The Delhi Bench of the Income Tax Appellate Tribunal ( ITAT ) ruled in favor of the assessee by removing the addition related to transport services or medical expenses reimbursement provided to non-employees, thereby exempting them from Fringe Benefit Tax ( FBT ) liability.
The appeal pertained to FBT against the order issued by the Assessing Officer (AO) under Section 115WE(3) of the Income Tax Act, 1961.
When filing the return, the assessee computed the value of FBT at Rs. 1,13,86,653/-, claiming certain expenses as exempt from FBT. However, the AO added Rs. 27,31,879/- to the returned income of the assessee as the value of FBT on these exempt expenses.
The Commissioner of Income Tax ( Appeals ) (CIT (A)) limited the disallowance to Rs. 5,56,161/-, being the value of FBT computed at 20% of Rs. 27,80,802/-.
Upon review, the two-member bench of the tribunal, comprising C.N.Prasad ( Judicial member ) and Dr.B.R.R.Kumar ( Accountant member ), determined that the expenses which costs 27,31,879 ,where the AO added, were incurred for providing transport services in the remote areas of Orissa where public transport connectivity was lacking. Similarly, expenses for taxi hire were for non-employees of the assessee company, and an amount of Rs. 25,500/- was spent on tour & travel, not conveyance.
Additionally, vehicle hire charges in the Sponge Iron division were for guests, not employees. These expenses also included medical expenses reimbursements of Rs. 4.65 lakhs and refreshments of Rs. 2.87 lakhs.
Considering CBDT Circular No. 8/2005 dated 29.08.2005 and judgments of Coordinate Bench of the ITAT Bangalore in the case of Wipro Ltd. regarding medical expenses, and the order of the Coordinate Bench of the ITAT Pune in the case of Brihan Maharashtra Sugar Syndicate Ltd. concerning loans given to employees, the tribunal concluded that no further addition other than the amount of Rs. 113,86,653/- was liable for computation regarding FBT liability.
Consequently, the appeal of the assessee was allowed.
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