1 IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 16TH DAY OF SEPTEMBER 2020 PRESENT HON BLE MR. JUSTICE ALOK ARADHE AND HON BLE MR. JUSTICE H.T.NARENDRA PRASAD I.T.A. NO.441 OF 2015 BETWEEN: 1. COMMISSIONER OF INCOME TAX C.R. BUILDING, QUEENS ROAD BANGALORE. 2. ADDL. COMMISSIONER OF INCOME TAX CIRCLE-11(4), RASHTROTHANA BHAVAN NRUPATHUNGA ROAD, BANGALORE-560001. ... APPELLANTS (BY SRI. K.V. ARAVIND, ADV.,) AND: M/S. IBM INDIA PVT. LTD., NO.12, SUBRAMANYA ARCADE BANNERGHATTA MAIN ROAD BANGALORE-560093 PAN: AAAC 14403L. ... RESPONDENT (BY SRI. T. SURYANARAYANA, ADV.) --- THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 10.04.2015 PASSED IN ITA NO.1449/BANG/2013 FOR ASSESSMENT YEAR 2009-10, PRAYING THAT THIS HON BLE COURT MAY BE PLEASED TO: (I) FORMULATE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. 2 (I) ALLOW APPEAL AND SET ASIDE ORDER PASSED BY ITAT, BANGALORE IN ITA NO.1449/BANG/2013 DATED 10-04-2015 AND CONFIRM ORDER OF APPELLATE COMMISSIONER CONFIRMING ORDER PASSED BY ADDL. COMMISSIONER OF INCOME TAX (LTU), CIRCLE-11(4), BANGALORE. THIS ITA COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED FOLLOWING: JUDGMENT This appeal under Section 260A of Income Tax Act, 1961 (hereinafter referred to as Act for short) has been preferred by revenue. subject matter of appeal pertains to Assessment year 2009-10. appeal was admitted by bench of this Court vide order dated 11.12.2015 on following substantial questions of law: (i) Whether Tribunal was correct in giving relief to assessee on issue of principal component of EMI payment for cars purchased on lease finance basis, by treating same as outside purview of FBT which is against provisions of Circular No.8/2005? 3 (ii) Whether Tribunal was correct in allowing relief to assessee, when expenses are not by any stretch of imagination, in nature of in- house training expenses whereby relaxation provided in Question No.51 of FAQ in Circular No.8/2005 dated 29.08.2005 of CBDT would not be available to assessee? 2. Facts leading to filing of this appeal briefly stated are that assessee is in business of trading and leasing of computer hardware, maintenance of computer equipment, development of computer software and related services. During Assessment Year 2009-10, assessee paid Rs.32,89,067/- as equated monthly installments for car purchase on finance lease basis. Out of aforesaid amount, amount of Rs.29,16,261/- was principal amount, whereas Rs.3,72,816/- was interest component. company filed return of fringe benefits for Assessment Year 2009-10 on 30.09.2009 declaring Rs.79,06,79,318 4 as value of fringe benefits provided by company. return was processed under Section 115WE(1) of Act. In meanwhile, assessment was taken up for scrutiny and notice under Section 115WE(2) of Act was issued on 30.09.2010. assessee was asked to reconcile expenses debited in profit and loss account with value of fringe benefits offered to tax. Assessing Officer by order dated 28.12.2011 inter alia held that in view of circular No.8/2005 dated 29.08.2005, monthly payment towards car purchase on finance / lease basis is in nature of expenditure on running or maintaining motor car and treated same as expenditure within meaning of Section 115WB2(1) for charging fringe benefit tax. It was further held that in house training necessarily refers to training program for learning opportunities developed by organization in which such program is used. It is further held that in assessee s case expenses claimed to be in house training expenses are actually 5 training expenses in general and assessee has wrongfully claimed benefit of exemption from fringe benefit tax from such expenses. Accordingly, amount of Rs.1,04,39,20,926/- including amount of Rs.2,60,86,015/- incurred on travel incidental to training was held to be chargeable to fringe benefit tax and same was calculated at rate of 20% of expenses incurred and amount of Rs.20,87,84,185/- was added as fringe benefit. assessee thereupon filed appeal before Commissioner of Income Tax (Appeals). Commissioner of Income Tax (Appeals) by order dated 16.07.2013 partly allowed appeal preferred by assessee. assessee as well as revenue approached Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal' for short) by filing appeals. Tribunal by order dated 10.04.2015 dismissed appeal preferred by revenue in respect of EMI as deemed expenditure chargeable to fringe benefit tax under Section 6 115WB(2)(H) by relying on order passed by assessee in case of Assessment Year 2008-09. Tribunal deleted expenses incurred by assessee towards traveling /boarding and lodging by relying on order made in case of assessee for Assessment Year 2008-09. In result, appeal preferred by revenue was dismissed and appeal preferred by assessee was allowed. In aforesaid factual background, this appeal has been filed by revenue. 3. Learned counsel for revenue submitted that assessee was bound to demonstrate before Assessing Officer that it had incurred entire expenditure for in house expenses. It is further submitted that Tribunal without dealing with question viz., whether expenditure incurred on in house training was actually incurred in that regard, has granted relief as sought for by assessee. On other hand, learned 7 counsel for assessee submitted that this appeal arises from ITA No.215/2011-12 which was preferred by assessee before Commissioner of Income Tax (Appeals) and therefore, only second substantial question of law arises for consideration. It was further submitted that in house training expenses are not liable to fringe benefit tax, as payments were made by assessee to Oracle and Infosys to train its employees and material in this regard was produced before authorities. It is also argued that Commissioner of Income Tax (Appeals), by order dated 08.12.2011, passed in case of assessee pertaining to Assessment Year 2009-10, directed Assessing Officer to subject sum incurred towards incidental expenses such as traveling, conveyance, boarding and lodging only to fringe benefit tax and aforesaid finding was accepted by revenue. Therefore, revenue cannot be permitted to question same for subsequent Assessment Year. In support of aforesaid submissions, 8 reliance has been placed on decision of Supreme Court in RADHASOAMI SATSANG Vs. COMMISSIONER OF INCOME-TAX (1992) 60 TAXMAN 248 (SC). 4. We have considered submissions made by learned counsel for parties and have perused record. Before proceeding further, it is apposite to take note of relevant extract of Section 115WB(2)(C) of Act which reads as under: conference (other than fee for participation by employees in any conference). Explanation- Fort he purposes of this clause, any expenditure on conveyance, tour and travel (including foreign travel), on hotel, or boarding and lodging in connection with any conference shall be deemed to be expenditure incurred for purposes of conference 5. relevant extract of Circular No.8/2005 dated 9 29.08.2005 reads as under: 51. Whether expenditure incurred during in-house employee training would be considered as conference expense and liable to FBI? Ans. FBT is not envisaged for levy on expenditure incurred for purposes of imparting in-house training to employees. However, FBT would be payable on any expenditure incurred towards food and beverage, tour and travel, and lodging and boarding in connection with such in-house training of employees. 6. Thus, from conjoint reading of provisions of Section 115WB(2)(C) and Circular No.8/2005 dated 29.08.2005, it is evident that expenditure incurred in imparting in-house training to employees is excluded from ambit of fringe benefit tax. However, other incidental expenses such as boarding, lodging, traveling and conveyance expenses would be liable to fringe benefit tax. assessee had produced documents 10 before authorities to show that it has incurred expenses for imparting training to its employees. Therefore, Tribunal has rightly held that there was no fringe benefit in in-house training expenditure. Tribunal, on basis of material available on record, has also recorded finding that repayment of loan obtained for purchase of acquisition of assets cannot be brought within purview of fringe benefit tax and it is only actual running and maintenance expenditure of cars taken on finance lease which is liable for fringe benefit tax. aforesaid finding of fact does not suffer from any perversity. 7. Supreme Court in RADHASOAMI SATSANG, supra, has held that even though principles of res judicata do not apply to income tax proceedings, but where fundamental aspect permeating through different Assessment Years has been found as fact one way or other and parties have allowed 11 position to be sustained by not challenging order, it would not be at all appropriate to allow position to be changed in subsequent year. For this reason also, so far as in-house expenses incurred by assessee for training of employees cannot be subjected to fringe benefit tax as finding on aforesaid issue was held in favour of assessee for Assessment Year 2008-09 by Commissioner of Income Tax (Appeals) which was accepted by revenue. In view of preceding analysis, substantial questions of law are answered against revenue and in favour of assessee. In result, we do not find any merit in appeal. same fails and is hereby dismissed. Sd/- JUDGE Sd/- JUDGE ss Commissioner of Income-tax, Bangalore / Addl. Commissioner of Income-tax Circle-11(4), Bangalore v. IBM India Pvt. Ltd