- (1.) The subject matter of challenge in this appeal is a judgment and order dated June 26, 2013, by which the learned Income tax Appellate Tribunal rejected the contention of the assessee that rule 8 of the Income-tax Rules, 1962 has any application in arriving at a valuation of the fringe benefits under Chapter XII-H. The learned Tribunal, as a matter of fact in rejecting the contention of the assessee, relied on an earlier judgment in the case of the assessee itself in I.T.A. No. 557/Kol/2010 wherein the following view was expressed: "7. We have carefully considered the submissions of the learned representatives of the parties and the orders of the authorities below. We have also considered the relevant provisions, i.e., sections 115WA, 115WB and 115WE of the Income-tax Act. We observe that an employer assessee is liable to pay fringe benefit tax under section 115WA of the Income-tax Act in relation to fringe benefits provided by him to its employees, sub-section (2) of section 115WA starts with a non obstante clause and states that notwithstanding that no income-tax is payable by an employer to its total income computed in accordance with the provisions of the Act, the tax on fringe benefits shall be payable by such an employer. Therefore, an employer is liable to pay fringe benefit tax even when no income-tax is payable by an employer on his total income computed in accordance with the provisions of the Income-tax Act. Therefore, the contention of the learned authorised representative for the assessee that the value of fringe benefit should be computed by applying rule 8 of the Income-tax Rules has no merit as fringe benefit tax is not payable on the income of the assessee but only fringe benefits provided by an employer to its employees. In view of the above, we agree with the learned Departmental representative that the contention of the learned authorised representative for the assessee has no merit and, accordingly, we uphold the order of the learned Commissioner of Income-tax (Appeals) by rejecting the grounds of appeal taken by the assessee." Aggrieved by the aforesaid order of the learned Tribunal the present appeal has been preferred. The sole question for consideration is "whether rule 8 is applicable for the purpose of computing valuation of the fringe benefits for the purpose of Chapter XII-H of the Income-tax Act?" Rule 8 provides as follows: "8. (1) Income derived from the sale of tea grown and manufactured by the seller in India shall be computed as if it were income derived from business, and forty per cent of such income shall be deemed to be income liable to tax. (2) In computing such income an allowance shall be made in respect of the cost of planting bushes in replacement of bushes that have died or become permanently useless in an area already planted, if such area has not previously been abandoned, and for the purpose of determining such cost, no deduction shall be made in respect of the amount of subsidy which, under the provisions of clause (30) of section 10, is not includible in the total income.
(2.) Mr. Majumdar, learned advocate appearing in support of the appeal, submitted that fringe benefit tax is an additional income-tax as would appear from section 115WA. Therefore, the rules applicable for the purpose of assessing income-tax would also be applicable for the purpose of arriving at a valuation of the fringe benefits. Before tax can be assessed, taxable income has to be arrived at. Similarly, before fringe benefit tax can be assessed the valuation of the fringe benefits has to be arrived at. When the fringe benefit tax is an additional income-tax, there can hardly be any doubt, according to him, that rule 8 shall apply with full force. He, in support of his submission, drew our attention to a judgment of the apex court in the case of CIT v. Doom Dooma India Ltd., 2009 310 ITR 392 wherein the question cropped up as to whether the assessee was entitled to apply rule 8 for the purpose of claiming depreciation. The Supreme Court answered the question as follows (page 399): "In our view, in cases where rule 8 applies, the income which is brought to tax as 'business income' is only 40 per cent of the composite income and, consequently, proportionate depreciation is required to be taken into account because that is the depreciation 'actually allowed'. Hence, we find no merit in the civil appeals filed by the Department.
(3.) The next judgment cited by Mr. Majumdar in the case of Jayshree Tea and Industries Ltd. v. Union of India, 2006 285 ITR 506 wherein a Division Bench of this court held that rule 8 was applicable to the additional income-tax payable under section 115-O. The Division Bench clarified its opinion by the following illustration (page 513): "If a tea company has a net income of Rs. 100, Rs. 40 would be liable to income-tax at the prescribed rate and the assessee would be assessed accordingly. By virtue of section 115-O if the company declares Rs. 50 for distribution amongst the shareholders it would have a proportionate liability. It is true that in case of company decides to distribute a part of the income it would be impossible to find out whether that part of the income included the whole of the agricultural income or a part of it. This exercise now, in our view, is not at all relevant in view of the provision of rule 8 of the Income-tax Rules. In such event the company would be charged on Rs. 40 for income-tax and on Rs. 50 for additional income-tax on proportionate basis.";