The Finance ministry can take a sigh of relief now as it has a reason to celebrate as the Supreme Court vacated the stay allowed by Madras High Court. But the Corporates must be a dejected lot as the Supreme Court upheld the constitutional validity of the much infamous Fringe Benefit Tax. So, the much maligne Fringe Benefit Tax is yet to stay.

After the decision of the Supreme Court, the Finance Ministers plans to accumulate significant revenue through this route got a shot in the arm. A two-judge Bench of Justices AR Lakshmanan and CK Thakker vacated the stay allowed by the Madras High Court on the fringe benefit tax.

“The revenue department is now optimistic that collections from the tax would cross Rs 4,000-crore mark when the fourth instalment is paid on March 16.” said sources from the ministry.

The Madras High Court had preiviously stayed collection of FBT from a petitioner, Kumbhat & Co in September last year. Many companies did not pay their dues on the pretext of the decision of the Madras High Court.

Fringe Benefits have been defined as any privilege, service, facility or amenity directly or indirectly provided by an employer to an employee by virtue of their employment. The levy is based on the principle of cost to the company. Currently, the employer pays a 30% tax on a defined base on different types of expenses.

Kumbhat & Co had challenged the constitutional validity of Sections 115WA to 115WL of the Income-Tax Act, 1961 which sought to tax privileges, services, facilities and amenities directly or indirectly provided by an employer to an employee or reimbursements made directly or indirectly for any purpose. They contended that these provisions were ultra vires of Articles 14 and 19(1)(g) of the Constitution.

However all the speculations have been put to rest by the decision of the Hon’ble Supreme Court. So, Corporates be ready shell out your earnings. This tax is going to stay and burn holes in your pockets, no matter how illogical it is.

Popularity: 1% [?]