By TIOL News Service

BANGALORE, JUNE 05, 2018: THE ISSUE IS - Whether AO can resort to rectification of intimation issued by him u/s 115WE(1), in the garb of reviewing and making additions to the value of fringe benefits tax in the hands of employer. NO IS THE ANSWER.

Facts of the case:

The assessee company, engaged in the business of construction, had filed a return of fringe benefits. The said return was accepted by the AO u/s 115WE(1), who thereafter passed an order u/s 154 and determined the value of fringe benefits by adding to the fringe benefit declared by the assessee, the value of staff welfare expenses and travelling and conveyance expenses. The assessee therefore approached the CIT(A) contending that the proceedings u/s 154 were not sustainable as there was no error apparent on the face of the record. Accepting the same, the CIT(A) cancelled the order passed u/s 154.

Tribunal held that,

++ it is seen that the AO has not set out in the order passed by him u/s 154 as to under which clause of explanation (a) to Sec.115WE(1) does the rectification done by him is applicable. The addition made to the value of fringe benefit by the AO, comprises entire staff welfare and conveyance expenses. The AO may be of the view that the said expenses incurred by assessee as an employer was fringe benefit and needed to be added to the value of fringe benefit, but for adding the expenses to the value of fringe benefit he should have found the information from the return itself;

++ it is admitted that in the proceedings u/s.154, the AO could not point out as to from what information in the return of income did he come to a conclusion that staff welfare and travelling and conveyance expense has to be added to the value of fringe benefit. Apparently this information was obtained by the AO not from the return of value of fringe benefit filed by the Assessee but from some other source, may be from the profit and loss account. Even in such a situation, he was not entitled to add the entire expenses and only a portion of such expenses can be considered as providing fringe benefit to employee as per the provisions of clause (E) and (F) of Sec.115WB(2). What the AO could not do when issuing an intimation u/s 115WE(1) cannot be done by him in proceedings u/s.154 for rectifying the intimation u/s.115WE(1). In the given circumstances, the CIT(A) was right in quashing the order u/s.154 on the ground that the rectification sought to be made by the AO did not fall within the ambit of powers u/s.154.

(See 2018-TIOL-789-ITAT-BANG)

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