Apar Lubricant Ltd. Vs DCIT (ITAT Mumbai)
In this appeal before the Income Tax Appellate Tribunal, Mumbai, the assessee challenged the order of the Commissioner (Appeals) arising from reassessment proceedings under section 147 for Assessment Year 2009–10, wherein an addition was made to the value of fringe benefits by treating advertising, publicity, and sales promotion expenses as liable to Fringe Benefit Tax (FBT) under sections 115WA and 115WB of the Income-tax Act, 1961. During the hearing, the assessee urged that the dispute could be resolved purely on merits and that the validity of reopening could be kept open as academic.
The assessee, engaged in the business of marketing lubricants and allied products, had incurred advertising and sales promotion expenditure of ₹1.41 crore. During the original assessment under section 143(3), complete details, including ledgers, documentary evidence, and explanations, were furnished. The assessee consistently explained that the expenses related to dealer and distributor incentives, promotional articles, payments to advertising agencies, exhibition charges, and sales commissions, all incurred towards third parties and not employees, and therefore did not result in any fringe benefit to employees.
Reassessment proceedings were later initiated on the premise that 20% of such expenses were liable to FBT under section 115WB(2)(D). The Assessing Officer treated certain components as taxable fringe benefits and made an addition of ₹1.08 crore, mainly alleging insufficient substantiation and distribution of promotional articles. The assessee demonstrated that parts of the expenditure had already been subjected to FBT, several items were expressly excluded under the proviso to section 115WB(2)(D), and the remaining expenses were paid to independent third parties such as vendors and dealers.
