Gujarat H.C : Section 263 on the ground that the assessment order was not erroneous and prejudicial to the interests of the Revenue

High Court Of Gujarat

CIT Vs. UTI Bank Ltd.

Section 115WC, 115WB, 263

Assessment Year 2007-08

M.R. Shah And K.J. Thaker, JJ.

Tax Appeal No. 463 Of 2014

June 23, 2014

JUDGMENT

M. R. Shah, J. – Feeling aggrieved and dissatisfied with the impugned judgment and order dated September 10, 2013, passed by the learned Income-tax Appellate Tribunal (hereinafter referred to as “the Tribunal”) in I. T. A. No. 790/Ahd/2012 for the assessment year 2007-08, the Revenue has preferred the present tax appeal to consider the following proposed substantial question of law :

“(A) Whether the Appellate Tribunal has substantially erred in quashing the order under section 263 on the ground that the assessment order was not erroneous and prejudicial to the interests of the Revenue ?

(B) The Appellate Tribunal has not appreciated the fact that the assessee had contributed Rs. 9.14 crores to the approved superannuation fund which was required to be treated as fringe benefit under section 115WB(1)(c) but the assessee had only disclosed Rs. 22.36 lakhs in the fringe benefit tax return ?”

2. That the assessee-bank filed its return of income of fringe benefit for the assessment year 2007-08 declaring a total value of fringe benefit of Rs.16,47,56,033. That the case was selected for scrutiny and, thereafter, assessment was framed under section 115WE(3), vide order dated December 21, 2009, determining the chargeable fringe benefits at Rs. 16,47,56,033. Later, on verification of the assessment record and from the annual accounts for the year ended March 31, 2007, the Commissioner noted that the assessee had contributed Rs. 9.14 crores approximately to the approved superannuation fund but in the return of fringe benefit tax it had shown only Rs. 22,36,132 as “contribution towards approved superannuation fund for the employees” and, therefore, the Commissioner was of the view that under section 115WB(1)(c) of the Act, any contribution by the employer to any superannuation fund for the employees attract the levy of fringe benefit tax on 100 per cent. of such contribution. He was thus of the view that the Assessing Officer had not made any addition to fringe benefit tax and, therefore, Rs. 8,91,31,247 has escaped assessment resulting into short levy of fringe benefit tax along with interest to the tune of Rs. 3,99,01,995 and, therefore, the Commissioner was of the view that the order passed by the Assessing Officer was erroneous and prejudicial to the interests of the Revenue and, therefore, in exercise of the powers under section 263 of the Act, the learned Commissioner of Income-tax issued a show-cause notice upon the assessee and the same was replied by the assessee. However, the learned Commissioner did not accept the submission made on behalf of the assessee and passed order dated January 5, 2012, and found that the amount of Rs. 8,91,31,247 has escaped assessment resulting into short levy of fringe benefit tax along with interest to the tune of Rs. 3,99,01,995, aggregating to Rs. 3,99,01,995. That being aggrieved by and dissatisfied with the order passed by the learned Commissioner dated January 5, 2012, passed in exercise of the powers under section 263 of the Act, the assessee preferred an appeal before the learned Tribunal being I. T. A. No. 790 of 2012 for the assessment year 2007-08 and after considering the provisions of section 115WB and section 115WC, the learned Tribunal has allowed the said appeal and has quashed and set aside the order passed by the learned Commissioner under section 263 of the Act by observing in paragraphs 55 and 56 as under :

“55. On reading the relevant provisions of section 115WB and section 115WC it can be seen that the value of contribution by an employer to an approved superannuation fund for the employees in excess of Rs. 1 lakh in respect of each employee is chargeable to fringe benefit tax. Before us, the learned authorised representative has placed on record the total contribution in the superannuation fund to be Rs. 9,13,67,379 which includes list of 29 employees where the contribution in the superannuation fund was more than Rs.1 lakh and their aggregate amount was Rs. 51,36,132. From the aforesaid amount, the assessee had reduced Rs. 29 lakhs, being the exemption limit in respect of 29 employees (the contribution was in excess of Rs.1 lakh each) and the balance of Rs. 22,36,132 was considered as taxable fringe benefit tax. Before us, the Revenue could not controvert the submissions made by the learned authorised representative. Nor could point out any mistake in the calculation of the fringe benefit tax.

56. In the case of Malabar Industries Co. v. CIT (supra) the hon’ble apex court has held that the Commissioner of Income-tax has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous ; and (ii) it is prejudicial to the interests of the Revenue so as to invoke the provisions of section 263. If one of them is absent if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue recourse cannot be had to section 263(1). In the present case, the Revenue could not point out any error in the calculation of working of fringe benefit tax and, therefore, the order of the Assessing Officer which is sought to be revised cannot be considered to be erroneous and, therefore, the provisions of section 263 could not be invoked in the present case. We, therefore, quash the order of the Commissioner of Income-tax. Thus, this ground of the assessee is allowed.”

3. Feeling aggrieved by and dissatisfied with the order passed by the learned Tribunal, the Revenue has preferred the present tax appeal.

4. We have heard Mr. Manish Bhatt, learned counsel appearing on behalf of the Revenue and Mr. R. K. Patel, learned advocate appearing on behalf assessee, who is on caveat. We have perused the order passed by the learned Commissioner under section 263 of the Act as well as the impugned judgment and order passed by the learned Tribunal. From the order passed by the learned Tribunal, it appears that out of the total amount of Rs. 9,13,67,379, which includes the list of 29 employees where the contribution in the superannuation fund was more than Rs. 1 lakh and their aggregate amount was Rs. 51,36,132 and from the aforesaid amount, the assessee had reduced Rs. 29 lakhs being the exemption limit in respect of the 29 employees (the contribution was in excess of Rs. 1 lakh each) and the balance of Rs. 22,36,132 was considered as taxable fringe benefit tax. As per section 115WC for the purpose of the said Chapter, the value of the fringe benefits shall be the aggregate of amount of contribution referred to in clause (c) of section 115WB which exceeds Rs. 1 lakh in respect of each employee.

5. Considering the above when Rs. 22,36,132 was considered as taxable (the contribution with respect to 29 employees to the extent in excess of Rs. 1 lakh each), the learned Tribunal has rightly held that there was no calculation mistake in the calculation of the fringe benefit tax.

6. Even on the facts also the learned Tribunal has held that the Commissioner was not justified in exercising the powers under section 263 of the Act.

7. We are in complete agreement with the view taken by the learned Tribunal more particularly the findings recorded by the learned Tribunal in paragraphs 55 and 56.

8. In view of the above, we see no reason to interfere with the impugned judgment and order passed by the learned Tribunal. Consequently, the proposed question of law are held in favour of the assessee and against the Revenue. Consequently, the present appeal deserves to be dismissed and is, accordingly, dismissed.

[Citation : 366 ITR 154]

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