No FBT on free of cost accessories given by car dealers: HC

The interpretation suggested by the Revenue Department is contrary to the interest of the customers or public interest,the court said.

Written by Agencies | New Delhi | Published:January 25, 2012 8:22 pm

Car dealers are not liable to pay Fringe Benefit Tax (FBT) on the extra fitments and accessories that a dealer gives to his customer while selling a vehicle,the Delhi High Court has held.

A bench of justices Sanjiv Khanna and R V Easwar said free of cost accessories provided by car dealers to customers are not in the nature of hospitality or sales promotion and do not fall under the head of FBT.

“We are of the view that the expenditure incurred on accessories which were supplied to customers who have purchased cars cannot be treated as sales promotion including publicity expenses,” the bench said.

“We do not think that in the present case giving accessories to customers,who have purchased cars,can be regarded as hospitality provided by the appellant. It is stretching the word hospitality beyond its natural meaning and as it is understood in business or in common parlance,” the bench added.

The division bench passed the order on a plea by a car dealer,T&T Motors Pvt Ltd,against an order of the Income Tax Appellate Tribunal (ITAT) which upheld the assessing officer’s order that extra fitments and accessories,given free of cost to customers,are taxable under FBT.

The court further said it would be contrary to public interest if such accessories are taxed under the category of hospitality or sales promotion as interpreted by the Revenue Department.

“The interpretation suggested by the Revenue Department is contrary to the interest of the customers or public interest,” the court said.

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