Income Tax Appellate Tribunal - Bangalore
Biocon Ltd, Bangalore vs Deputy Commissioner Of Income Tax, Ltu, ... on 20 April, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
BANGALORE BENCH 'A'
BEFORE SHRI N.V VASUDEVAN, JUDICIAL MEMBER
AND
SHRI A.K GARODIA, ACCOUNTANT MEMBER
ITA No.1248/Bang/2014
(Asst. Year - 2009-10)
The Dy. Commissioner of Income-tax,
Circle-11(4),
Bengaluru. . Appellant
Vs.
M/s. IDEB Project Pvt. Ltd.
10th Floor, Delta Tower,
Sigma soft Tech Park,
Varthurkodi, Whitefield Main Road,
Bangalore - 560066. . Respondent
PAN - AAACI5570N.
Appellant by : Shri C.H Sundar Rao, CIT
Respondent by : Shri A Shankar, Advocate
Date of Hearing : 5-04-2018
Date of Pronouncement : 20-04-2018
ORDER
PER SHRI N.V VASUDEVAN, JUDICIAL MEMBER :
This is an appeal by the Revenue against the order dated 30/6/2014 of Commissioner of Income-tax (Appeals) - I, Bangalore relating to asst. year 2009-10.
ITA No.1248/B/2014 22. The assessee is a company engaged in the business of construction. The assessee filed a return of fringe benefits. The said return filed by the assessee was accepted by the AO u/s 115WE(1) of the Income-tax Act 1961 (Act). The AO thereafter passed an order u/s 154 of the Act dated 18/3/2014. Whereby he determined the value of fringe benefits by adding to the fringe benefit declared by the assessee the following items:-
Item/head Amount
Staff welfare expenses: Rs. 2,82,01,939/-
Travelling and conveyance: Rs. 3,33,28,650/-
Total: Rs. 6,15,30,589/-
3. The assessee aggrieved by the aforesaid order of the AO filed an appeal before the CIT(A) contending that the proceedings u/s 154 of the Act are not sustainable as there was no error apparent on the face of the record which was apparent from any information in the return of value of fringe benefit filed by the assessee. The CIT(A) up held the contention of the assessee and cancelled the order u/s 154 of the Act making the following observation :-
"3. I have carefully considered the appellant's submissions. The AO has passed a rectification order u/s 154 of the Act against the return of Fringe Benefits processed u/s 115WE(1) of the Act. Reasons for passing such order that the appellant incurred expenditure towards staff welfare expenses of Rs.2,82,1,939/- and travelling and conveyance expenses of Rs.3,33,28,650/-. Under the provisions of section 115WE (1) while processing of return following adjustment should be made:-
"( l)Where a return has been made u/s 115 WD, such return shall be processed in the following manner namely:-ITA No.1248/B/2014 3
(a)the value of fringe benefits shall be computed after making the following adjustments, namely -
(i) any arithmetical error in the return; or
(ii) an incorrect claim, if such incorrect claim is apparent from any information in the return;
(b) The tax and interest, if any, shall be computed on the basis of the value of fringe benefits computed under clause (a)
(c) The sum payable by, or the amount of refund due to the assessee shall be determined after adjustment of the tax and interest, if any, computed under clause (b) by any advance tax paid, any tax paid on self-assessment and any amount paid otherwise by way of tax or interest.
(d) An intimation shall be prepared or generated and sent to the assessee specifying the sum determined to be payable by, or the amount of refund due dut to, the assessee under clause (c) and
(e) The amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee.
Provided that no intimation under this sub-section shall be sent after the expiry of one'year from the end of the financial year in which the return is made.
Explanation. -For the purposes of this sub-section,-
(a) "an incorrect claim apparent from any information in the return"
shall mean a claim, on the basis of an entry, in the return,-
(i) Of an item, which is inconsistent with another entry of the same or some other item in such return;
(ii) In respect of which the information required to be furnished to substantiate such entry has not been so furnished under this Act;
Or
(iii) In respect of a deduction or value of fringe benefits. where such deduction or value exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction;
ITA No.1248/B/2014 4(b) The acknowledgement of the return shall be deemed to be the intimation in a case where no sum is payable by. or refundable to the assessee under clause (c), and where no adjustment has been made under clause (a)."
3.1 Under section 115WE (1) of the Act, the AO can complete the assessment without passing a regular assessment order. The assessment would be completed on the basis of return submitted by the appellant. The provisions of section 115WE (l) are explained that when return is submitted and the AO wants to complete the assessment under section 115WE (1), then the case may fall under any of the following situations If any arithmetical error in the return or an incorrect claim if such incorrect claim is apparent from any informatics in the return.
If any tax or interest is found due on the basis of return filed under section 115WD, after adjustment of any advance tax paid, any tax paid on self assessment and any amount paid otherwise by way of tax or interest, then intimation shall be sent to the assessee specifying the sum so payable. Such intimation shall be deemed to be a notice of demand issued u/s 156 and all the provisions of the Act shall apply accordingly.
If any refund is due on the basis of return an intimation shall be sent to the assessee specifying the sum refundable along with refund cheque/advise.
When either no sum is payable or no refund is due, the acknowledgement of the return shall be deemed to be the intimation u/s 115WE(l). In other words, except for issuing intimation where any sum is payable by the assessee, the acknowledgement shall be deemed to be an intimation.
3.2 The AO could pass a rectification order if occurred any mistake on the above adjustment not otherwise. The rectification could be made only any mistake if assessment order was made u/s 115WE(3) of the Act.
3.3 Under Clause (E) of section 115WB(2) of the Act employee welfare included as fringe benefits with certain exception. Further, under Clause (F) of section 115WB(2) conveyance expenses comes under the ambit of fringe benefits, however, for the purpose of arriving at the taxable fringe benefit would be 5% of the expenses referred to in Clause Q of 115WB(2). In view of the above, the fringe benefits in questions are debatable and cannot be rectified u/s 154 of the Act. In ITA No.1248/B/2014 5 this context it is relevant to quote the decision of the Hon'ble Supreme Court in the case of Balaram Vs. Volkart Brothers and Others (1971) 82 ITR 50(SC) wherein it was held that -
"From what has been said above, it is clear that the question whether section 17(1) of the Indian Income-tax Act, 1922, was applicable to the case of the first respondent is not free from doubt. Therefore, the income- tax Officer was not justified in thinking that on that question there can be no two opinions. It was not open to the Income-tax Officer to go into the true scope of the relevant provisions of the Act in a proceedings under section 154 of the Income-tax Act, 1961. A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably by two opinions. As seen earlier, the High Court of Bombay opined that the original assessments were in accordance with law though in our opinion the High Court was not justified in going into that question. In Satyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Tirumale, this court while spelling out the scope of the power of a High Court under article 226 of the Constitution railed that an error which has to be establish by a long drawn process of reasoning on points where there any conceivably be two opinions cannot be said to be an error apparent on the fact of the record. A decision on debatable point of law is not a mistake apparent from the record - see Sidhrainappa Andannappa Man vi v. Commissioner of Income-tax 2. The power of the officers mentioned in section 154 of the Income-tax Act, 1961, to correct "any mistake apparent from the record" is undoubtedly not more than that of the High Court to entertain a right petition on the basis of an "error apparent on the face of the record." In this case it Is not necessary for us to spell out the distinction between the expression "error apparent on the face of the record"
and "mistake apparent from the record". But suffice it to say that the Income-tax Officer was wholly worrying in holding that there was a mistake apparent from the record of the assessments of the first respondent."
3.4 Considering the facts as well as the legal position discussed above, the .AO was not justified in passing rectification order u/s 154 of the ITA No.1248/B/2014 6 Act against the return processed u/s 115WE(1) of the Act. There-Fore, the appellant's appeal is allowed."
5. Aggrieved by the order of the CIT(A), the Revenue is preferred the present appeal before the Tribunal.
6. The ld DR relied on the order of the AO and submitted that there is a apparent in the order passed u/s 115WE(1) and, therefore, rectification proceedings were valid.
The ld counsel for the assessee relied on the order of the CIT(A).
7. We have carefully considered the rival submissions. It is clear from Section 115WE(1) (a)(ii) of the Act that what can be done while issuing an intimation u/s.115WE(1) is to correct "an incorrect claim, if such incorrect claim is apparent from any information in the return". What is an incorrect claim apparent from any information in the return has been defined in Explanation (a) to Section 115WE(1), which is as follows:
(b) "an incorrect claim apparent from any information in the return"
shall mean a claim, on the basis of an entry, in the return,-
(i) Of an item, which is inconsistent with another entry of the same or some other item in such return;
(ii)In respect of which the information required to be furnished to substantiate such entry has not been so furnished under this Act;
Or
(iii) In respect of a deduction or value of fringe benefits. where such deduction or value exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction;
8. The AO has not set out in the order passed by him u/s.154 of the Act as to under which clause of explanation (a) to Sec.115WE(1) of the Act does the rectification ITA No.1248/B/2014 7 done by him is applicable. The addition made to the value of fringe benefit by the AO in the order passed u/s.154 of the Act is to add to the value of fringe benefit for the purpose of levy of fringe benefit tax, the entire staff welfare expenses and travelling and conveyance expenses. The AO may be of the view that the aforesaid expenses incurred by the Assessee as an employer was fringe benefit and needed to be added to the value of fringe benefit but for adding the aforesaid expenses to the value of fringe benefit he should have found the information from the return itself. Admittedly in the proceedings u/s.154 of the Act the AO could not point out as to from what information in the return of income did he come to a conclusion that staff welfare and travelling and conveyance expense has to be added to the value of fringe benefit. Apparently this information was obtained by the AO not from the return of value of fringe benefit filed by the Assessee but from some other source, may be from the profit and loss account. Even in such a situation he was not entitled to add the entire expenses and only a portion of such expenses can be considered as providing fringe benefit to employee as per the provisions of clause ( E) and (F) of Sec.115WB(2). What the AO could not do when issuing an intimation under Section 115WE(1) of the Act cannot be done by him in proceedings u/s.154 of the Act for rectifying the intimation u/s.115WE(1) of the Act. In the given circumstances, the CIT(A) was right in quashing the order u/s.154 of the Act on the ground that the rectification sought to be made by the AO did not fall within the ambit of his powers u/s.154 of the Act, viz., rectifying mistake apparent from the face of the record. We find no grounds to interfere with the order of the CIT(A). Consequently, the appeal of the revenue is without merit and is liable to be dismissed.
9. In the result, the appeal of the Revenue is dismissed.
ITA No.1248/B/2014 8Order pronounced in the open court on 20th April, 2018.
Sd/- Sd/-
(A.K GARODIA) (N.V VASUDEVAN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Bangalore
Dated : 20/4/2018
Vms
Copy to :1. The Assessee
2. The Revenue
3.The CIT concerned.
4.The CIT(A) concerned.
5.DR
6.GF
By order
Sr. Private Secretary, ITAT, Bangalore
ITA No.1248/B/2014
9
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