By TIOL News Service

KOLKATA, JAN 01, 2018: THE issue before the Bench is - Whether credit card expenditure incurred by the assessee on behalf of the employer company, included in the FBT return filed by the company, can also be taxed in the hand of the assessee as perquisite. The ITAT verdict is NO.

Facts of the case

The Assessee is an individual and a wholetime director of M/s Govind Steel Co. Ltd. He had to travel abroad for the export business of the company and the company had authorized the Assessee to incur expenditure for and on behalf of the company through credit cards and otherwise. During the year under consideration, the Assessee travelled to different countries like USA, South Africa, Germany and incurred several expenditures for the purposes of the business of the said company. During those visits, the Assessee also purchased some electronic items like music systems of very insignificant amounts and had gifted the same to foreign buyers to promote the sales of the said company. Thereafter, M/s Govind Steel Co. Ltd paid all those amounts by way of reimbursement directly to credit card bankers. However, the AO alleged that those expenditures were of personal nature and requires to be added as perquisite in the hands of the Assessee as the employer had met the personal obligation of the Assessee and accordingly added 50% of the total expenditure on estimate basis. On appeal, the CIT(A) partly allowed the appeal and restricted the addition upto 10%.

After hearing the parties, the Tribunal held that,

++ the expenditure incurred by the assessee employee in his credit card during foreign travel visits , for and on behalf of the company M/s Govind Steel Co. Ltd , was not disputed by the revenue. In fact there was a specific finding in this regard in the order of the CIT(A). It was not in dispute that the assessee employee had not claimed any expenditure as deduction which were incurred by him through credit card during his foreign travel. He incurred expenses through credit cards and the same were reimbursed to him by the company M/s Govind Steel Co. Ltd. Moreover, the said expenses were included in the FBT return and hence by placing reliance on the Circular No. 8/2005dated 29.8.2005 , there cannot be any element of perquisite to be taxed in the hands of the assessee employee. In any case, if at all, there was no doubt in the mind of the revenue with regard to the subject mentioned expenses, the revenue could examine the same only in the hands of the company M/s Govind Steel Co. Ltd and not in the hands of the assessee employee. It was found that both the authorities below had grossly erred in making some addition towards the same on an estimated basis.

(See 2018-TIOL-07-ITAT-KOL)