S. S. Vijayakumar

Reply

On a reading of the provisions of Section 115WB(2) it is the understanding of the columnist that only employee related expenses, which are listed out in the sub-section, will be subject to fringe benefit tax. If an expense is completely unrelated to an employee, such expense should not be subject to fringe benefit tax.

If the expenses is wholly or partly related to employees, fringe benefit tax would be payable in respect of such expense.

The Board, however, through its Circular No.8 of 2005 dated August 29,2005 has clarified that even expenses which are listed in Section 115WB(2) which are unrelated to employees will be subject to fringe benefit tax. At any rate whichever view of the matter is taken there can be no difficulty in concluding that Boarding and Lodging expenses reimbursed to employees will be subject to fringe benefit tax. There should also be no difficulty in concluding that sales promotion expenses in the form of incentives to distributors will not be subject to fringe benefit tax. This view is also supported by the Circular in answering question number 61.

In so far as the batta given to drivers is concerned this would form part of the driver's salary and should not be subject to fringe benefit tax.

The travelling expense for delivery of an employer's products should be outside the ambit of fringe benefit tax though the circular seems to clarify otherwise. The same will be the position with regard to advertisement and sales promotion expenses incurred on outsiders who are not employees of an employer.

Query

In case of a partnership firm will the charges for telephone installed at the office and which is in the name of the firm be subject to fringe benefit tax?

Himanshu

Reply

So long as the partnership firm has at least one employee it is felt that fringe benefit tax will be attracted even in respect of the telephone expenses incurred on the telephone which is installed at an office and which is in the name of an employer. You may note that the partnership firm is also an employer for the purpose of fringe benefit tax.

Query

Will tax be payable on long term capital gains from sale of shares where the share was purchased between March,3, 2003 and September 14,2003?

Vineet Malhotra

Reply

Section 10(36) allows an exemption on long term capital gains if:

The long-term capital asset is an eligible equity share in a company

The share was purchased on or after March 1,2003 but before March 1, 2004.

Eligible equity has been defined in the section to be shares purchased in the secondary market and where such share is a constituent of the BSE-500 index of the stock exchange, Mumbai on March 1,2003 and where the purchase and sale is entered into in a recognised stock exchange in India. If the share is allotted through a public issue on or after March 1,2003 and is listed in a recognised stock exchange before March 1,2004 and the transaction of sale is entered into in a recognised stock exchange in India, the condition stands satisfied. You can claim the exemption if you satisfy these conditions and will not have to pay any tax on the capital gain.

Similarly section 10(38) grants an exemption in respect of any gain arising from the transfer of equity shares if:

The transaction of sale of such equity shares or units is entered into after the coming into force of securities transaction tax i.e., on or after October 1,2004. Such transaction is chargeable to securities transaction tax i.e. where the sale is through a recognised stock exchange.

(Mail your queries to taxtalk@thehindu.co.in or by post to `Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002.)

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