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Query regarding FBT

Anoop (service) (28 Points)

18 May 2007

hello CA's one query from my side regarding FBT.

Guest house expenses- what is regarded as a guest house. According to Madras high court, unless the guest house is intended for use by a complete stranger , it cannot be called a guest house to fall with in section 115 WB (2) (K)-CIT V ARUNA SUGAR LTD. (1980) 123 ITR 619 (Mad.)

our company is having a guest house and incurring the rent expenses etc for it. so please guide me. our guest house is being used by our employees and guests only and no stranger can stay there.

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5 Replies

Raj Kr.Goyal (CA) (58 Points)
Replied 18 May 2007

Hi, In terms of the provisions of clause (K) of sub-section (2) of section 115WB, FBT is payable on expenditure incurred for the purposes of maintenance of any accommodation in the nature of guest house other than accommodation used for training purposes. Therefore, expenditure on all guest houses is liable to FBT irrespective of whether they are used as holiday homes or not.

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Raj Kr.Goyal (CA) (58 Points)
Replied 18 May 2007

In terms of the provisions of clause (K) of sub-section (2) of section 115WB, any expenditure incurred for the purposes of maintaining any accommodation in the nature of guesthouse other than accommodation used for training purposes is liable to FBT. Since the expenditure on provision of food at the guest house maintained by the employer, contract charges paid to guest house staff and rent paid or payable in respect of the guest house building, are all for the purposes of maintenance of the guest house, such expenses are liable to FBT. Also depreceiation amount not liable to FBT.

M.Sriram Shenoy (CA Final) (814 Points)
Replied 18 February 2008

Dear Anoop. Dont worry, In respect of guest house maintenance; assets purchased for guest house including depreciation thereon and rent of guest house are EXCLUDED from the purview of FBT.

Other maintenance expenses will attract FBT. And by the way, "STRANGERS" in this context doesnot literally mean unknown people, it means non-employees of the company who may have come to carry out an assigned work on contract or other basis upon the company's notice.

1 Like

hardik (fresher) (69 Points)
Replied 29 June 2009

Dear sir,

Can you please tell whether FBT is payable on Guest House Rent.

Regards

praveen (Chartered Accountant) (6971 Points)
Replied 30 June 2009

Originally posted by :M.Sriram Shenoy
"	Dear Anoop. Dont worry, In respect of guest house maintenance; assets purchased for guest house including depreciation thereon and rent of guest house are EXCLUDED from the purview of FBT. Other maintenance expenses will attract FBT. And by the way, "STRANGERS" in this context doesnot literally mean unknown people, it means non-employees of the company who may have come to carry out an assigned work on contract or other basis upon the company's notice.	"

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