FRIENGE BENEFIT TAX

WHAT WAS THE FRIENGE BENEFIT TAX

The Hon’ble Finance Minister in the Finance Bill 2005 had
proposed to levy tax in the hands of the employer in respect of
the benefits being extended to the employees by such employer. The
objective, as stated by the Finance Minister, is the difficulty in isolating
the personal elements in respect of the benefits provided to the
employees where there is a collective enjoyment of such benefits for
purposes of business but includes partially the benefit of personal
nature. After the introduction of the Bill many issues were raised by the
trade, industry and chambers. After extensive consultations and deliberations
the initial proposal put forward in the Finance Bill 2005 was
modified. The salient features of the Fringe Benefit Tax after amendment
and notification of the Finance Act, 2005 are as under:

A. Applicability

The Fringe Benefit Tax is a tax to be paid by an employer in addition to
the income tax payable for every assessment year starting from the
assessment year 2006-07. The tax is to be paid in respect of the fringe
benefits provided or deemed to have been provided by an employer
to his employees. The liability to pay Fringe Benefit Tax shall be
there even when there is no liability to pay income tax by an employer.
Accordingly, all those who fall within the definition of employer
shall be required to pay tax on the fringe benefits provided to the
employees irrespective of the fact that income, which an employer is
earning, is exempt under the Income Tax Act or there is a loss.
Accordingly, those entities which are claiming exemption under
Section 10 such as mutual funds, undertakings in free trade zone
claiming exemption under Section 10A, export-oriented units claiming
exemption under Section 10B or under Section 10BA, shall be
liable to pay the Fringe Benefit Tax. The Fringe Benefit Tax is a liability
of the tax of the employees to be born by the employer. That is why
even loss making entities and entities whose income is exempt shall
also be required to pay Fringe Benefit Tax.

B. Meaning of ‘Employer’

The liability to pay Fringe Benefit Tax is on the employer. For this
purpose an employer shall mean a company, a firm, an association of
persons or a body of individuals, a local authority and every artificial
With the notification of the Finance Act, 2005, the Fringe
Benefit Tax has become a law and every person falling within
the definition of employer shall now be required to comply
with the provisions relating to the Fringe Benefit Tax. This
article provides an overview of the salient features of the
Fringe Benefit Tax after amendment and notification of the
Finance Act, 2005.
TAXATION
Fringe Benefit Tax—
Concept & Compliance
-Ved Jain

juridical person. Individuals and HUFs are not required to pay
Fringe Benefit Tax meaning thereby that sole proprietorship
concerns shall be out of this tax net. A further exemption has been provided
to the trusts or institutions which are eligible for exemption
under Section 10(23C) or which are registered under Section 12AA of
the Act. The trusts and institutions will be exempt from Fringe Benefit
Tax till they are eligible to claim exemption under Section 10(23C)
is there or there is a valid registration under Section 12AA.
However, in case this registration is cancelled or approval is withdrawn,
then there will be a liability to pay Fringe Benefit Tax.

C. Meaning of ‘Fringe Benefits’
The liability to pay tax under this new provision is on the value of
fringe benefits. As such, the first important issue is, ‘What is the
meaning of fringe benefits?’ As per the provisions of the Act, fringe benefit
means any consideration for employment provided by way of
any privilege, service, facility or amenity directly or indirectly provided
by the employer whether by way of reimbursement or otherwise
to his employees, including former employees and includes any
free or concessional ticket provided by the employer for private journey of his
employees or their family members and also any contribution by the employer to
an approved superannuation fund for his employees.
Further, as stated in the beginning, the purpose of levying Fringe Benefit Tax on the employer is the difficulty in isolating personal elements in respect of the benefits
provided to the employees where there is a collective enjoyment of
such benefits by the employees. A deeming provision has been introduced
to provide for that in case the employer has incurred any expenditure
or has made any payment in respect of certain purposes in the
course of his business or profession and for any activity irrespective of
whether such activity has been carried on with the object of deriving
income or not, a certain percentage of such expenditure shall be
deemed to be the fringe benefit extended to the employees by the
employer. Thus, carrying on the business or profession is not essential.
Even carrying on of an activity, irrespective of the fact
that motive of such activity may not be to derive income, will attract liability to pay
Fringe Benefit Tax. By this deeming provision a part of the expenditure, irrespective
of the fact whether it has actually resulted in any benefit or amenity to the
employees or not, shall be deemed to be the fringe benefit extended to the
employees. Accordingly, one cannot claim that a particular expenditure
has been incurred wholly and exclusively for the purposes of
business and has not resulted into any benefit or amenity to the
employee and should not be included in the fringe benefit.
This is a presumptive tax with a deeming fiction. First, a deeming
fiction has been created that the expenditure incurred on the specified
heads has an element of benefit to the employees, which is deemed
to be a fringe benefit of the employee and then to quantify the
element of personal nature. A presumption has been created that out
of this a specified percentage of the expenditure is the value that is of
personal benefit to the employees. The presumptive system has been
adopted to avoid disputes on the issue as to which expenditure is for
business purposes or which expenditure is for personal purposes and
if it is of mixed nature, how much of that is for business or for personal
purposes.

D. Valuation of Fringe Benefits

The various heads of expenditure and the value of each expenditure
which shall be deemed to be the fringe benefits are as under

TAXATION
The Fringe Benefit Tax paid by employer shall not be an eligible expenditure while
computing profit or gain of business or profession,despite the fact that the same has been paid on account of the liability of employees. A new sub-section
40(a)(ic) provides that this tax shall not be deducted while computing income.

Tax at a flat rate of 30 per cent is to be paid on the aggregate value of
the fringe benefit calculated by applying the above percentages.
Further, surcharge at the rate of 10 per cent and education cess at the
rate of 2 per cent is to be added to the tax computed above. The
applicability of the surcharge and education cess is all on employer
irrespective of the total income of the employer. Thus, the effective
fringe benefit tax rate is 33.66 per cent.

E. Exemptions

The percentage earmarked against each head of expenditure is the
value which is to be included while computing the total amount of
fringe benefits on which tax is to be paid. It is to be noted that some
exemptions have been provided in respect of certain expenditures,
which shall not be deemed to be the fringe benefits liable for taxation.
i. The first and the important exception is the expenditure on
food or beverages provided by the employer to his employees in
office or in factory or any expenditure incurred through paid
vouchers which are not transferable and usable only at eating
joints or outlets. As such, expenditure incurred on providing tea,
coffee, food etc in office or factory is not to be included in the
fringe benefits. This exception is with reference to the expenditure
incurred on employees only and accordingly the expenditure
incurred in office or factory on customers, visitors, etc. cannot
be excluded and shall be liable for Fringe Benefit Tax since
under clause (B) provision of hospitality of every kind by the
employer to any person is within the scope of fringe benefits.
However, this concession of excluding expenditure incurred
on employees runs contrary to the objective for levying Fringe
Benefit Tax, as here one is required to pay tax in respect of
the expenditure specifically incurred on persons other than
employees. Further, there is no ceiling on the amount of the
expenditure the employer can incur per day per employee nor
the expenditure has been restricted to non-alcoholic beverages
as was earlier restricted in the proviso to Rule 3(7)(iii) of
Income Tax Rules, 1962. It is to be further noted that
as regards exemption of expenditure incurred through paid
vouchers, no condition has been imposed that these paid vouchers
are to be used by the employees only. The intention to provide
this concession apparently is to extend the facility to the
employees to eat food outside the office, in case, the office is
not able to accommodate and provide facility of eating food
within its premises. However, there is no such restriction in the
wording of this clause. As per language of this clause, any
expenditure incurred on or payment through paid voucher is to
be excluded. Further, there is no ceiling on the amount of the
expenditure which one can incur either per day or per employee as
were provided in the proviso to Rule 3(7)(iii) of Rs.50 per meal.
Presently, one may give a paid voucher of any amount even to a
customer, but with a condition

TAXATION
Clause of Head of Expenditure Percentage of Section 115 the expenditure
WB(2) deemed to be fringe benefit

(A). Entertainment 20%
(B). Hospitality of every kind to any person 20%
(C). Conference (other than fee for participation) 20%
(D). Sales promotion, including publicity excluding advertisement 20%
(E). Employees Welfare 20%
(F). Conveyance, tour and travel, including foreign travel 20%
(G). Use of Hotel, boarding and lodging 20%
(H). Repair, running (including Fuel), maintenance of motorcars
and depreciation thereon 20%
(I) Repair, Running (including fuel), maintenance of aircraft and
depreciation thereon 20%
(J). Use of Telephone including mobile phone (other than leased lines) 20%
(K). Maintenance of accommodation in the nature of guest houses
(Other than for training purposes) 20%
(L). Festival celebration 50%
(M). Use of health club and similar facilities 50%
(N). Use of any other club facilities 50%
(O). Gifts 50%
(P). Scholarship 50%

115WB(1)(b) Any Free or Concessional ticket for private journeys Actual
115WB(1)(c) Contribution to Superannuation fund Actual
that such person himself uses the same at an eating joint or outlet.

ii. In respect of expenditure incurred on conference, the fee
for participation by the employees in the conference shall not be
included in the fringe benefits. However, expenditure on conveyance,
tour, travel on hotel incurred in connection with any
conference shall be included in the value of the fringe benefits.

iii.Expenditure incurred on advertisement is not to be included in
the value of fringe benefits. The type of the expenditure on
advertisement which is not to be included has been specifically
provided. Expenditure on advertisement in print media, electronic
media, transport systems, holding of or participation in a
press conference, business convention,fair or exhibition, publication
of any notice, and by way of signs, artwork, painting, banner,
direct mail, kiosk, hoardings shall be excluded from the value
of the fringe benefit. However, expenditure on sponsorship of
any sports event or any other event shall be excluded only
when the event is organized by any government agency or trade
association or body. This will mean that in case the event is
organized by the employer himself, then the expenditure
incurred on such event shall be included in the value of fringe
benefits. Payment made to advertising agency for any of the
purposes stated above shall also be out of the purview of the
Fringe Benefit.
iv. Any expenditure incurred on payment made to fulfil any
statutory obligation with regard to the employees shall not form
part of the fringe benefits and, as such, is not to be included in the
amount of expenditure incurred on employees welfare. Thus, the
contribution made by the employer to the Provident Fund,
ESIC, etc. shall not be liable for Fringe Benefit Tax. It may be
further noted that contribution to the approved superannuation
fund is to be included in the value of fringe benefits and the
valuation of the same shall be at 100 per cent of the value. The
reason being that contribution to approved superannuation fund
is not any statutory obligation. It is a voluntary payment made by
the employer to the superannuation fund and the same is not
liable for taxation in the hands of the employee and fully
deductible expenditure in the hands of the employer.
However, contribution to the approved gratuity fund shall not
be liable for Fringe Benefit Tax as the same is a statutory obligation
of the employer.

F. Employer Specific Concessions
In addition to the above general exemptions, certain employer-specific
concessions have also been provided. In the case of an
employer who is engaged in the business of hotel, the value of
fringe benefits liable for tax in respect of provision of hospitality
(clause B) shall be 5 per cent (as against the general rate of 20 per
cent) of the total amount of expenditure incurred on hospitality. In the
case of the employer who is engaged in the business of construction,
the value of the fringe benefits in respect of the expenditure
incurred on conveyance, tour and travel including foreign travel
(clause F) shall be 5 per cent instead of 20 per cent. In the case of
employer engaged in the business of carriage of passengers or goods
by motorcars, the value of the fringe benefits in respect of the
expenditure incurred on repair, running and maintenance of motorcar,
including depreciation (clause H) shall be 5 per cent instead of 20 per
cent. In the case of an employer engaged in carriage of passenger or
goods by aircraft, the value of fringe benefit in respect of expenditure
on repair, running, maintenance including depreciation of
aircraft shall be taken as nil instead of 20 per cent. Further, in the case
of an employer engaged in the business of manufacture or production
of pharmaceuticals, and computer software, the value of fringe benefits
liable for tax in respect of expenditure incurred on conveyance,
tour and travel including foreign travel (clause F) and use of
hotel, boarding and lodging facility (clause G), shall be 5 per cent (as
against the general rate of 20 per cent) of the expenditure incurred
under these heads. Scope of ‘computer software’ has not been specified
in this section. However, as per Explanation 2 to Section 10A and
Explanation (b) to Section 80HHE, ‘computer software’ means any
computer program recorded on any disk, tape, perforated media or
other information storage device or any customised electronic data, or
any product or service of similar nature as may be notified by the
board. The board has notified the list of information technology
enabled products vide notification no. SO 890(E) dated 26th of
September 2000 which includes call centres, data processing, medical
transcription, back office operations within the meaning of computer
software. However, it may be noted that the meaning of the computer
software stated above in
Explanation 2 is for the purposes of Section 10A only and in
Explanation (b) is for the purposes of Section 80HHE only.

G. Need For Reclassification of Expenditure Heads
With the introduction of Fringe Benefit Tax from 1st April, 2005,
there is a need to revise the expenditure heads so that the expenditure
not liable for fringe benefit do not get merged with the expenditure
liable for Fringe Benefit Tax. Some of the heads where this regrouping
will be required are as under. i. Hospitality provided to the
employees by way of food and beverage in office or factory or
by way of paid vouchers need to be debited under a separate
head other than the employee welfare / staff welfare expenditure.
ii. Expenditure on repair, running and maintenance of motor car
and depreciation thereon need to be classified separately from
the expenditure incurred on repair, running of vehicles
other than motor cars such as scooter, bus, truck, etc.
iii. Expenditure on conference fee for participation of employees
needs to be classified separately in view of exemption in clause (C).
iv. Expenditure, which is taxable as perquisite in the hands of
employees, is not liable for Fringe Benefit Tax. As such all
such expenditure need to be debited under the head ‘Salary’
or ‘Establishment Expense’, so that the same does not get
clubbed with the other expenditure which is liable for Fringe
Benefit Tax. Expenditure on maintenance of guesthouse being used for training
purposes need to be classified separately from the expenditure
incurred on maintenance of guesthouse as such.

H.Fringe Benefit Tax is not a deductible expenditure
The fringe benefit tax paid by the employer shall not be an eligible
expenditure while computing profit or gain of business or profession,
despite the fact, that the same has been paid on account of the liability
of the employees. A new subsection 40(a)(ic) has been inserted
to provide that the Fringe Benefit Tax shall not be deducted while
computing income. The reason for this is that this tax despite being an
obligation of the employee is borne by the employer and still it is not
added as fringe benefit while computing the liability of the Fringe
Benefit Tax. Thus, the tax is not being compounded of. In the alternative
option, the tax could have been compounded of and full
deduction of the tax would have been allowed while computing
business income. Under both the alternatives, the total tax liability is
same for a tax paying entity. However, in the alternative option,
the liability of the tax-exempt and loss-making entities would have
been much higher. Further, tax auditor shall be required to specify
the amount of fringe benefit tax debited in the profit and loss
account under clause 16(f) of Form 3CD of the tax audit report from
assessment year 2006-07 onwards.

Compliance of Fringe Benefit Provisions
◆ Payment of tax in advance:

The Fringe Benefit Tax is applicable
from financial year beginning on 1st April 2005, i.e.,
assessment year 2006-07. For complying with the fringe benefit
provisions, every employer shall be required to compute the
value of the fringe benefits, every quarter. It is to be noted
that there is a liability to pay Fringe Benefit Tax by way of
advance tax every quarter, not on the basis of yearly estimate, but
on the basis of the actual value of fringe benefits computed every
quarter. Further, there is no threshold limit for the liability to
pay Fringe Benefit Tax in advance every quarter as is the
case under Section 208 of the Act in the case of regular income
tax is to be paid only when the same is Rs. 5000 or more. This
may cause genuine hardship to those entities, which will be
required to pay small or nominal amount of Fringe Benefit Tax
and will also cause administrative problem to the collecting
bank as well as tax administration.In view of this requirement
to pay advance tax on actual basis, every employer shall be
required to compute the actual
TAXATION
A new clause (d) is being added to Section 271(1) for levying penalty in case there is a concealment
of the particulars of fringe benefit or inaccurate particulars are furnished. The penalty for late
filing of FBT return shall be Rs. 100 per day for each day of default starting from the due date of
return as against penalty of Rs. 5000 leviable for late filing of return of regular income.
amount of the fringe benefit liable for tax. The immediate
requirement will be to compute the same for the first quarter
starting from 1st April 2005 to 30th June 2005 of the current
year and pay the tax thereon at the rate of 33.66 per cent (inclusive
of surcharge and education cess) by 15th July 2005. Similar
liability is to be computed and paid for the subsequent quarters
by 15th October and 15th January. However, for the quarter
ending on 31st March, the fringe benefit tax is to be paid
even before the end of the quarter, i.e., by 15th March.
In case of failure to pay the tax for any quarter, or where the tax
paid is less, then there shall be a liability to pay interest at the rate
of 1 per cent on the amount of the short-fall for every month or part
of the month till the short-fall continues. The liability to pay
interest under the Fringe Benefit Tax is on monthly basis and shall
continue till the date it is actually paid. The provision of interest
liability in case of default or delay in payment of fringe benefit
tax in advance are on the line of section 234B and 234C of the
act with exception that these two have been merged by providing
that interest is to be paid from the date of the default till actual payment.
(There is no breaking of the period up to 31st March and
the period thereafter). Further, in case of default in any quarter,
interest is to be computed on monthly basis as against quarterly
basis under Section 234C of the Act. The liability to pay interest in
case of shortfall of tax is on actual amount of the tax payable
without any concession on account of estimation
as is the case under Section 234B and Section 234C of the Act where
interest is payable only when the advance tax paid
is less than 90 per cent of the actual tax liability.
This may cause practical difficulties particularly
for the last quarter where the tax is to be deposited
by 15th March, i.e., 16 days even before the quarter
ends. Further, in the case of entities such as banks having a large number of
branches, it may practically be difficult to compile information
of all the branches within a period of 15 days from the end of
the quarter and that too after making the provision of the
expenditure incurred on accrual basis.
◆ Filing of Return:
Every employer who has provided the fringe benefits, as explained
above, to his employees is required to file return of fringe
benefits irrespective of the fact whether such employer is
required to file the return of his own income under Section 139
of the Act or not. The due date of filing the return shall be 31st
October for a company and a person whose accounts are
required to be audited. In other cases, the due date shall be 31st
July every year. It has been further provided that where return
is not filed the Assessing Officer shall have the right to ask the
employer to file the return. Further, an employer can file a
revised return in case he discovers any omission or wrong statement
in the return already filed. In case of delay in filing the
return, interest at the rate of 1 per cent for each month of default is
to be paid on the amount of fringe benefit tax as reduced by
the advance tax paid. The first return shall be for assessment
year 2006-07 and shall fall due either on 31st July, 2006 or 31st
October, 2006 as the case maybe. The return form has not
been notified yet. The return though legally required to be an
independent return, the same may be in the form of a declaration
with certificate from tax auditor, giving computation of
the value of the fringe benefit under each head of the expenditure
liable for fringe benefit tax. Considering the requirement of
paying advance tax on actual amount of fringe benefit, the
information required in the return form and certification
thereof will be required to be given on quarterly basis.
◆ Assessment:
The procedure of the assessment including the best judgement assessment and
reassessment shall be the same as is applicable in the case of the
regular assessment of the income. These provisions are

Every employer who has provided the fringe benefits to his employees is required to file return of
fringe benefits irrespective of whether such employer is
required to file return of his own income under Section 139 of the
Act or not. The due date of filing return shall be 31st October for a
company and a person whose accounts are required to be
audited.
TAXATION
exactly on the lines of Section 143, 144, 147 and 148 of the Act
including refund of the excess tax paid. Despite the return
being a separate return, it appears that there will be no separate
scrutiny of FBT returns. The Finance Minister in the
Parliament at the time of the passage of the Finance Bill 2005,
has stated: “What we are doing is eliminating
the entire discretion. What we are asking him is to file a tax
audit certificate saying according to his auditor these are the
expenditure under the various heads. If the tax audit certifies
these are heads, the officer has no discretion. The Income Tax
Officer has to accept that audit certificate unless it turns out to
be a patently false certificate. We will accept that certificate of
the auditor”.
◆ Penalty for concealment:
A new clause (d) is being added to Section 271(1) for levying
penalty, in case there is a concealment of the particulars of the
fringe benefit or inaccurate particulars are furnished about such
fringe benefit. The penalty is on the same line as is for concealment
of income and the minimum penalty shall not be less
than the amount of the tax sought to be evaded and maximum
penalty can be three times of the amount sought to be evaded.
◆ Penalty for late filing of return: The penalty provisions
for late filing of FBT return are more stringent as compared to
late filing of return of regular income. The penalty for late filing
of FBT return shall be Rs.100 per day for each day of
default starting from the due date of return as against penalty
of Rs. 5000 leviable for late filing of return of regular income
and that too when return is not filed before the end of the assessment
year.

Perquisite versus Fringe Benefit
With the shifting of the tax liability on employer from employees in
respect of certain fringe benefits, these fringe benefits that were hitherto
taxable in the hands of the employees as perquisites, will no
longer be taxable in the hands of the employees. For this, Rules for valuation
of perquisites have been amended vide notification no.
68/2005 dated 28th February, 2005, whereby Rule 2 relating to valuation
of motor car perquisite, Rule 3(6) relating to free or concessional
journey given to transport employees, Rule 3(7)(ii) to 3(7)(vi)
relating to value of travelling, free meals, gift, credit cards, club facility
and Rule 3(8) relating to valuation of any other
benefit and exempting expenses on telephones having withdrawn.
Further, clause (vi) of Section 17(2) has been amended to provide that
only those fringe benefit and amenity shall be included in the
perquisite of the employees, which are not chargeable to tax under
fringe benefit tax. The meaning of this will be that those benefit or
amenity, on which tax is payable by the employer as fringe benefit tax,
will not be included in the income of the employees. Similarly, sub
section (3) of Section 115WB has been inserted in the chapter on the
Fringe Benefit Tax to provide that privilege, service, facility or
amenity does not include perquisite in respect of which tax is paid or
payable by the employee. Thus, any perquisite given to the
employee is to be included in the income of the employee in view of
the provisions of the Section 17(2), the same is not liable for any fringe
benefit tax. Thus, there exists mutual exclusion between the two.
What is taxable in the hands of employee cannot be taxed as fringe
benefits in the hands of the employer in view of Section
115WB(3) and what is taxable as fringe benefit in the hands of
employer cannot be taxed in the hands of employees in view of
amended clause (vi) of Section 17(2) of the Act. Thus, there is no
scope of double taxation. House rent allowance, rent
free accommodation, transport allowance, leave travel concession,
perquisite on account of reimbursement of medical expenses (in view
of proviso to Section 17(2)), interest- free or concessional loan, supply
of gas, electric energy or water for household consumption, use of
mobile assets and transfer of movable assets shall not be liable for
Fringe Benefit Tax and shall be considered as perquisite in the
hands of the employee only of course after considering exemption

TAXATION
In case of failure to pay the tax for any quarter, or where the tax paid is less, there shall be a liability to pay interest at the rate of 1% on the amount of the shortfall for every month or part of the
month till short-fall continues. Liability to pay interest under the Fringe Benefit Tax is on monthly basis and shall continue
till the date it is actually paid.

in respect of such perquisite, if, any available under the Act. However,
facility or amenity extended to the employees by way of motor car,
free meal, gift, credit card, club facility, telephone is not to be
included in the hands of the employees as perquisites as these
are now to be taxed as fringe benefits in the hands of the employer.
The new Fringe Benefit Tax in a way has given an additional increment
to the employees as their liability to pay tax in case they are
enjoying facility or amenity by way of motor car, etc, will get reduced
by the amount of tax which would otherwise have been payable every
month by way of deduction of tax at source.

Business Expenditure versus Fringe Benefit
An important issue after levy of Fringe Benefit Tax is the disallowance
of the expenditure incurred under Section 37(1) on
account of personal use in view of the fact that the provision of Sec
37(1) has not been amended to provide any exclusion. As per provision
of Section 37(1), expenditure incurred wholly and exclusively
for the purposes of business or profession not being in the nature of
capital expenditure or personal expenses is allowable. Thus,
expenditure incurred by any employer, which is of personal
nature, will not be allowable expenditure even after payment of
Fringe Benefit Tax. It may be clarified that expenditure incurred on
employees, i.e., where the relationship is that of employer-employee,
is not considered to be personal in nature as any payment or expenditure
incurred on employee is in consideration of services provided
by the employee and as such is for business purposes. Thus, there cannot
be any disallowance under Section 37(1) in respect of expenditure
incurred on the employee. However, where there is no
employer-employee relationship,such as expenditure incurred on
partners or non-employee directors, if the expenditure incurred is
of personal nature and not for business purposes, the same will not be
eligible for deduction under Section 37(1) of the Act and consequently,
there will not be any liability to pay fringe benefit tax on such
expenditure as the expenditure has not been incurred in the course of
business or profession. However, where the expenditure incurred for
partners or non-employee directors is relatable to business and there
may be some element of personal nature in such expenditure, such as
use of motor cars, etc, the same need not be disallowed now as the
same is liable for fringe benefit tax by capturing the personal element
of such expenditure as otherwise it may lead to double taxation.
Fringe Benefit Tax is a new law. As is the case with any new
law, many issues will arise on its interpretation and application. One
can only hope that all such issues get sorted out and clarified at the
earliest. ■
But the Indian Govt.has withdrawn the FBT from this current year.

With the introduction of Fringe Benefit Tax, the
expenditure heads need to be revised so that the
expenditure not liable for fringe benefit do not get
merged with expenditure liable for this Tax. For
example, hospitality provided to employees by
way of food and beverage in office or factory or by
way of paid vouchers need to be debited under
a separate head other than the employee welfare/
staff welfare expenditure.
TAXATION
INVITATION FOR CONTRIBUTING ARTICLES FOR COMING ISSUES
We have decided to bring out the July 2005 issue of The Chartered Accountant as special issue on the theme ‘Accountancy
Profession in Global Perspective’ to mark the 56th Chartered Accountants Day (July 1, 2005). The professionals are
invited to contribute articles on the theme from both national and international angles.
The articles should not exceed 4,000 words each. Every article should have an Executive Summary of about 100/150
words, author’s e-mail ID, postal address and contact numbers along with a passport size photograph.
Theme for other future issues are:
August – Service Tax September – SMPs and SMEs
The articles for the July 2005 special issue should reach us by June 9, 2005 while the write-ups for August 2005 issue
should reach us by July 9, 2005.
The articles can be sent to us by e-mail at nadeem@icai.org / ebsecretariat@icai.org or by post (two manuscripts along with
a soft copy of article, e-mail Id and passport size photograph) to -
The Editor, The Chartered Accountant, Journal Section, ICAI, PO Box 7100, New Delhi - 110002
The contributors may go through the ‘Guidelines for Authors of The Chartered Accountant Journal’ hosted on the website
of the Institute at the link http://www.icai.org/announ/guidelinesauthors.html for reference.
http://www.indiastudychannel.com/resources/Index.aspx?UserId=Aparna1970