Income Tax Appellate Tribunal - Ahmedabad
E-Infochips Limited, Ahmedabad vs Assessee on 29 October, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "A" BENCH AHMEDABAD
आयकर अपीलीय अिधकरण,
अिधकरण अहमदाबाद Ûयायपीठ 'ए
ए'
BEFORE SHRI SHAILENDRA KUMAR YADAV,
JUDICIAL MEMBER,
AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER.
ITA.No.1174/Ahd/2011
(Assessment Year:2007-08)
M/s. e-Infochips Ltd.
11-A/B, Candra Colony,
Off C.G.Road, Ellisbridge,
Ahmedabad. Appellant
Vs.
DCIT,
Circle 4, Ahmedabad. Respondent
PAN: AACCS1310E
अपीलाथȸ कȧ ओर से /By Appellant :Urvashi Shodhan, A.R.
ू×यथȸ कȧ ओर से/By Respondent : Shri B. L. Yadav, Sr.D.R.
सुनवाई कȧ तारȣख/Date of Hearing : 16.10.2014
घोषणा कȧ तारȣख/Date of Pronouncement :29.10.2014
ORDER
PER SHAILENDRA KUMAR YADAV, J.M:
This appeal has been filed by the assessee against the order of Commissioner of Income Tax (Appeals)-VIII, I.T.A. No. 1174/Ahd/2011 A.Y. 07-08 (M/s. e -Infochips Ltd. vs. DCIT) Page 2 Ahmedabad, dated 17.01.2011 for A.Y. 2007-08 on the following grounds.
"(1) The Learned Assessing Officer and Hon. CIT(Appeals) have erred in passing the order and thereby making additions to the value of FBT and particularly retaining the additions (By CIT-A) respectively for the year I.T.A.Y. 2007-08 as per orders, not appreciating the provisions of the Act and instructions of CBDT on the various issues in respect of the values of FBT and interest charged as under:-
Rs.
(a) Sales promotion Rs. 4,18,356/-
(b) Travelling Expenses Rs. 6,73,166/- [Partly allowed by CIT(A)]
(c) Conference Expenses Rs. 2,36,633/-
(d) Interest Rs. 1,81,089/-
(2) The Learned CIT (Appeals) has erred in following
the decision of his predecessor and not arriving at his own conclusions.
(3) The Assessing Officer and Hon. CIT(Appeals) have erred in not considering the submissions made from time to time and have erred in not following the CBDT instructions correctly on the subject."
2. Assessing Officer during the course of assessment proceeding observed that assessee had not worked out correctly the liability for FBT on payments made by it under following heads:
i) Sales promotion Rs. 4,18,356/-
ii) Travelling Expenses Rs. 6,73,166/-
iii) Conference Expenses Rs. 2,36,633/-
I.T.A. No. 1174/Ahd/2011 A.Y. 07-08 (M/s. e -Infochips Ltd. vs. DCIT) Page 3 Total Rs. 13,27,855/-
Assessing Officer rejected the claim of the assessee mainly for the reasons that issue involved are similar to the preceding year and so following the decision of earlier year, Assessing Officer disallowed 5% of difference in travelling and 20% of difference in conference and sales promotion expenses.
3. In appeal CIT(A) following its predecessor's order for A.Y. 06-07 confirmed the addition to taxable value of FBT on account of sale promotion of Rs.4,18,356/- regarding travelling expenses and conference expenses, CIT(A) granted partial relief.
4. At the outset, ld. A.R. pointed out that this issue is covered by order of ITAT in assessee's own case for A.Y. 2006-07 in ITA No. 623/Ahd/2010, wherein Tribunal has restored the issue to A.O. by observing as under:
"8. For examining these issues it is necessary to look into the relevant portion of the Act and the questions answered by the Board which are reproduced herein below for reference:-
Sec.115WB (2): the fringe benefits shall be deemed to have been provided by the employer to his employees, if the employer has, in the course of his business or profession (including any activity whether or not such activity is carried on with the object of deriving income, profits or gains) incurred any expense on, or made ny payment for, the following purposes, namely:-
I.T.A. No. 1174/Ahd/2011 A.Y. 07-08 (M/s. e -Infochips Ltd. vs. DCIT) Page 4 (A) --
(B) ----
(C) Conference (Other than fee for participation by the employees in any conference).
Explanation.- For the purposes of this clause, any expenditure on conveyance, tour and travel (including foreign travel), hotel, or boarding and lodging in connection with any conference shall be deemed to be expenditure incurred for the purposes of conference; (D) Sales promotion including publicity:
(i) Provided that any expenditure on advertisement,-
(i) Being the expenditure (including rental) on advertisement of any form in any print (including journals, catalogues or price lists) or electronic media or transport system;
(ii) Being the expenditure on the holding of, or the participation in, any press conference or business convention, fair or exhibition'
(iii) Being the expenditure on sponsorship of any sports event or any other event organized by any Government agency or trade association or body;
(iv) Being the expenditure on the publication in any print or electronic media of any notice required to be published by or under any law or by an order of a court or tribunal;
(v) Being the expenditure on advertisement by way of signs, art work, painting, banners, awnings, direct mail, electric spectaculars, kiosks, hoardings, bill boards [ display of products] or by way of such other medium of advertisement, (vi) Being the expenditure by way of payment to any advertising agency for the purposes of clauses (i) to (v) above.
I.T.A. No. 1174/Ahd/2011 A.Y. 07-08 (M/s. e -Infochips Ltd. vs. DCIT) Page 5
(vii) Being the expenditure on distribution of samples either free of cost or at concessional rate and ]
(viii) Being the expenditure by way of payment to any person of repute for promoting the sale of goods or services of the business of the employer,] (E) -----
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Question & Answer No.58 of Board Circular No.8/2005 being relevant is also reproduced herein below for reference:-
"Whether "sales promotion expenses" includes brokerage and selling commission in relation to sales paid to direct selling agents/direct marketing agents and, if so, whether FBT is payable thereon?
58. Brokerage and selling commission paid for selling goods have been held by courts to be in the nature of ordinary selling expenses. Therefore, the expenditure on brokerage and selling commission is not expenditure for the purposes of 'sales promotion including publicity' within the meaning of clause (D) of sub-section(2) of Sec.115WB Accordingly, FBT is not payable on brokerage and selling commission paid for selling goods."
9. Now let us analyze the expenses incurred by the assessee.
Sl. Head of Details of FBT not Explanation No. expenses expenditure liable offered by according to the assessee assessee which is not I.T.A. No. 1174/Ahd/2011 A.Y. 07-08 (M/s. e -Infochips Ltd. vs. DCIT) Page 6 accepted by A.O
1. Sales Sales 93060 Fees for promotion conference exhibition in Japan not liable to FBT
2. Conference Conference 0 115WB2(c) exp.
3. Foreign Marketing 238601 Not liable to Marketing expenses in FBT US
4. Marketing Marketing 11786184 Not liable to exp. FBT
5. Foreign Onsite exp. 89725 Not liable to Maintenan FBT ch sales
6. Exhibition Paid to 59500 Not liable to VLSI Trust FBT 7 Trade Registration 500 Not liable to Mark fees FBT
8. Foreign Onsite exp. 81598 Not liable to Maintenan FBT ch sales
9. sales Marketing 4285985 Not liable to promotion exp. FBT Total 1,66,35,153
1) Fees paid for conference Rs. 93060/- :- The assessee had claimed that this expenses was related to fees paid for the employees to participate in the exhibition held at Japan. Therefore, this expenditure is exempt from FBT by virtue of Sec,115WB(2)(C) because the provisions of I.T.A. No. 1174/Ahd/2011 A.Y. 07-08 (M/s. e -Infochips Ltd. vs. DCIT) Page 7 the act provides that fees for participation by the employees in any conference is exempt. It is perceptible from the provisions of the Act that if the nature of expenditure is of the nature as explained by ld.A.R then by virtue of Sec.115WB(2)(C) such expenditure does not come under the ambit of the provisions of FBT. However, apparently the facts with respect to the nature of expenditure incurred by the assessee do not clearly emerge from the order of the Id. A.O. Therefore, we remit back this issue to the file of Ld.A.O for verification and pass appropriate order as per law.
2) With respect to Item Nos.2 to 9 excluding item No.7 being Trade mark fee of Rs. 500/- which falls outside the purview of FBT, the nature of expenditure incurred by the assessee is also not clearly brought out in the order of Id.AO in order to determine the relevant provisions of the Act which could be invoked to bring the expenses under the net of FBT. Therefore, in the interest of justice this issue is also remitted back to the file of AO.
10. Thus the first ground viz. "Ld. Addl.CIT has erred in making the addition and Hon.CIT(A) have erred in sustaining the addition of Rs.33,27,031/- being sales promotion expenses to the taxable FBT value" is hereby remit back to the file of Id.AO for fresh consideration. It is ordered accordingly.
11. With respect to foreign maintenance allowance and staff training expenses amounting to Rs. 1,73,39,3637- ( 1,61,66,331 + 11,75,532), Id. CIT(A) observed in Para 5.11 of his order that these expenditures do not fall within the scope of section 10(14)(ii) of the Act and therefore, provisions of FBT will be applicable and the Circular No.8/2005 issued by CBDT will also not come to the assessee's rescue. However, Id. CIT(A) has categorically made a finding that these expenditures also includes boarding and lodging. Thus from the order of the Revenue, the correct I.T.A. No. 1174/Ahd/2011 A.Y. 07-08 (M/s. e -Infochips Ltd. vs. DCIT) Page 8 and full classification of expenditure is not split and made clear, and thus the relevant provisions of the Act that should be invoked to the relevant expenditure is also not stated in the order. Therefore, in the interest of justice, this ground raised by the assessee is also remitted back to the file of the ld. AO for a clear cut finding and fresh consideration."
Nothing contrary has been brought to our knowledge on behalf of the Revenue. Facts being similar, so following the same reasoning we restore the issue in respect of values of FBT on account of sale promotion, travel expenses, conference expenses to Assessing Officer with direction to decide the same as per facts and law after providing due opportunity of hearing to the assessee. Issue of interest is consequential. Assessing Officer is directed accordingly.
5. As a result, appeal filed by the assessee is allowed for statistical purpose.
Pronounced in the open Court on this the 29th day of October, 2014.
Sd/- Sd/-
(ANIL CHATURVEDI) (SHAILENDRA KUMAR YADAV)
ACCOUNTANT MEMBER JUDICIAL MEMBER
True Copy
S.K.SINHA
आदे श कȧ ूितिलǒप अमेǒषत / Copy of Order Forwarded to:-
1. राजःव / Revenue
2. आवेदक / Assessee I.T.A. No. 1174/Ahd/2011 A.Y. 07-08 (M/s. e -Infochips Ltd. vs. DCIT) Page 9
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ- अपील / CIT (A)
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाइल / Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद ।