In the first ever judgement on the fringe benefit tax, the Supreme Court has held that an Australian company R&B Falcon (A) Pty Ltd, a service provider in the offshore oil drilling businesses, spending money on transporting people to manage rigs in waters off the Indian coast is not liable to pay FBT.

The controversial tax, which was introduced in the Finance Act 2005 by Finance Minister P Chidambaram, was a levy on the employer in relation to fringe benefits and perquisites enjoyed by employees, in cases where it was not possible to identify the individual tax base.

The Act came into force with effect from April 1, 2006. The object for imposition of the said tax was to bring about horizontal equity and not a vertical equity.

While setting aside the Authority for Advance Ruling (AAR) decision, which held FBT can be levied on the transport expenses incurred by the company, a bench headed by Justice S B Sinha held that R&B Falcon was a not liable to pay FBT on the transportation cost incurred by it in providing transport facility for movement of offshore employees from their residence in home country to the place of work and back.