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
|
