Can a assessee be permitted to change the nature of expense for FBT calculation

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Ankit Dangayach (Querist)

21 October 2007 A company engaged in generation of electricity wants to Reclassify the expense and wants to avoid FBT in Following manner.
Central Government appoints Central Security forces for Safeguarding its assets From Terrorism as Power plant is in High Security Zone. So it Divide the Expense on Running Hospital, grant given for running the schhol and many other expense Which are Liable to FBT in ratio of its Employees and Number of security forces Personnel and thus it transfer share of such expense in security expense A/c and avoid Tax.(The services Of Hospital and school etc are available to Both company employees and Military personnel).

For Eg If Company has 10 Employees and Central Government appoints 4 Military personnel for plant Security and company incurred RS 140 as Expense on which FBT is Leviable .So company transfers Rs 40(140/14) In Security Expense A/c from the concerned expense A/c(Like Grant in Aid School A/c) and pays
FBT on only Rs 100.

Is such Classification Is permiited under the Act?Can Company Continue with the Present System of Payment of FBT while complying with Law?

Late CA Sampat Jain

Late CA Sampat Jain (Expert)

22 October 2007 The Head under which you classify expenses does not determine the nature of expenses . It is the reverse , the nature of expenses should determine the head of expenses .
If your nature of expense is such that it is covered under FBT expenses ......change of head has got no meaning .......rather it is concious wrong classification to avoid FBT.

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