23 March 2009
I am sorry, but I beg to differ from Mr. Manmohan in this regard. FBT is a presumptive tax. In case of a presumptive tax, it is not open for the Judiciary to legislate or interpret the law. However, it is also not open to the assessee to contend that a certain expenditure, if falling under the taxable criteria as defined in the law, is not taxable. Such spirit of the law as well as the legislative intent can be easily gauged if one peruses Circular No. 8/2005, wherein it has been clearly mentioned that no bifurcation of expenses on employees & otherwise is possible (to avoid evasion of tax through innovative accounting practices). Only the professional fees paid to auditors as well as their out-of-pocket expenses shall be exempt from FBT. However, expenses on ticket for auditor & other outsiders like professionals, shall, invariably, attract FBT.
23 March 2009
"The reimbursement of expenditure incurred for the purposes of conveyance, tour and travel is essentially a component of professional fee paid by the client to the lawyer or auditor. Accordingly, such expenditure is not liable to FBT in the hands of the client."
23 March 2009
Whenever a company debits a expense directly incurred by them, FBT is attracted. Now if the travelling expenses are re-imbursed to the auditor, there are two aspects. Firstly, if the auditor purchases the ticket in his name and then travels and the co. reimburses the expenses, then NO FBT is levied.
Secondly, if the auditor travels, but the bill comes in co. name, FBT is attracted.
24 March 2009
The Central Board of Direct Taxes has issued a list of frequently asked questions with answers on Fringe Benefit Tax, clarifying some issues raised by the trade and industry at different fora after the presentation of the Finance Bill, 2005 and also after its enactment.
13. Whether expenditure incurred by a professional like a lawyer or auditor on conveyance, tour and travel, and reimbursed by the client, is liable to FBT in the hands of the client?
Ans. The reimbursement of expenditure incurred for the purposes of conveyance, tour and travel is essentially a component of professional fee paid by the client to the lawyer or auditor. Accordingly, such expenditure is not liable to FBT in the hands of the client."
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