Calcutta High Court
Mcleod Russel India Ltd vs Cit. West Bengal-Ii on 1 September, 2014
Author: Soumitra Pal
Bench: Soumitra Pal, Arindam Sinha
ORDER SHEET
ITA 75 of 2012
IN THE HIGH COURT AT CALCUTTA
Special Jurisdiction (Income Tax)
ORIGINAL SIDE
MCLEOD RUSSEL INDIA LTD
Versus
CIT. WEST BENGAL-II
BEFORE:
The Hon'ble JUSTICE SOUMITRA PAL
The Hon'ble JUSTICE ARINDAM SINHA
Date : 1st September, 2014.
For Appellant/Assessee : Mr.S.Das,Advocate
For Respondent/Revenue : Mr.P.K.Bhowmik,Advocate
Mr.Aniket Mitra,Advocate The Court : This Income Tax Appeal was admitted on the following questions :
"1. Whether the Tribunal below committed substantial error of law in upholding the computation of the value of fringe benefit in the case of assessee engaged in the business of growing, manufacturing and sale of tea without having regard to the relevant provisions of the Income- tax Act, 1961 read with Rule 8 of the Income-tax Rules 1962.
2. Whether the Tribunal below committed substantial error of law in holding that there was no similarity between the provisions of Section 115WA vis-à-vis section 115-0 of the Act.
3. Whether the Tribunal below committed substantial error of law in upholding the inclusion of expenses in the taxable value of fringe 2 benefit in the case of an assessee engaged in the business of growing, manufacturing and sale of tea although expenses included were not allowed as deduction when computing the total income under the Act ?"
Heard Mr.Prabir Kumar Bhowmik, learned advocate for the respondent/revenue and Mr.Das, learned advocate for the appellant/assessee.
We find the questions arose out of the issue decided by the Tribunal regarding the applicability of Rule 8 in the matter of arriving at the value of fringe benefit for the purpose of tax therein. The issue has been decided in the unreported judgement delivered on 3rd July, 2014 in ITAT 165 of 2013, G.A.No.3135 of 2013 (M/s.Apeejay Tea Ltd. vs. Commissioner of Income Tax, Central-I & Anr.) in considering an illustration given by the Hon'ble Supreme Court in CIT vs. Doom Dooma India Ltd. reported in 310 ITR 392. We set out the relevant portion of the said judgement :
"...We shall take assistance of the illustration to resolve the issue. Let us assume that the other expenses in illustration (a) amounting to Rs.300/- include Rs.100/- spent by the employer on account of fringe benefits made available to its employees. In that case, 40% of the aforesaid sum of Rs.100/- would also be includible in illustration (b). Therefore, the question posed before us has really been answered by the illustration given by the Apex Court in the aforesaid judgment. It cannot be disputed that the amount of expenditure incurred by the 3 assessee in extending fringe benefits to its employees was not solely for the purpose of business. The expenditure incurred is both for the purpose of business and for the purpose of agriculture. The submission made by Mrs. Gutgutia that the expenditure on account of fringe benefits has already been taken into account is not correct. The net profit and loss of the business has to be arrived at after deducting all the expenses as indicated in illustration 'A' in the case of Doom Dooma (supra). Once that is done 40% of the net profit and loss has to be worked out which shall be chargeable to tax. Once this is done the expenditure on account of fringe benefits would automatically stand reduced to 40% as would appear from illustration """"in the case of Doom Dooma (supra). The revenue is interested in contending as would appear from the impugned orders that the expenditure on account of fringe benefit cannot be reduced to 40% for the purpose of computing fringe benefit tax. If that is done, the result would be that the agricultural income itself would become liable to tax, which is not permissible under sub-Section 1 of Section 10 of the Income Tax Act. The provisions contained in Chapter XII H of the Income Tax Act have to be read subject to Section 10 of the Income Tax Act. For the aforesaid reasons, we are of the opinion that the judgment of the learned Tribunal cannot be sustained. The submissions advanced by Ms. Gutgutia naturally do not help the revenue. The judgment cited by her was with regard to the question as to whether fringe benefit tax 4 amounts to double taxation. That question was answered by Their Lordships in the negative. Before us, the question of double taxation has not arisen for consideration.
The question formulated above is, therefore, answered in the affirmative and in favour of the assessee."
Since the issue stands decided, the questions arising therefrom are answered as follows :
Question no.1 is in the negative and in favour of the assessee; and Question no.3 is in the negative and in favour of the assessee. So far as question no.2 is concerned, as it arises out of the reasoning given in the impugned order passed by the Tribunal on the issue decided, the same is redundant and need not be answered.
Therefore, the appeal is allowed.
Urgent certified copy of this order, if applied for, be given to the appearing parties on priority basis.
(SOUMITRA PAL, J.) (ARINDAM SINHA, J.) ssaha AR(CR)