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Punj Lloyd Ltd. 17-18, Nehru Place New Delhi Vs. Addl. CIT Range 14, New Delhi.
July, 31st 2015
                    IN THE INCOME TAX APPELLATE TRIBUNAL
                        DELHI BENCHES : "F" NEW DELHI

                   BEFORE SHRI G.C. GUPTA, VICE PRESIDENT
                 AND SHRI J.SUDHAKAR REDDY ACCOUNTANT MEMBER

                              ITA Nos: 1009,1010/Del/2011
                                    AY : - 2007-08

             Punj Lloyd Ltd.       vs.   Addl. CIT
             17-18,                      Range ­ 14,
             Nehru Place                 New Delhi.
             New Delhi
             (PAN AAACP0305Q)

                (Appellant)                            (Respondent)

                       Appellant by      : Shri Rupesh Jain, Advocate
                       Respondent by     :Shri Vikram Sahay, Sr. DR

                     Date of Hearing     :08.7.2015
               Date of pronouncement     :29.07.2015


                                  ORDER

PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER




         These are appeals filed by the assessee, directed against the order passed

by the CIT(A) XVII, New Delhi dated 19.11.2010 for the assessment year 2007-08,

wherein he confirmed the levy of "fringe benefit tax" u/s 115WE of the Income Tax

Act 1961 vide order dated 24.12.2009 and has also confirmed the rejection of the

application filed by the assessee u/s 154 of the Act. The facts of the case and the

relevant sections are brought out by the AO from page 2 to 4 of the order which is

extracted for ready reference:-




      "VALUE OF FRlNGE BENEFITS ON ACCOUNT OF EXPENSES RELATED TO AIRCRAFTS
                                                       ITA Nos.1009, 1010/Del/2011
                                                      Punj Lloyd Ltd. vs ACIT

In the original return, the value of fringe benefits was declared at Rs.11,29,71,006/-
which was subsequently" revised by filing revised return to Rs.5,42,95,190/-. Thus, in
revised return, the value of fringe benefits were reduced by an amount of
Rs.5,86,75,815/-. On examining these returns, it was noted" that the above
difference is on account "of different value of fringe benefits adopted for repair,
running (including fuel) and maintenance of air craft and the amount of depreciation
thereon. In the original return, the assessee adopted the value of fringe benefits @
20% on total expenditure of Rs.29,33,79,076/- incurred for repair, running (including
fuel) and maintenance of aircraft and the amount of depreciation thereon. Thus, this
value was taken at Rs.5,86,75,815/-. In the revised return, the assessee adopted the
above value at Rs. Nil. This caused the difference of Rs. 5,86,75,815/- in value of
fringe benefits in the return. The assessee was asked to provide the reason for
revising the value of fringe benefits. Vide letter dated 23.10.09, the assessee
submitted as under: "

"In the original return tiled, the value of Rs. 5,86,75,81S/- in respect of repair; running
and maintenance expenses of aircrafts had been- wrongly included in the , ) total
value of Rs. 1 1,29,71,006/- but the same should be liable for FET at NIL rate in view
of section 115WC(2)(1) of the Income Tax Act, 1961 since the assessee company, in
addition of other businesses activities, is also in the business of carriage of
passengers or goods" by aircraft However, the expenses were treated as part of
fringe benefit when the return was originally filed. Subsequently this was noticed and
the return was revised to rectify. Assessee company has been granted license for
operating aircrafts from Airports Authority of India (Copy of the license is being
enclosed herewith.) In pursuance of this license, the company is operating aircraft in
charter basis for carrying passengers, in addition to usage for companies business
purposes. Company utiJizes operating and maintenance services from different
service providers in this business. All the expenses in connection with providing
aircraft on charter hire basis to third parties is borne by the company ddirect1y or by
way of reimbursement of expenses incurred by the service providers. Assessee
Company gives aircraft on charter/hire basis to third parties either directly or through
services providers. Evidence in respect of operation of aircraft on charter hire basis is
enclosed herewith.

Break-up the repair, running and maintenance expenses of aircraft is as follows:







                                                                                              2
                                                             ITA Nos.1009, 1010/Del/2011
                                                            Punj Lloyd Ltd. vs ACIT



PARTICULARS                   TOTAL          RATE                FBT     VALU
                              AMOUNT                             INCLUDE   E
 Expenses           debited   157641917/- 20%                    31528383
 to profit and loss
 account in respect
 of repair, running
. and maintenance
 of aircraft
 Depreciation          on      160358306/-- 20%                  32071661
 Aircraft
 TOTAL EXPENSES                318000223/-                       63600044
 Income from Hiring            24621147/- 20%                   4924229
 of Aircraft
 Net         Expen es          293379076/-                       58675815



       In view of the fact that the assessee company is also engaged in the business of
       carriage of passengers or goods by aircraft it is liable to FBT at NIL rate, in respect of
       expenses incurred on repair, running and maintenance of the aircraft,. Revised return
       was accordingly filed"

       Before discussing the issue further, it. would be worthwhile to discuss the provisions
       of Income Tax Act with regard to computation of value of fringe benefit in relation to
       repair, running (including fuel) and maintenance of air craft and the amount of
       depreciation there on, As per Section I 1 5WB(2) (I), the expenditure incurred by
       employer for his employees on repair, running (including fuel) and maintenance of air
       craft and 'the amount of depreciation thereon is considered as fringe benefit. Section
       115WC prescribes the value of such fringe benefits, The relevant portion of section is
       reproduced below:

       115WC (1) - For the purpose of this Chapter, the value of fringe benefits shall be
       aggregate of the following namely. , ... , . , . , , , , , .



               (c) 20% of the expenses referred to in clause (A) to (K) of sub-section (2) of
       section 11 S WB.

       Sub-section (2) of section 11 SWC provides relied in value of fringe benefits under
       certain circumstances. Clause (1)of this sub-section (2) of 11 SWC reads as under.

                (t)     In the case of an employer engaged in the business of carriage of
       passengers or goods by aircraft, the value of fringe benefits for the purposes referred
       to in clause (J) of sub-section (2) of section 11 SWB shall be taken as Nil .



                                                                                                    3
                                                           ITA Nos.1009, 1010/Del/2011
                                                          Punj Lloyd Ltd. vs ACIT

             Thus , the value of fringe benefits on repair, running (including fuel) and
       maintenance of air craft and the amount of depreciation there on will be calculated
       @ 20% in normal business and will be taken at Nil in the case of an employer, who is
       engaged in the business of carriage of passengers or goods by aircraft.

              In light of above, the issue which is required to be examined is that whether
       the assessee can be regarded as engaged in the business of carriage of passengers or
       goods by aircraft.

              The assessee is having two aircraft -

              (1)    Helicopter: model BELL 206 L4. The same was purchased in the year
                     2004-05;

              (2)    Aircraft: Model GULF stream IV. The same was acquired during the
                     F.Y.2006-07 .

               Thus, the assessee was having helicopters since 2004-05 and it purchased
       another aircraft during the financial year under consideration. From the past record,
       it is seen that the assessee was regularly offering the value of fringe benefits in
       relation to helicopter for taxation. However; suddenly .during the year, the assessee
       took a different stand, when it purchased new aircraft "amounting to Rs. 106.68
       crore. On examining the income from aircraft, it is noted that the assessee has
       earned the income on account of hiring of the aircrafts to two parties namely Kubase
       Solutions and Indo-Pacific Aviation Ltd. The invoices issued for such income were also
       examined. These invoices indicate that the income from aircraft is on account of
       charter hire charges received from above parties. Thus, assessee is earning income
       from hiring of helicopter and aircraft."

2.   The assesseee claimed before the AO that it is engaged in the business of

carriage of passenger or goods, by aircraft and hence as per section 115 WC (f) the

value of fringe benefit tax, for the purposes referred to in clause (i) of sub section

(2) of section 115WE shall be taken as NIL. The AO as well as the CIT(A) analysed

the facts of the case and held that the assessee was using the air craft for the

internal business of the company and this constituted merely 92.85% of the usage

and that the air craft was given on hire only for 7.15%. Similarly in the case of

usage of helicopter, it was found that the assessee was using a helicopter mainly for

the purpose of the asessee's internal business. There is also a finding of fact that the


                                                                                                4
                                                            ITA Nos.1009, 1010/Del/2011
                                                           Punj Lloyd Ltd. vs ACIT

assesee has no direct contact with passengers and the income generated was only

from hire charges or hire on estimate basis. The assessee relied on the opinion of

M/s. Vaish Associates Advocates and filed a revised return of income, claiming

exemption. On facts this contention of the assessee was rejected by the Assessing

Officer.


3.         In appeal before the first appellate authority, the assessee reiterated the

contentions raised by him before the AO. In addition he contented as follows :-


       "Without prejudice to the above, it is respectfully submitted, that in case it is held
       that giving aircraft on charter basis is not an activity of carriage of passengers, the
       aforesaid expenses to the extent attributable to the period of hire are not liable to
       fringe benefit tax for the following reasons:

       In terms of section 115WA of the Act, an additional tax by way of fringe benefit tax is
       payable in respect of fringe benefits provided or deemed to have been provided by an
       employer to its employees. Sub-section (2) of section 115WB deems certain expenses
       incurred by an employer as resulting in a fringe benefit to an employee, which are
       subject to fringe benefit tax at the value to be determined in accordance with the
       provisions of section 115WC of the Act. It is respectfully submitted, that where an
       expenditure incurred does not clearly result In any benefit/fringe benefit to an
       employee, no portion thereof can be deemed to be subject to fringe benefit tax under
       section 115WB(2) read with section 115WC of the Act.

       A certain percentage of the expenditure incurred on running, repairing and
       maintenance of aircraft including amount of depreciation thereon, is subject to fringe
       benefit tax for the reason that the possibility of the aircraft having been used for the
       benefit of the employees cannot be ruled out and it is not practically possible to work
       out the benefit derived by certain employees so as to tax the same as perquisite in his
       hands. It is respectfully submitted, that in a case where the aircraft is not used by an
       employer in its business but is let on hire and is under the possession and control of
       the hirer, the possibility of usage of the aircraft by the employees of the owner of the
       aircraft is ousted and there cannot in such a situation be any case of benefit being
       derived by the employees from use of aircraft so as to result in levy of fringe benefit
       tax. Thus, during the period when aircraft is used by the hirer, no fringe benefit is
       derived by the employees, which can be subjected to tax in the hands of the
       owner/employer.



                                                                                                  5
                                                               ITA Nos.1009, 1010/Del/2011
                                                              Punj Lloyd Ltd. vs ACIT

       It may not be out of place to mention that the assessing officer in the order passed
       under section 154 of the Act has not reduced the sum of Rs.2,46,26, 147/- received by
       the appellant on account of charter hire from the expenditure incurred by the
       appellant on running, repair, etc., of the aircraft, for the purposes of computing the
       value of fringe benefits liable to tax, treating it as income from business of hiring. As
       a corollary the expenditure incurred in relation to such business income cannot be
       considered for purposes considered for purposes of valuing the fringe benefit, else
       there would be double taxation.

       In view of the above, in the event it is held that the provision of aircraft on hire, is not
       an activity of carriage of passenger, it is respectfully submitted, that the expenditure
       incurred by the appellant during such period cannot be considered for the purposes
       of valuation of fringe benefit." (emphasis ours)

4.      The Ld. CIT(A) rejected the alternative contention by observing that the

assessee had itself admitted liability of FBT in the original return filed by it and that

even in the earlier years the assessee had paid FBT based on similar facts and on

the doctrine of consistency the claim of the assessee has to be dismissed. He further

held as follows :-


       "The provisions for levy of FBT were introduced by the legislature to do away with the
       ad-hoc disallowances on account of personal user of certain expenses. Under these
       provisions of FBT, .the Act provides for presumption that part of the expenses are
       used for the personal benefits of employees. The exemption in respect of employer
       engaged in the business of carriage of passengers or goods has been provided
       because there it was felt that the expenses will be mainly relating to business of
       carriage of goods or passengers. In the appellant's case, there is no dispute that
       major amount. of the expenses is relating to the own use by the company which is
       also evident from the fact that the total expenditure on account of repair, running
       and maintenance of helicopter/aircraft is Rs.31,80,00,223/- whereas the revenue
       (that too from rental hire charges) of Aircraft/helicopter is Rs.2,46,26,147/- only.
       Merely because the appellant was authorized by the other objects clause of the
       memorandum to do the business of carrying on of passengers/goods or that it was
       permitted by the competent authority to carry on such business, it will not imply that
       the appellant has actually carried on the business of carrying on of passenger/goods
       and that the expenditure on repair, renewal and depreciation etc. have been incurred
       in relation to the business of carrying on of passengers/goods. The order of the AO
       for charging the expenses to FBT is well reasoned and based upon correct
       appreciation of facts and law. "


                                                                                                      6
                                                        ITA Nos.1009, 1010/Del/2011
                                                       Punj Lloyd Ltd. vs ACIT




5.     Aggrieved the assessee has filed this appeal in ITA 1009/Dl/2011 and ITA No.

1010/Del/2011 against the common order passed by the CIT(A) wherein he had

upheld the order of the AO passed both u/s 154 and under section 115WE(3) of the

Act.


6.     We have heard Shri Rupesh Jain, Ld. Counsel for the assessee and Shri Vikram

Sahay Ld. DR on behalf of the revenue.


7.     Shri Rupesh Jain did not pressed for the claim of exemption u/s 115WC(2)(f)

of the Act. The sum and substance of its submission is that the charge of fringe

benefit tax u/s 115WA would come into play only when fringe benefits are provided

or deemed to have been provided by an employer to its employees during the

previous year. He emphasised the fringe benefits means "any consideration for

employment" u/s 115WB of the Act and that sub section (2)of section 115WB is

controlled by section 115WB of the Act. For this proposition he relied on the decision

of Mumbai Bench of the Tribunal in the case of DCIT vs. Kotak Mahindra Old Mutual

Life Insurance Ltd.134 ITD 388 (M).


8.     He also relied on the following case laws :


        Intervalve (India) Ltd. vs. ACIT 149 TTJ 365


9.      The Ld. DR Shri Vikram Sahay opposed the contentions of the assessee and

submitted that sub section (2) of section 115WB deems that fringe benefits have

been provided by the employer to its employees and under sub section (1) the

amount of expenditure incurred was rightly brought to tax by the AO and confirmed



                                                                                         7
                                                      ITA Nos.1009, 1010/Del/2011
                                                     Punj Lloyd Ltd. vs ACIT

by the Ld. CIT(A). He pointed out that the assessee filed a revised return of income

only on the basis that it is entitled to relief u/s 115WC (2)(f) of the Act and when

the same is rejected, the assessee without furnishing any details or demonstrating

how its claim is tenable made an alternative claim. He submitted that the assessee

now conceded that it is not engaged in the business of carriage of passengers or

goods by air craft and under these circumstances the original return stands and the

stand of the assessee in all the previous years has to be considered and the order of

the first appellate authority upheld.


10.     Rival contentions heard. On a careful consideration       of the facts and

circumstances of the case and a perusal of the papers on record and the orders of

the authorities below, we hold as follows :-


      The contention of the assessee is that, the AO has given a finding that the

expenditure in question was incurred for the purpose of business, as there is no

disallowance of any expenditure on an allegation of personal use and that the

expenditure in question is not "consideration for employment" and hence not fringe

benefit tax as contemplated u/s 115WB (1) of the Act. This argument has to be

rejected for the reason that fringe benefit tax can be levied only when the

expenditure incurred is for the purpose of business. Even salary paid to an

employee,    is consideration for employment and is expenditure incurred for the

purpose of business.





11.    On the contention of the assessee that there is no consideration for

employment, we find that the assessee had submitted before the CIT(A) that there




                                                                                        8
                                                        ITA Nos.1009, 1010/Del/2011
                                                       Punj Lloyd Ltd. vs ACIT

is a possibility of the aircraft having being used for benefit of the employees. The

submissions have been extracted by us at para 3 of this order.


12.     When the assessee admits of a possibility of the air craft having been used

for the use of benefit of employee, to plead otherwise at this stage cannot be

countenanced. The assessee has not provided any evidence in support of this

contention.


13.   The Mumbai Bench of the Tribunal in the case of DCIT vs. Kotak Mahindra Old

Mutual Life Insurance Ltd., was considering a case where there is a finding of fact

of the CIT(A), that the day to day local travel expenditure and taxi hire charges were

for movement of employees during working hours. There is no such factual

submissions by the assessee at any stage of proceedings or before us. Under these

circumstances this decision is factually inapplicable. The order of the Pune Bench in

the case of Intervalve (India) Ltd. vs ACIT (supra) is distinguishable as the assessee

has not demonstrated on facts, its claim that the expenditure in question, is not "any

consideration for employment". It is well settled that when a party claims a

particular exemption, it is for that party to lead evidence and substantiate its case.


14.   The assessee has in the earlier assessment years, consistently filing FBT

returns and paying tax on the very same expenditure. During the current year, the

assessee has originally filed a FBT return and offered the sum in question to tax. It

was only thereafter a revised return is filed making a claim specifically for exemption

u/s 115WC(2)(f). Now that the assessee has conceded that it is not eligible for

exemption u/s 115WC(2)(f), the amount declared in the return of income before

claiming this exemption will become taxable.



                                                                                          9
                                                               ITA Nos.1009, 1010/Del/2011
                                                              Punj Lloyd Ltd. vs ACIT

15.        In view of the above discussion the appeal of the assessee in ITA

No.1009/Del/2011 is dismissed. The Ld. Counsel for the assessee submitted that the

appeal No.1010/Del/2011 would become infructuous in view of the above

submissions. Hence this appeal of the assessee is also dismissed.


16.       In the result both the appeals filed by the assessee are dismissed.


          Order pronounced in the open court on 29th July, 2015.

                 sd/-                                       sd/-

         (G.C. GUPTA)                              (J. SUDHAKAR REDDY)
      VICE PRESIDENT                              ACCOUNTANT MEMBER
Dated: the 29th July, 2015
`veena'

Copy of the Order forwarded to:

1.    Appellant
2.    Respondent
3.    CIT
4.    CIT(A)
5.    DR
6.    Guard File                              By order
                                                         Dy. Registrar

Sl.                     Description                       Date
No.

 1.   Date of dictation by the Author                    8.7.2015

 2.   Draft placed before the Dictating Member           9.7.2015

 3.   Draft placed before the Second Member

 4.   Draft approved by the Second Member

 5.   Date of approved order comes to the Sr. PS

 6.   Date of pronouncement of order

 7.   Date of file sent to the Bench Clerk

 8.   Date on which file goes to the Head Clerk




                                                                                             10
                                  ITA Nos.1009, 1010/Del/2011
                                 Punj Lloyd Ltd. vs ACIT

9.   Date of dispatch of order




                                                                11

 
 
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