Recovery of Fringe Benefit Tax

This query is : Resolved

vijay (Querist)
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06 April 2008 As per the Income-tax Act, 1961 FBT paid on ESOP's can be recovered by the employer from the employee. The same would not be taxable in the hands of employer

I'm of the view, that the recovery of FBT on other fringe benefits should also be not taxable in the hands of the employer on the following grounds:

1) FBT is not an allowable expenditure for the purpose of computation of the business income.
So, when an expenditure is not allowable for the purpose of computation of business income anything recovered towards the same should not be taxable.

2) Moreover the FBT recovered from the employee would not be treated as tax paid by him for computation of his tax liability.

Kindly give your opinion on the above.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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07 April 2008 Provisions relating to FBT contained in the Income Tax Act and clarifications issued through Circular No. 8/2005 dated August 29, 2005 do not stand in the way of recovery of FBT from the employees. The difficulty could be in maintaining employee-wise fringe benefit details, where they are directly employee related. The general ones of course will be not recoverable.

In such a case whether the recovery would be chargeable to tax? Yes.