By TIOL News Service

MUMBAI, APRIL 20, 2018: THE issue before the Bench in this case was whether expenses incurred by a company purely on business purposes, and not being incurred on its employees, would attract Fringe Benefit Tax u/s 115WA. NO is the verdict.

Facts of the case

THE assessee company is a leading manufacturer & trader of pharmaceutical products. During the relevant AY, it filed returns for Fringe Benefit Tax (FBT), declaring an income of about Rs 12.4 crores. On assessment the AO enhanced such income to about Rs 26.81 crores, having included expenses incurred for business purposes, as chargeable to FBT. The AO also held that the expenditure need not arise out of employee-employer relationship. The AO also relied on the provisions in Section 115WB(2) and held that once expenditure is incurred as specified herein, then the same would be subject to FBT u/s 115WA. On appeal, the CIT(A) upheld the view taken by the AO. Subsequently, the Tribunal allowed the assessee's appeal and held that the expenditure was incurred for business purposes & were not employee-related. It relied on the High Courts decision in TT Motors Ltd. v/s Assistant Commissioner of Income Tax wherein it was held that payments not being employee-related (made to third parties), they could not be subject to FBT u/s 115WA of the Act. Hence the Revenue's appeal.

On hearing the matter, the High Court held that,

++ the Tribunal has rendered a finding of fact that the expenditure has been incurred to make payment to third parties. Inasmuch as, this payment nowhere arises out of the employee-employer relationship. It is a business expenditure, pure and simple as also accepted by the AO in the Assessment Order dated 20th December, 2008 (statement annexed thereto). It is not even the case of the Revenue that payments were made to the employees and not their parties. In view of the above as it is accepted by the Revenue that the issue in the context of the present facts, stands concluded by the decisions of this Court in Tata Consultancy Services and Lionbridge Technologies Pvt. Ltd., the question as framed does not give rise to any substantial question of law.

(See 2018-TIOL-745-HC-MUM-IT)