No Fringe Benefit tax leviable when there is no actual contribution made to Approved Superannuation Fund

The issue in this appeal of the assessee is regard to the addition of Rs. 49,04,112/- made by the Assessing Officer and confirmed by the learned CIT(A) being provision towards contribution to Approved Superannuation Fund for the purpose of determining the liability of the assessee on account of Fringe Benefits Tax.

In this matter, the assessee is a company which is engaged in the business of manufacturing of engineering goods, resale & erection and contracts. The return of income together with Fringe Benefit was filed by the assessee for the year under consideration on 31.10.2007 declaring a total value of Fringe Benefit at Rs.40,66,296/-. In the assessment originally completed under Section 115WE(3) of the Income-tax Act, 1961 (the Act) vide order dated 18.09.2009, the Assessing Officer determined the total value of Fringe Benefit at Rs.40,66,296/- as declared by the assessee in the return.

Subsequently, the assessment was reopened by him after having noticed that the assessee had claimed expenditure of Rs. 49,04,112/-on account of contribution to Approved Superannuation Fund which was not considered for determining the value of Fringe Benefit. He accordingly issued a show-cause notice to the assessee as to why an addition of Rs.49,04,112/- should not be made to the total value of Fringe Benefit. In reply, it was submitted by the assessee that even though a sum of Rs.49,04,112/- was debited to the Profit and Loss account on account of provision for Approved Superannuation Fund, the same was not paid over to the Life Insurance Corporation with whom a Trust was formed and recognized by the Commissioner of Income-tax. It was submitted that the provision made for superannuation fund was added back in the computation of total income by the assessee-company and there being no benefit extended to the employees on account of superannuation fund, there was no question of any amount which could be liable to Fringe Benefit Tax in the hands of the assessee.

The Assessing Officer did not find this explanation offered by the assessee to be acceptable. According to him, the assessee would claim this expenditure as deduction in the subsequent year u/s 43B of the Act and the same would remain out of the purview of Fringe Benefit Tax. He held that the said expenditure thus was deemed to have been incurred by the assessee in the year under consideration and the same, therefore, was liable to be considered for determining Fringe Benefit Tax payable by the assessee for the year under consideration. He accordingly made an addition of Rs.49,04,112/- on account of provision for Superannuation Fund.

Against the order passed by the Assessing Officer u/s115WG r.w.s. 115WE(3) of the Act, an appeal was preferred by the assessee before the learned CIT(A) and after considering the submissions made by the assessee as well as the material available on record, the learned CIT(A) confirmed the addition of Rs.49,04,112/-. Aggrieved by the order of the learned CIT(A), the assessee has preferred appeal before the Tribunal.

ITAT in its order relied on judgement given by the Chennai Bench of ITAT in the case of M/s. Bharat Overseas Bank Ltd and deleted the addition of Rs.49,04,112/- made by the Assessing Officer and confirmed by the learned CIT(A) on account of provision towards contribution to Approved Superannuation Fund while determining the value of Fringe Benefit. The Chennai Bench Of ITAT in the case of M/s. Bharat Overseas Bank Ltd (supra) held as follows:

“Taking cue from the same, we also hold that merely by making a provision, the assessee has not made any actual contribution to the approved pension fund in question so as to attract the charging section aforesaid. So far as the case law cited by the Revenue is concerned (supra), mindful of the trite preposition of the law is that in case of two divergent judicial opinions, the one which favours the assessee has to be adopted, we hereby decide the appeal in favour of the assessee and against the Revenue. In this regard, we find support from the decision of the Hon’ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. [88 ITR 192].”

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