Ita/441/2015 Of The Commissioner Of Income Tax v. M/S Ibm India Pvt Ltd

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 16 DAY OF SEPTEMBER 2020. PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD LT.A.§ NO.441 OF 2015 BETWEEN: 1.THE COMMISSIONER OF INCOME TAX. C.R. BUILDING, QUEENS ROAD BANGALORE. 2 |THE ADDL. COMMISSIONER OF INCOME TAX CIRCLE-11(4), RASHTROTHANA BHAVAN NRUPATHUNGA ROAD, BANGALORE-S60001.. ... APPELLANTS (BY SRI. K.V. ARAVIND, ADV.,) AND: M/S. IBM INDIA PVT. LTD.,NO.12, SUBRAMANYA ARCADE BANNERGHATTA MAIN ROAD|BANGALORE-560093.PAN: AAAC 14403L. .. RESPONDENT (BY SRI. T. SURYANARAYANA, ADV.) THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT,1961 ARISING OUT OF ORDER DATED 10.04.2015 PASSED IN [TA|NO.1449/BANG/2013 FOR THE ASSESSMENT YEAR 2009-10,|PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO:(1) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW.STATED ABOVE. (I) ALLOW THE APPEAL AND SET ASIDE THE ORDERPASSED BY THE ITAT, BANGALORE IN ITA NO.1449/BANG/2015|DATED 10-04-2015 AND CONFIRM THE ORDER OF THE APPELLATE|COMMISSIONER CONFIRMING THE ORDER PASSED BY THE ADDL.|COMMISSIONEROF.INCOME|TAX(LTU),.CIRCLE-11(4),BANGALORE. THISLIACOMINGONFOR.HEARING,THISALOK ARADHE J.,DELIVERED THE FOLLOWING: DAY, JUDGMENT This appeal under Section 260A of the Income Tax) Act, 1961 (hereinafter referred to as the Act for short)has been preferred by the revenue. The subject matterof the appeal pertains to the Assessment year 2009-10.The appeal was admitted by a bench of this Court vide order dated 11.12.2015 on the following substantial questions of law:| (I)Whether the Tribunal was correct Ingiving relief to the assessee on theissue of principal component of theEMI payment for cars purchased onlease finance basis, by treating thesame as outside the purview of FBTwhich is against the provisions ofCircular No.8/2005? (iI)Whether the Tribunal was correct Inallowing relief to assessee, whenthe expenses are not by any stretchof imagination, in the nature of in-Mouse training expenses wherebythe relaxation provided in QuestionNo.51 of FAQ in Circular No.8/2005dated 29.08.7005 of CBDT wouldnot be available to the assessee?allowing relief to assessee, whenthe expenses are not by any stretchof imagination, in the nature of in-Mouse training expenses wherebythe relaxation provided in QuestionNo.51 of FAQ in Circular No.8/2005dated 29.08.7005 of CBDT wouldnot be available to the assessee? 2 |Facts leading to filing of this appeal brieflystated are that the assessee is in the business of tradingand leasing of computer hardware, maintenance ofcomputer|equipment,|developmentofcomputer.software and related services. During Assessment Year2009-10, the assessee paid Rs.32,89,06/7/- as equatedmontnly installments for car purchase on finance leasebasis. Out of the aforesaid amount, an amount of|Rs.29,16,261/- was the principal amount, whereasRs.3,/72,816/- was interest component. The companyfiled the return of fringe benefits for the AssessmentYear 2009-10 on 30.09.2009 declaring Rs./9,06,/79,318 2 |Facts leading to filing of this appeal brieflystated are that the assessee is in the business of tradingand leasing of computer hardware, maintenance ofcomputer|equipment,|developmentofcomputer.software and related services. During Assessment Year2009-10, the assessee paid Rs.32,89,06/7/- as equatedmontnly installments for car purchase on finance leasebasis. Out of the aforesaid amount, an amount of|Rs.29,16,261/- was the principal amount, whereasRs.3,/72,816/- was interest component. The companyfiled the return of fringe benefits for the AssessmentYear 2009-10 on 30.09.2009 declaring Rs./9,06,/79,318 as value of the fringe benefits provided by the company.The return was processed under Section L15WE(1) ofthe Act. In the meanwhile, the assessment was takenup for scrutiny and a notice under Section 115WE(2) ofthe Act was issued on 30.09.7010. The assessee wasasked to reconcile the expenses debited in profit andloss account with the value of fringe benefits offered totax. The Assessing Officer by an order dated 28.12.2011inter alia held that in view of circular No.8/2005 dated29.08.2005, the monthly payment towards car purchase.on finance / lease basis is in the nature of expenditureon running or maintaining a motor car and treated theSame as expenditure within the meaning of Section115WB2(1) for charging fringe benefit tax. It wasfurther held that in house training necessarily refers to atraining program for learning opportunities developed bythe organization in which such program is used. It isfurther held that in assessee’s case the expensesclaimed to be in house training expenses are actually training expenses in general and the assessee haswrongfully claimed the benefit of exemption from fringebenefit tax from such expenses. Accordingly, anamount of Rs.1,04,39,20,926/- including an amount ofRs.2,60,86,015/- incurred on travel incidental to trainingwas held to be chargeable to fringe benefit tax and theSame was calculated at the rate of 20% of the expensesincurred and an amount of Rs.20,8/7,84,185/- wasadded as fringe benefit. The assessee thereupon filed anappealbeforetheCommissionerofIncome.Tax!(Appeals). The Commissioner of Income Tax (Appeals)by an order dated 16.07.2013 partly allowed the appealpreferred by the assessee. The assessee as well as therevenue approached the Income Tax Appellate Tribunal(hereinafter referred to as ‘the Tribunal for short) byfiling:appeals.TheTribunal|Dy an)order|dated10.04.2015 dismissed the appeal preferred by therevenue in respect of EMI as deemed expenditurechargeableCO fringebenefitCaxunder|Section 115WB(2)(H) by relying on the order passed by theassessee In the case of Assessment Year 2008-09. TheTribunal deleted the expenses incurred by the assesseetowards traveling /boarding and lodging by relying onthe order made in the case of the assessee for the|Assessment Year 2008-09. In the result, the appealpreferred by the revenue was dismissed and the appealpreferred by the assessee was allowed. In the aforesaidfactual background, this appeal has been filed by therevenue. 3 Learned counsel for the revenue submitted that.the assessee was bound to demonstrate before theAssessing Officer that it had incurred entire expenditurefor in house expenses. It is further submitted that theTribunal without dealing with the question viz., whetherexpenditure incurred on the in house training wasactually incurred in that regard, has granted the relief assought for by the assessee. On the other hand, learned 3 Learned counsel for the revenue submitted that.the assessee was bound to demonstrate before theAssessing Officer that it had incurred entire expenditurefor in house expenses. It is further submitted that theTribunal without dealing with the question viz., whetherexpenditure incurred on the in house training wasactually incurred in that regard, has granted the relief assought for by the assessee. On the other hand, learned counsel for the assessee submitted that this appealarises from ITA No.215/2011-12 which was preferred bythe assessee before the Commissioner of Income Tax(Appeals)andtherefore,|only.SECONC|substantialquestion of law arises for consideration. It was furtherSubmitted that in house training expenses are not liableto fringe benefit tax, as payments were made by the|assessee to Oracle and Infosys to train its employeesand material in this regard was produced before theauthorities. It is also argued that Commissioner ofIncome Tax (Appeals), by order dated 08.12.2011,passed in case of assessee pertaining to AssessmentYear 2009-10, directed the Assessing Officer to subjectthe sum incurred towards incidental expenses sucn astraveling, conveyance, boarding and lodging only tofringe benefit tax and aforesaid finding was accepted bythe revenue. Therefore, tne revenue cannot be|permitted to question the same for the subsequentAssessment Year. In support of aforesaid submissions, reliance has been placed on the decision of the SupremeCourtInIRADHASOAMISATSANGVs.COMMISSTONER|OFINCOME-TAX’|(1992)60TAXMAN 248 (SC). 4. We have considered the submissions made by the learned counsel for the parties and have perused therecord. Before proceeding further, it is apposite to takenote of relevant extract of Section 115WB(2)(C) of theAct which reads as under: “conference(otherthan|feeforparticipationby theemployeesIn|hy|conference). Explanation- Fort he purposes of this|clause, any expenditure on conveyance, tourand travel (including foreign travel), on hotel,or boarding and lodging tn connection withany conference shall be deemed to beexpenditure incurred for the purposes ofconference” 5. The relevant extract of Circular No.8/2005 dated 29.08.2005 reads as under: “HI.Whetherexpenditureincurredduring in-house employee training would beconsidered as conference expense and liableto FBI?Ans. The FBT is not envisaged for levy|on the expenditure incurred for the purposesof imparting in-house training to employees. |However, FBI would be payable on anyexpenditureincurredtowardsfoodandbeverage, tour and travel, and lodging andboarding in connection with such in-house’training of employees.” 6. Thus, from conjoint reading of provisions of|Section 115WB(2)(C) and Circular No.8/2005 dated29.08.2005, it is evident that expenditure incurred inimparting in-nouse training to employees is excludedfrom the ambit of fringe benefit tax. However, otherincidental expenses such as boarding, lodging, travelingand conveyance expenses would be liable to fringebenefit tax. The assessee had produced the documents before the authorities to show that it has’ incurredexpenses for imparting training to its employees.—Therefore, the Tribunal has rightly held that there wasno fringe benefit in in-house training expenditure. TheTribunal, on the basis of material available on record,has also recorded a finding that repayment of loanobtained for purchase of acquisition of assets cannot bebrought within the purview of fringe benefit tax and it isonly actual running and maintenance expenditure of thecars taken on finance lease which is liable for fringebenefit tax. The aforesaid finding of fact does not sufferfrom any perversity. J |The.Supreme.CourtIn|RADHASOAMTSATSANG,SUDPIadhas held that even though principlesOf res judicatado not apply to income tax proceedings,but where a fundamental aspect permeating through thedifferent Assessment Years has been found as the factone way or the other and the parties have allowed the J |The.Supreme.CourtIn|RADHASOAMTSATSANG,SUDPIadhas held that even though principlesOf res judicatado not apply to income tax proceedings,but where a fundamental aspect permeating through thedifferent Assessment Years has been found as the factone way or the other and the parties have allowed the position to be sustained by not challenging the order, itwould not be at all appropriate to allow the position tobe changed in subsequent year. For this reason also, sofar as in-house expenses incurred by the assessee for.training of the employees cannot be subjected to fringebenefit tax as the finding on the aforesaid issue washeld in favour of the assessee for the Assessment Year2008-09 by the Commissioner of Income Tax (Appeals)which was accepted by the revenue. In view of preceding analysis, the substantial|questions of law are answered against the revenue andin favour of the assessee. In the result, we do not find any merit in the)appeal. The same fails and is hereby dismissed. Sd/-JUDGE. Sd/-JUDGE.