fringe benefit tax

This query is : Resolved

Narendran (Querist)
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08 May 2009
We are given one market survey assignment to market survey company. at the end of the assignment work there reimbursed their traveling expenses with Fringe benefit tax. Whether FBT will applicable to contract relationship. but i understand that it will applicable to employer employee relationship. pls clarify

CA CS CIMA Prakash Somani

CA CS CIMA Prakash Somani (Expert)
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08 May 2009 YOu are right there is no FBT as Empyee Emyer relation does not exist.

Ca Anand Dubey

Ca Anand Dubey (Expert)
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08 May 2009 Its true that Employee employer relation is pre-requisite for levt of FBT , but segregation of expenses is not allowed and you will have to pay FBT if you show that as expenses on travelling. Please refer the following explaination by CBDT:-

" Under sub-section (2) of section 115WB, fringe benefits shall be deemed to have been provided by the employer to his employees, if the conditions specified therein are satisfied.

Hence, if the employer has incurred any expense for any one of the purposes enumerated in clauses (A) to (P) of sub-section (2) of section 115WB, the whole of that expense falling under the relevant head shall be deemed to have been provided. No segregation as 'expenses incurred on employees' or 'expenses incurred on others' is permissible."

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taxindiaconnect

taxindiaconnect (Expert)
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08 May 2009 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?
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.
Thus if the expenditure on travels etc of the consultants is booked with the fees for the services head, FBT is not payable without doubt. If the expenditure is booked in travel head, it can not be argued that the FBT is not applicable as the employer employee relationship is not there at a particular expenditure. The employee employer relationship need to be seen at the entity level, not at the expenditure level. Since the company has employees, the relationship has been established, there is no need to look further into the expenditure, whether incurred by employees or not.
I absolutely agree with Anand.