disallowance as personal expenses
V.Bhuvanesh
(Querist) 28 April 2010
This query is : Resolved
Dear sir,
Can the assessing officer disllow expenses on account of travelling expenses,telephone expenses on account of personal element involving partners although the firm had paid fringe benefit tax for Ass.Yr.2008-2009.
A V Vishal
(Expert) 28 April 2010
The employee himself doesn't attract any tax, with the liability having been shifted to the employer by the regime of FBT. Having paid FBT, the entire amount becomes available for deduction as business expenditure.
In equity and fairness, which courts in India steadfastly uphold, the I-T Department, having imposed FBT, simply cannot subject the same expenditure to disallowance to the extent it is attributable to personal benefit of the employees. Indeed, it was to check the tendency to allow employees to go on a binge at company's expense that the regime of FBT was ushered in. Having extracted its pound of flesh, the Department cannot ask for more because that would amount to inflicting a double whammy.
AMIT BAJAJ ADVOCATE
(Expert) 28 April 2010
Its very good question. Mr A.V Vishal has given good answer to it. Equity and fairness should prevail. Such expense should not be disallowed
Vineet
(Expert) 29 April 2010
I do agree with Vishal. Once all such expenses have been subjected to fringe benefit tax at a pre determined rate, arbitrariness cannot be brought in by the AO to make further disallowance unless it is a proven case of bogus expenditure.
