Singareni Colleries Company Ltd Vs ACIT (ITAT Hyderabad)
AR of the assessee submitted that the amount of electricity provided to the employees is not a Fringe Benefit as this is a contractual obligation to the employees working in coal mines which is as per the National Coal Workers Agreement ( NCWA) and this benefit is provided to mitigate the occupational hazard in coal mining. He further submitted that Employee’s welfare U/s 115WB(E) does not include any expenditure in current or payment made to (1) fulfill any statutory obligation, or (2) mitigate occupational hazards according to the explanation given under sub-c1ause(e) of Sub-Section 2 of section 115WB of the Income Tax Act, 1961.
The ld. DR, on the other hand relied on the orders of revenue authorities and submitted that the expenditure incurred by the assessee by way of providing electricity to its employees at free of cost/concessional rate is not for fulfilling statutory obligation since the agreement between the management of the assessee company and the Coal Workers Association is not statutory and only a facility provided by the company to its employees.
On going through the agreement entered into between the representatives of Central Trade Unions with Hon’ble Minister of Coal & Mines and Secretary, Govt. of India, Department of Coal & Chairman, Coal India ltd. on 12th January, 2004, we find that the CBDT has not been recognized the said agreement and, therefore, this agreement cannot override the income-tax Act, which is enacted by the Parliament. The above agreement is not statutory and only a facility provided to the employees in a particular sector. In view of the above discussion, we do not find any infirmity in the orders of the CIT(A) in confirming the order of the AO wherein the AO has made an addition in the hands of the assessee towards Fringe benefit tax on account of expenditure pertaining to staff towards electricity consumption and upholding the orders of CIT(A) in all the appeals under consideration, we dismiss the grounds raised by the assessee in all the AYs under consideration.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
These appeals filed by the assessee are directed against CIT(A), Vijayawada’s common order dated 28/02/2014 for AYs 2006-07 to 2008-09 involving proceedings u/s 115WE of the Income Tax Act, 1961 ; in short “the Act”. As identical facts and grounds are involved in these appeals, they were clubbed and heard together and, therefore, a common order is passed for the sake of convenience.
2. The grounds raised in all these appeals are common, except the quantum of additions, which are as under:
“1. Your appellant submits that the CIT (A), Vijayawada, erred in law and on facts of the case in confirming the addition of Rs.6,87,69,125/- as taxable Fringe Benefits towards employees’ welfare, ignoring the fact that your appellant was under a statutory obligation to provide electricity to the. employees at their residential premises as per National Coal Workers’ Agreement.
2. Your Appellant submits that CIT(A), Vijayawada, ought to have accepted the explanation provided by your appellant regarding the facts and circumstances and occupational hazards leading to the incurring the expenditure and deleted the addition.
3. The CIT(A) erred in law and on facts of the case in not considering the fact that providing electricity to the workers and employees is covered by explanation lor/and 2 of Sub-clause (E) of Sub-section 2 of section 115WB of the Income Tax Act, 1961. The CIT (A), failed to appreciate that National Coal Workers Agreement was a statutory document binding on your appellant, who is also a party to the agreement. “
3. To dispose of these appeals, we refer to the facts from AY 2006-07 and the decision taken in this year of appeal shall apply mutatis-mutandis in other appeals also.
4. Briefly the facts of the case are the assessee filed its fringe benefits in the combined return of income in form no. 2D for AY 2006-07 admitting taxable value of fringe benefits at Rs. 7,98,31,913/-, which was processed u/s 115WE(1) of the Act. Subsequently the case was selected for scrutiny as per the norms laid down by the CBDT. In response to the notice issued u/s 115WE(1) of the Act, the Accounts Officer of the assessee company furnished the information as called for.
4.1 During the course of assessment proceedings, the AO noticed that the Company had debited a sum of Rs. 19,93,00,750/- towards Power and Fuel. The AO asked the assessee company to furnish break-up of the expenses. On verification of the details, the AO noticed that the expenditure includes the payments made on account of electricity supplied to the residential quarters provided to its employees. He, therefore, asked to furnish details of electricity consumed by each residential quarter during the year and further pointed out that why the said expenditure should not be treated as perquisite in the hands of the employees. The break of the expenditure is as under:
