Kotak Mahindra Old Mutual Life ... vs Assessee

1

8314 KMOMLIL AY -08-09

आयकर अपील य अ धकरण, ए खंडपीठ मंब ु ई INCOME TAX APPELLATE TRIBUNAL,MUMBAI - A BENCH सव ी आई पी बंसल , या यक सद य एवं राजे , लेखा सद य Before S/Sh. I P Bansal,Judicial Member & Rajendra,Accountant Member आयकर अपील सं/.ITA No.8314/Mum/2011, नधारण वष/Assessment Year-2008-09 M/s. Kotak Mahindra Old Mutual DCIT-1(2),Aaykar Bhavan,M K Life Insurance Limited 7th Floor, Road, Bldg. No.4, Infinity IT Park, Gen. Vs Mumbai-20 A.K. Vaidya Marg, Dindoshi, Malad(E)Mumbai-400 097 PAN:AAACO 3983 B (अपीलाथ /Assessee) ( यथ / Respondent) नधा रती ओर से/Assessee by :Shri Chetan Desai राज व क ओर से/ Revenue by :Ms. S. Padmaja सुनवाई क तार ख/ Date of Hearing : 08- 04 -2015 घोषणा क तार ख / Date of Pronouncement : 08-04-2015 आयकर अ ध नयम,1961 क धारा 254(1)के अ तगत आदे श Order u/s.254(1)of the Inco me-tax Act,1961(Act) लेखा सद य राजे के अनुसार Per Rajedra,A.M.-

Challenging the order dt.9/9/2011 of the CIT(A)-2,Mumbai,assessee-company has raised following Grounds of Appeal:

GROUND NO. I - FBT is not chargeable when there is no Fringe Benefit provided to the employees

1. The Commissioner of Income tax (Appeals) - 2 ("hereinafter referred as to the CIT(A)'') erred in holding that expenditure of Rs.10,76,61,312/- incurred by the Appellant on Mobile/Residential Telephone, Travel, Conference & Meeting, Guest House, and Agents Training was liable to levy of Fringe Benefit Tax (FBT).

2. The Appellant therefore, prays that the said amount be excluded from the levy of FBT as claimed by Appellant.

GROUND NO. II -Residential Telephone, Mobile Phone Instrument & Mobile Phone Expenses

1. The CIT(A) erred in holding that expenditure of Rs.1,4962,994/- incurred by the Appellant on Residential Telephone, Mobile Phone Instrument cost and Mobile Phone was liable to levy of Fringe Benefit Tax as these expenses did not result in any benefit to the employees..

2. The Appellant therefore, prays that the said amount be excluded from the levy of FBT as claimed by Appellant.

GROUND NO. III -Travel Expenses (Domestic & Foreign) 2

8314 KMOMLIL AY -08-09

1. The CIT(A) erred in holding that expenditure of Rs.4,00,65,999/- incurred by the Appellant on domestic and foreign traveling was liable to the levy of Fringe Benefit Tax as these expenses did not result in any benefit to the employees.

2. In the alternative and without prejudice to the above the benefit, if any, was not collective in nature and therefore did not fall within the scope of FBT.

3. The Appellant therefore, prays that the said amount be excluded from the levy of FBT as claimed by Appellant.

GROUND NO.IV - Travelling Expenses-Hotel Boarding & Lodging

1. The CIT(A) erred in holding that expenditure of Rs.1,60,56,885/- incurred by the Appellant on Travelling-Hotel Boarding & Lodging was liable to the levy of FBT as this expense did not result in any benefit to the employees.

2. In the alternative and without prejudice to the above the benefit, if any, was not collective in nature and therefore did not fall within the scope of FBT.

3. The Appellant therefore, prays that the said amount be excluded from the levy of FBT as claimed by Appellant.

GROUND NO.V - Conference & Meeting

1. The CIT(A) erred in holding that expenditure of Rs.3,11,61,947/- incurred by the Appellant on Conference and Meeting was liable to the levy of FBT as these expenses did not result in any benefit to the employees.

2. The Appellant therefore, prays that the said amount be excluded from the levy of FBT as claimed by Appellant.

GROUND NO.VI - Guest house Expenses

1. The CIT(A) erred in holding that expenditure of Rs.17,27,723/- incurred by the Appellant on Guest house was liable to the levy of FBT as these expenses did not result in any benefit to the employees.

2. The Appellant therefore, prays that the said amount be excluded from the levy of FBT as claimed by Appellant.

GROUND NO.VII -Agents Entertainment & Refreshment

1. The CIT(A) erred in holding that expenditure of Rs.36,85,764/- incurred by the Appellant on Life agents Training and Life Agents Entertainment was liable to the levy of FBT as these expenses did not result in any benefit to the employees.

2. The Appellant therefore, prays that the said amount be excluded from the levy of FBT as claimed by Appellant.

2.Assessee-company,engaged in the business of Life Insurance and annuity, filed its return of fringe benefit tax (FBT) on 28/09/2008, disclosing the value of Fringe Benefit (FB) to the extent of Rs.4,14,64,837/-.The AO completed the assessment u/s.115WE(3) on 30/11/2010 determining the total value of FB at Rs.8.25 crores. From the tax audit report the AO found that the assessee had computed FB on the following expenses SN. Nature Expenses Exp Amount Rs. % of expenses Value of Fringe Benefits

1 Employee Stock Option 3,28,91,159 100% 3,28,91,159

2 Entertainment 4,71,602 20% 94,320

3 Employee Welfare 3,18,60,191 20% 63,72,038 3

8314 KMOMLIL AY -08-09

4. Repair running (including 84,92,627 20% 16,98,525 fuel), maintenance of motor cars and the amount of depreciation thereon

5. Festival Celebrations 4,96,364 50% 2,48,182

6. Club Facilities 3,21,223 50% 1,60.612

Total Value of fringe Benefit 7,45,33,166 4,14,64,836

As regards remaining value of FB amounting to Rs.7.13 crores it was stated that the value of the following benefits was not liable for FBT:

SN. Nature Expenses Exp Amount Rs. % of expenses Value of FB

1 Telephone/Fax/Telex Expenses- 33,541,306 20% 6,708,261 Office Landlines

2 Telephone Exp.-Mobile phones 14,962,994 20% 2,992,599 & Residential phones

3 Travel Expenses domestic & 40,065,999 5% 2,003,300 Foreign

4 Hotel, Boarding and Lodging 16,056,885 20% 3,211,377 Facilities

5 Conveyance Expenses 94,116,443 20% 18,823,289

6. Conference & Meeting 31,161,947 20% 6,232,289

7. Guest house Expenses 17,27,723 20% 345,544

8. Agents Entertainment and 3,685,764 20% 737,153 Refreshment

9. Advertisement 151,379,407 20% 30,275,881

Total 386,698,468 71,329,793

It was contended by the assessee that the above expenditure was admissible as deductible business expenditure, that same were not privileged/services/benefit/amenity directly or indirectly to its employees that same were not liable for FBT. However, the AO did not agree with the assessee and held that FBT was presumptive tax, that a presumptive method was applied to certain head of expenditure. Finally, he held that expenses incurred on telephone, mobile phone, travel, conveyance, guest house, entertainment and refreshment, conferences, amounting to Rs.7.13crores was liable to tax for FB.

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3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority (FAA).After considering the submissions of the assessee and the assessment order,he held that similar issue were decided by the then FAA while deciding the appeals filed for the AYs 2006-07 and 2007-08, that he had held the expenditure on telephone and conveyance expenses incurred for the employees for business, including car hire could not be treated as FB,that for the other items of expenditure the decision of the AO was to be confirmed.

4.Before us,Authorised Representative (AR) contended that in the case of the assessee as well as other group concerns the Tribunal had restored the matter to the file of the AO. He relied on the orders of the Tribunal for earlier years(ITA No.63/Mum/2010 AY2006-07 dt.25.11.2011; ITA No..5251/Mum/2010-AY2007-08 dt.11.4.2012)delivered in assessee's own case.

5.We have heard the rival submissions and perused the material before us.We find that while deciding the appeal for the AY 2006-07 the Tribunal has held,at para No.10 of the its order,as under :-

"10. Sub-section (2) of section 115WB is a deeming provision where certain expenditures incurred by the employee, fringe benefit are deemed to have been provided by the employer to his employee. In our opinion, sub-section (2) of section 115WB which defines "fringe benefit" under Chapter-XII-H, control sub-section (2) and any expenditure incurred by an employer in the course of his business or profession, which is not a consideration for employment, cannot be considered as "fringe benefit". Thus, the deeming provisions of sub-section 2 of section 115WB, applies only when the expenditure is in the nature of considered for employment. Thus, while restoring the issue back to the file of AO for adjudication afresh, we direct the AO to apply the proposition of law as interpreted by us while determining the value of fringe benefit. On the issue of expenditure incurred on conference and meetings, the AO shall consider bifurcation submitted to him with respect to the expenditure incurred on the agents and brokers and pass appropriate orders."Fringe benefit" cannot arise when expenditure is incurred on persons who are not employees.On the issue of club membership fee, the payments made to LIMRA and Actuarial Society of India, are to be excluded as they are no payments to clubs. With these observations, we restore the issue back to the file of AO for adjudication afresh."

Respectfully,following the above we are remitting back the matter to the file of the AO for fresh adjudication.Effective ground of appeal,filed by the assessee,is allowed for statistical purposes.

As a result,appeal filed by the assessee stands statistically allowed. फलतः नधा रती वारा दा खल क गई अपील सांि यक उ दे य के लए मंजरू क जाती है.

Order pronounced in the open court on 8th,April,2015.

आदे श क घोषणा खल ु े यायालय म दनांक 8th April,015 को क गई ।

Sd/- Sd/- (आई पी बंसल/I P Bansal) (राजे / RAJENDRA) या यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER मुंबई/Mumbai, दनांक/Date: 08.04.2015 JV. 5

8314 KMOMLIL AY -08-09

आदे श क त ल प अ े षत/Copy of the Order forwarded to : 1.Appellant /अपीलाथ 2. Respondent / यथ

3.The concerned CIT(A)/संब ध अपील य आयकर आयु त, 4.The concerned CIT /संब ध आयकर आयु त

5.DR "A" Bench, ITAT, Mumbai / वभागीय त न ध, ए खंडपीठ,आ.अ. याया.मंब ु ई

6.Guard File/गाड फाईल स या पत त //True Copy// आदे शानस ु ार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst. Registrar आयकर अपील य अ धकरण, मुंबई /ITAT, Mumbai.