By Geeta Jani, Dhishat B. Mehta, Chartered Accountants
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9 Singapore Tourism Board, in re
(2008) 307 ITR 34 (AAR)
S. 115WA, S. 115WB, Income-tax Act
Dated : 17-10-2008
Issue :
Liaison office of non-resident is chargeable to FBT even if
no income is earned in India.
Facts :
The applicant was a company incorporated in Singapore with
the objective of promoting Singapore tourism (‘SingCo’). SingCo had set up
several liaison offices in India and had employees based in India, working in
these liaison offices. SingCo did not carry on any business activities through
these liaison offices; no income accrued or arose to SingCo in India; and the
expenses relating to the liaison offices were reimbursed by the Singapore office
of SingCo.
SingCo sought advance ruling on the question whether FBT
would be applicable in respect of its employees in its liaison offices in India.
Before the AAR, the tax authorities referred to AAR’s ruling
in Population Council Inc., In re (2006) 286 ITR 243 (AAR) and submitted
that while in that ruling, the applicant was a non-profit-making organisation,
in the present case, the applicant is a profit earning company though it is not
earning any income in India because RBI does not permit liaison offices of
foreign companies to do so. It further submitted that the applicant has incurred
expenses which would be subject to FBT and the earlier ruling should apply to
the applicant’s case.
Held :
The AAR referred to the observations in the earlier ruling
and ruled that :
(i) as per the scheme of Chapter XII-H and S. 115WA, FBT
liability is in addition to income-tax and is subject to separate provisions
with regard to return, assessment, payment of tax, etc.
(ii) FBT is a levy on certain types of expenditure rather
than tax on income. Taxability of income is not a prerequisite for liability
to FBT. S. 115WA(2) makes it clear that even when there is no liability to pay
income-tax, FBT liability may still be attracted.
(iii) a foreign entity not earning any income in India, but
having employees based in India, is liable to FBT if it pays fringe benefits
to those employees.
