The Bombay High Court held that Pharmaceutical Company on providing free medicine samples to doctors cannot invoke Fringe Benefits Tax (FBT)provisions.
Aristo Pharmaceuticals, the respondent is engaged in the business of manufacturing of pharmaceutical products of various types. The assessee filed a return of fringe benefit disclosing the value of fringe benefits to the extent of Rs. 5,41,64,140/-. The initial assessment was concluded by the Assessing Officer accepting the return of fringe benefit value as disclosed by the assessee.
Thereafter, the case was reopened under Section 115WG of the Act. The assessment was reopened on the ground that the distribution of free medicine samples was in the nature of the fringe benefit and therefore, the expenditure incurred by the assessee on the same was includible for the purpose of fringe benefits tax.
Although the assessee contended that the nature of expenditure was not covered within the meaning of sales promotion for the purpose of fringe benefits tax, the Assessing Officer did not accept the said contention of the assessee. Accordingly, the Assessing Officer added a sum of Rs. 4,01,40,143.00 to the value of fringe benefits tax thorough assessment order dated November 22, 2010.
On an appeal by the assessee, the Commissioner of Income Tax(CIT), Mumbai affirmed the decision of Assessing officer in the light of the decision of High Court in Commissioner of Income Tax(CIT) vs Tata Consultancy Services Ltd.
The division bench of Justices Ujjal Bhuyan and Milind Jadhav heard the appeal filed by Commissioner of Income Tax against an order passed by Income Tax Appellate Tribunal(ITAT).
Section 115WA of Income Tax Act elaborates as “Charge of fringe benefits tax”
(1) In addition to the income-tax charged under this Act, there shall be charged for every assessment year commencing on or after the 1st day of April 2006, additional income-tax (in this Act referred to as fringe benefit tax) in respect of the fringe benefits provided or deemed to have been provided by an employer to his employees during the previous year at the rate of thirty per cent on the value of such fringe benefits.
(2) Notwithstanding that no income-tax is payable by an employer on his total income computed in accordance with the provisions of this Act, the tax on fringe benefits shall be payable by such employer.
While dismissing an appeal filed against an Income Tax Appellate Tribunal(ITAT) Order, the Court held that for levy of fringe benefits tax, the relationship of the employer is the sine qua non and the fringe benefits have to be provided by the employer employees in the course of such relationship.
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