JB of the Income Tax Act, thus restored the issue involved to the file of the Commissioner of Income Tax Act [CIT(A)].

The brief facts of the case are that the assessee SICPA India Private Limited  filed return of income declaring income of Rs.17,65,38,023/- under normal provisions of the Act and book profit under Section 115JB of the Income Tax Act Rs.56,41,92,385/-. The case was selected for scrutiny and assessment order came to be passed under Section143(3) of the Income Tax Act.

The Assessing Officer (AO) concluded that, the amount of provision for fringe benefit tax was not debited to P & L(Profit & Loss) account as an expense and net profit before tax was taken in order to compute the book profits under Section 115JB of the Income Tax Act, hence opined held that deduction for provision of fringe benefit tax is not allowable and also held that such claim is not in consonance with adjustments mentioned in Explanation 1 to 5 Section 115JB of the Income Tax Act.

Aggrieved by the order the assessee filed an appeal before the CIT(A) which uphold the decision of AO. Further aggrieved the assessee filed an appeal before the Tribunal.

The Authorised Representative the assessee Anuj Tiwari submitted that the said issue has been decided in Assessee’s favour for Assessment Year 2007-08 by the CIT(A) which has not been contested by the Department.  Apart from this,  the CBDT Circular No. 8/2005 clearly states that Fringe Benefit Tax is an allowable deduction in computing book profit as per Section 115JB of the Income Tax Act.

Departmental Representative Anuj Garg relied on the findings and conclusion of the Lower Authorities.

The Bench comprising of Shamim Yahya, Accountant Member and Yogesh Kumar U.S., Judicial Member observed that in computing the book profit under Section 115JB of the Income Tax Act the assessee considered the net profit before tax as per audited financial statement and separately claimed deduction for fringe benefit tax of Rs. INR. 8,00,000. The A.O. held that the deduction for provision for fringe benefit tax is not allowable and the claim of the assessee is not in consonance with adjustment mentioned in Explanation 1 to Section 115JB of the Act.

The specific plea of the assessee before the CIT(A) regarding applicability of the CBDT vide Circular No. 8/2005, wherein it is clarified that fringe benefit tax is an allowable deduction in computing book profit as per Section 115JB of the Income Tax Act.

The Tribunal found that the CIT (A) has not considered the Circular of the CBDT, therefore, it restored the issue involved to the file of the CIT(A) to consider the CBDT Circular mentioned above and decide the issue afresh in accordance with law.

Thus the ground raised by the assessee was allowed for statistical purpose.

To Read the full text of the Order CLICK HERE

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