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| *Ostroff, Fair and Company>>>India Taxes |
Whether the reimbursement of travelling expenses incurred by a firm of chartered accountants is liable to FBT? |
Whether the reimbursement of travelling expenses incurred by a firm of chartered accountants is liable to FBT? Please refer to circular issued by CBDT on FBT. In case of reimbursements to third party, FBT will not be levied on the entity reimbursing the amount, since that party itself has not SPENT the amount. But the said thirty party shall be liable for payment of FBT, in case provisions of FBT are applicable to third party. Lets say ABC Ltd. has reimbursed certain travel expense to a partnership firm of a chartered accountants X Associates. In this case FBT shall be levied on X Associates, rather than ABC Ltd., since as per CBDT circular, the expenditure has actually been spent by former (though reimbursed by latter) rather than latter, therefore REIMBURSED Party should bear the FBT. CA. Deepak Bholusaria I suppose you are from India and refer to the Fringe Benefits Tax introduced by the Government of India under new Section 115WB in the Income Tax Act. Accordingly, the answer is as follows: The fringe benefits shall be deemed to have been provided by the employer to his employees, if the employer has, in the course of his business or profession (including any activity whether or not such activity is carried on with the object of deriving income, profits or gains) incurred any expense on, or made any payment under Sub Sec. (Q), as introduced by the Finance Act 2006, for the following purposes, namely: (Q) tour and travel (including foreign travel) BUT, in my view, this refers to tour and travel to any person at the expenses of the firm to bring business to derive further income. Your question seems to refer to the travelling expenses for the journeys made for the purpose of audit of the clients of the firm of the Chartered Accountants for carrying our your assigned duties, as an employee or articled/audit clerk. If so, the said reimbursement will fall in to the category of the Travelling Allowance, which is termed as a perquisite and is exempt from income tax. For further guidance you may like to read "Dhingra's Income Tax for employees 2006-07 & 2007-08', as published by M/s JBA Publishers, New Delhi and available from all leading booksellers of India. NO; For an item of expenditure, to be made liable for FBT., there has to be a relation of employee - employer, a firm of Chartered accountants (probably appointed to do statutory or other audit) are not the employees of the company Primary condition of FBT applicability is there should be the Employer and Employee relationship. But in this case there is no Employer and Employee relation to reimberse the expenses of CA Firm |
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