Fringe Benefit Tax - Apex Court solved the confusion relating to applicability of sub-sections (1), (2) and (3) of Section 115WB

Fringe Benefit Tax - Apex Court solved the confusion relating toapplicability of sub-sections (1), (2) and (3) of Section 115WB
Since the inception (as Introduced by Finance Act, 2005, w.e.f.1-4-2006) of the concept of fringe benefit tax in Income Tax, therewas wide confusion and ambiguity over applicability of provisionssub-sections (1), (2) and (3) of 115WB of the Act.
Sub-section (1) of 115WB defines the meaning of the term "fringe benefit".
Sub-section (2) of 115WB prescribes that any expenses incurred orpayment made for the purposes mentioned in clause (A) to clause (Q)shall be deemed to have been provided by the employer to hisemployees.
Sub-section (3) excludes the followings from the purview of FBT:
(a) perquisites in respect of which tax is paid or payable by the employee.
(b) any benefit or amenity in the nature of free or subsidisedtransport or any such allowance provided by the employer to hisemployees for journeys by the employees from their residence to theplace of work or such place of work to the place of residence
Whereas the section 115WA is a charging Section
In view of this, the following doubts / ambiguities have been clearedby the Honorable Supreme Court:
1. Whether exemption provided in sub-section (3) is includedinto sub-section (1) or sub-section (2).
Held: We, therefore, are of the opinion that AAR was right in itsopinion that the matters enumerated in sub-section (2) of Section115WB are not covered by sub-section (3) thereof, and the amenity inthe nature of free or subsidized transport is covered by sub-section(1).
2. Whether the provisions of FBT are restricted to employeeshaving residence in India
Held: The statute does not say so. Fringe benefit tax being a tax onexpenditure; the only concern of the revenue where for should be as towhether such expenditure has been made. Appellant has a permanentestablishment in India. It pays income-tax in India. It carries onbusiness in India. It has for the purpose of carrying out itsbusiness activities engaged persons from within India or outsideIndia. If it makes any expenditure for bringing any employee fromabroad, the same would also liable to be taken into consideration forthe purpose of sub-section (1) of Section 115WB.
3. Scope and power of CBDT while interpreting the statutoryprovisions (Circular No. : 8/2005, DATED 29-8-2005)
Held: CBDT has the requisite jurisdiction to interpret the provisionsof Income-tax Act. The interpretation of CBDT being in the realm ofexecutive construction, should ordinarily be held to be binding, saveand except where it violates any provisions of law or is contrary toany judgment rendered by the courts.
4. The question as to whether the nature of a travellingexpenditure incurred by the appellant would attract the benefitssought to be granted by the statute did not and could not fall forconsideration of the AAR.
Held: Whether the payments were made to them on a regular basis orwhether the expenditures incurred which strictly come within thepurview of Section 115WB or not must, therefore, be answered havingregard to the materials placed on records. If any question arises asto whether the agreement entered into by and between the appellant andthe employees concerned would attract, in given cases, the liabilityunder FBT benefit tax would have, thus, to be determined by theassessing authority.

The Finance Bill, 2008 received the assent of the President of Indiaon the 10th May, 2008

The Finance Bill, 2008 received the assent of the President of Indiaon the 10th May, 2008 and consequently the Finance Act, 2008 is beingpublished in the Gazette of India dated 10th May, 2008 as Act No.18 of2008. Central Government has issued seven notifications relating toservice tax so as to give effect to various provisions of the FinanceAct, 2008.2. Transaction between associated enterprises:
2.1 In the Finance Act, 2008, section 67 has been amended. Asper this amendment, service tax is required to be paid by the personliable to pay service tax on the taxable services provided even if theconsideration for the taxable services provided is not actuallyreceived. In such cases, service tax is required to be paidimmediately after crediting/debiting of the amount in the books ofaccounts or receipt of payment, whichever is earlier. However, thisprovision is restricted to transaction between associated enterprisesand shall come into force w.e.f. 10th May, 2008. Explanation to Rule6(1) of the Service Tax Rules, 1994 has been added as removal ofdoubts stating that any payment received towards the value of taxableservice shall include any amount credited or debited, as case may be,to any account, whether called 'Suspense account' or by any othername, in the books of account of a person liable to pay service tax[Refer notification No.19/2008-Service Tax dated 10.05.08].
3. Certain provisions relating to the levy of service tax inthe Finance Act, 2008 shall come into force from a date to benotified. For this purpose, notifications No.18/2008 to24/2008-Service Tax, all dated 10th May, 2008 have been issued.
4. Following changes / amendments shall come into force w.e.f.16.05.2008:
· Seven services which are specifically mentioned in thecategory of taxable services and amendments made relating to existingtaxable services.
· Amendments made in section 65 (defines taxable services andspecified terms used in relation to taxable services) and section 66(charging section) vide the Finance Act, 2008.
· Amendments made in Export of Services Rules, 2005 and theTaxation of Services (Provided from Outside India and Received inIndia) Rules, 2006 so as to categorise the newly specified taxableservices under Rule 3 [Refer notification No.20/2008-Service Tax dated10.05.08 & notification No.21/2008-Service Tax dated 10.05.08].
· Optional Scheme for payment of service tax on Purchase or Saleof foreign currency: Service tax is leviable on purchase or sale offoreign currency, including money changing, provided by an authorizeddealer in foreign currency or an authorised money changer, or aforeign exchange broker. Where the consideration for the servicesprovided in relation to purchase or sale of foreign currency is notexplicitly indicated, the person liable to pay service tax has beengiven the option to pay service tax calculated at the rate of 0.25% ofthe gross amount of currency exchanged. The method is prescribed underrule 6(7B) of the Service Tax Rules, 1994. [Refer notificationNo.19/2008-Service Tax dated 10.05.08].
5. Government of India has already notified, videnotifications No.41/2007-Service Tax, dated 06.10.07 and 43/2007-ST,dated 29.11.07, sixteen taxable services attributable to export goods,whether or not in the nature of input services, providing refund ofservice tax paid on the said sixteen taxable services. Consequent uponthe enactment of the Finance Act, 2008, Government has notified16.05.2008 as the effective date for the specifically included taxableservices vide the Finance Act, 2008. Out of the said taxable services,refund of service tax paid by exporters has been extended to thefollowing additional 3 services:
· Purchase or sale of foreign currency under banking and otherfinancial service,
· Purchase or sale of foreign currency under foreign exchangebroking service,
· Supply of tangible goods for use service