SICPA India Private Limited Vs ACIT (ITAT Delhi)
ITAT Delhi held that fringe benefit tax is an allowable deduction in computing book profit as per Section 115JB of the Income Tax Act.
Facts- The assessee filed return of income declaring income of Rs.17,65,38,023/- under normal provisions of the Act and book profit u/s. 115JB of Rs.56,41,92,385/-. The case was selected for scrutiny and assessment order came to be passed u/s. 143(3) of the Act.
AO disallowed the claim of provision of Fringe Benefit Tax. CIT(A) also disallowed the claim of Fringe Benefit Tax in computing book profits u/s. 115JB. Being aggrieved, the present appeal is filed.
Conclusion- Held that in computing the book profit u/s 115JB of the Act the assessee considered the net profit before tax as per audited financial statement and separately claimed deduction for fringe benefit tax of Rs. INR. 8,00,000/-. The A.O. held that the deduction for provision for fringe benefit tax is not allowable and the claim of the assessee is not in consonance with adjustment mentioned in Explanation 1 to Section 115JB of the Act. The assessee taken a specific plea before the CIT(A) regarding applicability of the CBDT vide Circular No. 8/2005 dated 29/08/2005, wherein it is clarified that fringe benefit tax is an allowable deduction in computing book profit as per Section 115JB of the Act.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by Assessee is filed against the order of Learned Commissioner of Income Tax (Appeals)-XXV, New Delhi [“Ld. CIT(A”, for short], dated 01/11/2019 for Assessment Year 2008-09.
2. The grounds of Appeal are as under:-
“1. The Ld. CIT(A) has grossly erred both on facts and in law in upholding the action of the Ld AO of apportioning the expenditure in the nature of Advertisement & Publicity Expenses and Business Promotion Expenses aggregating to INR 14,25,570/- for the purpose of computing the profits of the eligible undertaking and thereby re-computing deduction under section 80-IC of the Act.
2(a) The Ld CIT(A) has grossly erred both on facts and in law in upholding the action of the Ld AO of allocating ‘Foreign profits of the eligible undertaking and thereby re-computing the deduction under section 80-IC of the Act.
2(b) Without prejudice to Ground no 2(a) above, the Ld CIT(A) has grossly erred both on facts and in law in upholding the action of the Ld AO of allocating Foreign Exchange Fluctuation Loss to the eligible undertaking in the ratio of closing value of inventory of raw materials & finished goods.
3(a) The Ld. CIT(A) has grossly erred both on facts and in law in upholding the action of the Ld AO of disallowing the closing balance of Provision for Leave Encashment’ amounting to INR 26,08,537/- as appearing in the balance sheet of appellant instead of the Provision for Leave Encashment of INR 4,80,093/- created and debited to the Profit & Loss a/c during the year under consideration.
3(b) Without prejudice to Ground no 3(a) above, the Ld CIT(A) has grossly erred both on facts and in law in upholding the action of the Ld. AO in not allowing deduction for Provision Leave Encashment amounting to INR 480,093/- created and debited to the Profit & Loss a/c during the year under consideration.
4(a) The Ld CIT(A) has grossly erred both on facts and in law in upholding the action of the Ld AO in carrying out disallowance of INR 23,32,900/- by invoking the provisions of section 14A of the Act and applying Rule 8D of the Rules.
4(b) Without prejudice to Ground No 4(a) above, the Ld. AO has grossly erred both on facts and in law in considering the value of all the investments for computing disallowance under section 14A of the Act read with Rule 8D(2)() of the Rules.
5. The Ld. CIT(A) has grossly erred both on the facts and in law in upholding the action of the Ld. AO in not allowing deduction for ‘Fringe Benefit Tax’ amounting to INR 8000,000/- for the purpose of computing book profits under section 115JB of the Act.
6. The Appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal.”
3. The brief facts of the case are that the assessee filed return of income declaring income of Rs.17,65,38,023/- under normal provisions of the Act and book profit u/s 115JB of Rs.56,41,92,385/-. The case was selected for scrutiny and assessment order came to be passed u/s 143(3) of the Act by making following additions.
