INCOME TAX ACT, 1961

Section 115WB

Fringe benefit tax - Leviability--Free samples provided to doctors--No employer-employee relationship between assessee and doctor - Book profit under section 115JB - Computation of

Issue arose for consideration as to whether on the facts and in the circumstances of the case and in law, Tribunal was right in ignoring the fact that free medical samples distributed to doctors is in nature of sales promotion and similarly, any expenditure on free samples of other products distributed to trade or consumers would be liable to FBT. Held: For levy of fringe benefit tax, relationship of employer and employees is the sine qua non and the fringe benefits has to be provided by employer to the employees in the course of such relationship. Court referred to Circular No. 8/2005 of CBDT which indicated that the objective of taxing perquisite of fringe benefit was both on the ground of equity and economic efficiency. The basis of fringe benefit tax was the benefit or perquisite which emanates out of an employer-employee relationship which is a pre-requisite for levy of fringe benefit tax. Since there was no employer-employee relationship between assessee and doctors to whom the free samples were provided, expenditure incurred for the same could not be construed as fringe benefits to be brought within the additional tax net by levy of fringe benefit tax.

REFERRED : Eskayef Ltd. Etc. (now Known as Smith Kline Beecham Pharmaceuticals (India) Ltd.) v. CIT (2000) 245 ITR 0116 (SC) : 2000 TaxPub(DT) 1462 (SC) CIT v. Tata Consultancy Services Ltd. (2015) 374 ITR 112 (Bom) : 2015 TaxPub(DT) 2487 (Bom-HC) M/s. Aristo Pharmaceuticals Pvt. Ltd. v. DCIT [ITA NO. 7899/MUM/2011, dt. 25-1-2017]

FAVOUR : In assessee's favour

A.Y. :

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