ITAT Delhi Upholds Fringe Benefit Tax on Employee Travel and Hospitality Expenses And Deletes Penalty

The Income Tax Appellate Tribunal (ITAT) Delhi dismissed the assessee’s appeals challenging the Fringe Benefit Tax assessments and upheld the taxability of the impugned expenditures as fringe benefits.

Jet Lite (India) Ltd. is an airline company and was subjected to Fringe Benefit Tax assessments for Assessment Years 2007-08 and 2008-09. According to a special audit conducted under Section 142(2A) of the Income Tax Act, the AO treated expenditure incurred on concessional air tickets provided to employees, hospitality expenses, conveyance and travelling expenses, goods, and hotel boarding and lodging expenses as fringe benefits chargeable to tax under the provisions of Chapter XII-H of the Act and also imposed penalties under Section 271(1)(d) alleging that the assessee had furnished inaccurate particulars by not including the aforesaid expenditures while computing taxable fringe benefits.

The assessments were upheld by the CIT(A), and penalties were deleted, against which the assessee preferred an appeal, leading to cross-appeals by the Revenue before the Tribunal.

The Tribunal observed that Section 115WB has categorically covered various categories of expenditure, including free or concessional tickets, hospitality, conveyance and travelling, goods, and hotel boarding and lodging expenses. Accordingly, the Tribunal upheld the FBT assessments and dismissed the assessee’s appeals. The Tribunal referred to the Supreme Court’s decision in CIT v. Reliance Petroproducts Pvt. Ltd, which held that making an unsustainable claim in law does not amount to furnishing inaccurate particulars of income.

The Tribunal observed that the assessee had consistently disclosed the nature of expenditures and had advanced legal explanations supporting its stand. Merely because those explanations were ultimately rejected in quantum proceedings could not automatically justify the levy of penalty. Accordingly, the Tribunal dismissed the Revenue’s appeals and confirmed the deletion of penalties under Section 271(1)(d), holding that the assessee had neither concealed particulars nor furnished inaccurate particulars of fringe benefits.