Fringe benefit tax

This query is : Resolved

venkithari (Querist)
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30 August 2007 An assessee has incurred car expenses of Rs.40000/- in cash and disallowance is made as per the provisions of Sec40A(3).
Should FBT be paid on this amount or not?

Experts opinion is sought.

Late CA Sampat Jain

Late CA Sampat Jain (Expert)
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31 August 2007 Disallowance made on the ground that expenditure is not genuine and accepted , means expenditure was never incurred , which means no FBT.

But in case of 40(A)(3), it is added back only on the ground of cash payment ......incurring of expenditure is not under cloud.

Another angle is this that FBT is for the deemed benefit to employees, which otherwise the employee should have paid tax . Such benefit does not become non existent , only because cash payment is made.

Therefore, in my opinion , FBT will be payable even after disallowance under section 40(A)(3).