MUNDRA PORT AND SPECIAL ECONOMIC LTD. Vs. ADDITIONAL COMMISSIONER
LAWS(IT)-2014-5-39
INCOME TAX APPELLATE TRIBUNAL
Decided on May 09,2014

Mundra Port And Special Economic Ltd. Appellant
VERSUS
ADDITIONAL COMMISSIONER Respondents

JUDGEMENT

ANIL CHATURVEDI, J. - (1.) THIS appeal is filed by the Assessee against the order of CIT(A) -VIII, Ahmedabad dated 22.10.2010 for A.Y. 2007 -08.
(2.) THE relevant facts as culled out from the material on record are as under.
(3.) ASSESSEE is a company stated to be engaged in the business of development and operation of port and SEZ. Assessee filed its return of income for A.Y. 07 -08 on 29.12.2007 declaring total Nil income after setting off of carry forward losses and depreciation. The case was selected for scrutiny and thereafter the assessment of Fringe Benefit was framed under section 115 WE(3) of the Act vide order 30.12.2009 and the total Fringe Benefit was computed at Rs. 2,54,91,650/ -. Aggrieved by the order of A.O, Assessee carried the matter before CIT(A). CIT(A) vide order dated 22.10.2010 dismissed the appeal of the Assessee. Aggrieved by the order of CIT(A), the Assessee is now in appeal before us and has raised the following grounds: - 1. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in proceeding on the assumption (made vide para 2 of the Appellate Order) that even as the appellant had taken six grounds concerning the levy of Fringe Benefit Tax in respect of Sales Promotion Expenditure, the common argument in all those grounds was only in respect of levy of Fringe Benefit Tax in respect of business expenditure which did not at all result into any benefit to the appellant's employees. The learned CIT(A) ought to have appreciated that even if the grounds taken by the appellant in its appeal before him were to be reduced to 'effective' grounds, it was incumbent upon him to render his appellate decision at least on the following issues: a) On the appellant's challenge to the validity of the assessment order impugned before him, inter alia, on the ground that the relevant provisions in respect of the Fringe Benefit Tax were unconstitutional (vide Grounds No. 1 and 2 of its appeal before him); b) On the appellant's challenge to the levy of Fringe Benefit Tax of Rs. 15,23,231 on the value of fringe benefits of Rs.45,25,345 (corresponding to expenditure of Rs.90,50,068 which, in the contention of the appellant, was not liable to Fringe Benefit Tax) vide the assessment order impugned before him; c) On the appellant's challenge to the levy of interest presumably amounting to Rs. 3,11,693 under Section 115WJ and/or Section 115WK of the Income -tax Act, 1961 (details thereof not having been provided either in the assessment order or in the Notice of Demand) (vide Ground No. 7 of its appeal before him); d) On the appellant's plea, made vide Ground No. 6 of its appeal before him, without prejudice to the foregoing issues, to direct the learned Assessing Officer not to initiate any recovery proceedings for the Fringe Benefit Tax of Rs. 15,23,231 which the appellant had deposited in a separate bank account in conformity with the decision of the Gujarat High Court in the Writ Petition filed by the Gujarat Chamber of Commerce and Industries and Others; The learned CIT(A) has grossly erred in not rendering his decision on the issues at items (a), (c) and (d) above. 2. The appellant prays that unless this Hon'ble Tribunal may deem it appropriate to keep the appellant's present appeal before it pending, till the Hon'ble Gujarat High Court had rendered its final decision in the Writ Petition, for being disposed of in accordance with such final decision of the Hon'ble Gujarat High Court, it may be pleased to consider and render its decision on the issues at items (a), (c) and (d) referred to in the preceding Ground on which the learned CIT(A) has not rendered his appellate decision and on the issue at item (b) which the learned CIT(a) has decided against the appellant. 3. The appellant craves leave to add, amend and/or alter the ground or grounds of appeal either before or at the time of hearing of the appeal. Though the Assessee has raised several grounds, the only effective ground is with respect to levy of Fringe Benefit Tax in respect of Sales Promotion Expenditure. During the course of assessment proceedings, A.O noticed that Assessee had incurred Sales Promotion Expenditure. He also noticed that of the total Fringe Benefit Tax (FBT) of Rs. 90,50,688/ - on the sales promotion expenses, Assessee had paid tax of Rs. 76,37,779/ - on benefits which were related to the employees and taxes of Rs. 15,23,231/ - on non - employee related benefits were parked in the form of fixed deposit with the State Bank of Saurashtra. Assessee had claimed that the expenses made under the head "Gifts" were actually in the nature of Sales Promotion and did not fell within the ambit of FBT and fell within the ambit of the writ petition filed by Chamber and Commerce Industries wherein it was agitated that the payments related to Sales Promotion does not fall within the ambit of FBT. The A.O did not accept the contentions of the Assessee. He was of the view that the nature of "Gifts" are such that it is not possible to categorize then completely with Sales Promotion. He accordingly directed the Assessee to pay the entire amount of Rs. 15,23,231/ - along with interest as per the computation of Fringe Benefit Tax. Aggrieved by the order of A.O, Assessee carried the matter before CIT(A). CIT(A) confirmed the order of A.O by holding as under: - 2.3 I have carefully considered the assessment order as well as submissions made by the appellant. The provision of Section 115WB(2) is explicitly clear that if assessee has made any payment towards expenditure mentioned in Clause - A to Clause - Q, assessee is liable to make payment of FBT. The value of fringe benefit is to be worked out by applying a percentage given in Section 115WC. Both the Sections do not give any discretion that FBT is required to be computed only on those expenditure which are directly related to or which are for the benefit of employees. As provisions of Fringe benefit taxes are very clear, the submission made by appellant for non -levy of FBT on sales promotion expenditure cannot be accepted, as there is no scope of adjustment in Section and all the expenditure debited to profit & loss account and covered by those provisions are subject to FBT and Assessing Officer has rightly considered sales promotion expenditure while determining FBT in case of appellant. The decision of Hon'ble Gujarat High Court does not put any stay on assessment or appellate proceedings and in such order it is only stated that till the disposal of the final appeal by the High Court, assessee can deposit FBT to separate bank account for expenditure which are not for the benefit of employees. Hence, decision relied upon by appellant in present case is not applicable. Considering this, addition to the value of fringe benefits made by Assessing Officer is confirmed.;


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