FBT liability-unique cases

This query is : Resolved

rachit shah (Querist)
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03 January 2009 if there is only 1 employee in the firm then whether FBT would be liable to pay??? as under section-115WA wording are emplyoees and not employee..

if a co-operative society on making high profits distributes to its members gold coins, then whether the same would be considered as GIFT???
whether FBT liability arises on the same??

plz solve the querry...

CA Hemant T Dewani

CA Hemant T Dewani (Expert)
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03 January 2009 Basis of Charge of Fringe Benefit Tax is defined under Section 115WA (1) of the Income Tax Act’ 1961, the summarization of which can be done as under:

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Fringe Benefit Tax is payable with effect from assessment year 2006-07 by an Employer on specified fringe benefit (s) provided or deemed to have been provided to it’s employees;
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Fringe Benefit Tax is payable in addition to the income tax charged under the Income Tax Act’ 1961;
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For charging FBT to an employer there should be at least one employee in the employer concern.
GIFTS

This clause of Section 115WB (2) considers expenditure incurred by the employer towards provision of any Gifts whether in Cash or Kind to the employees as a Fringe Benefit and hence makes it liable to Fringe Benefit Tax. It includes the following:

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Expenditure incurred on gifts made under Trade schemes or for Promotions of the company;
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Expenditure incurred on gifts to employee on their Marriage;
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Cost of Gifts made in kind valuation of which is to be made on the basis of its cost to the employer;
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Cost of gifts given under Trade schemes or for Promotion of company’s products to Distributors / Retailers;
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Expenditure on any other Gift in Cash or Kind to any employee.

Valuation of fringe benefits:

50% of total expenditure incurred as defined above shall be the value of Fringe Benefits chargeable to tax under this clause of Section 115WB (2)(O).

PLEASE NOTE:

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Expenditure incurred on providing Gifts with logo of the Organization on it does not fall under the purview of this Clause but falls under Clause (D) - Sales promotion and Publicity;
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Cost of Gift made to a customer, even though may be exclusively for the purpose of Sales promotion, would fall within the scope of the specific provision of this Clause and not under Clause (D)- Sales promotion and Publicity

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