FBT on business development

This query is : Resolved

Tanuja Sinha (Querist)
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30 August 2007 In case an employee goes to USA for business development. The company allows him to take his spouse & child. Does the company have to charge only FBT @ 20% on the expenses incurred in this regard??

CA Prasanna Krishnan V

CA Prasanna Krishnan V (Expert)
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31 August 2007 Dear Sir

Hitherto in several cases are there wherein it was held that 'expenses of accompanying spouse/children' are inadmissable U/s 37 of Income Tax Act 1961.

CIT Vs Hajee Moosa & Co (1985) (Madras HC)
Smt Surekha P Kothari (2003)(Madras HC)
Bombay Mineral Supply Co Pvt Ltd Vs CIT (1975) Gujarat HC
are some examples.

We have few cases wherein such expenditure due to case specific reasons allowed too (Examples - Glaxo Laboratories I Ltd (1986) and EF Ferguson (Bombay HC)

Coming back to your case, payig FBT as you mentioned is enough for FBT purpose. Please do not forget that the whole expenditure might be disallowed U/s 37 too (In that case you will not have FBT liability effectively @ 6.67%, but income tax @ 33.99%!).