Mohan Padmanabhan

According to tax experts, since PSU transport outfits do not carry passengers in cars but in vehicles, an urgent word substitution is needed.

Kolkata , June 22

THE State transport companies, many of which have been in the red for long years, are in a tizzy over a governing clause of the new fringe benefit tax (FBT), now chargeable under Section 115WA (of the Finance Act of 2005) as additional income-tax.

As per the relevant clause of Section 115WC of the Act, which prescribes the value of fringe benefits which are specified in Section W115WB of the Act, for an employer engaged in the "business of carriage of passengers or goods by motor cars," the value to be taken shall be 5 per cent instead of 20 per cent; in other words, a kind of relief for the already beleaguered PSU transport companies, but only if they deal in motor cars and not vehicles.

According to tax experts, since PSU transport outfits do not carry passengers in cars but in vehicles, an urgent word substitution is needed.

If the term "motor car" is not clarified properly in the Act, the transport companies may face the problem of an ITO refusing to allow the prescribed 5 per cent valuation on a mere technicality.

Experts said that the transport companies are also being discriminated against in terms of the FBT vis-à-vis the aircraft operators, as under clause (f) of the said Section, an employer engaged in the same business of carriage of passengers or goods by aircraft gets the benefit of nil rate.

Mr S.N. Pal, Managing Director of Calcutta Tramways Company (CTC), which also runs a large fleet of public buses on city roads, told Business Line that the CTC is concerned over this clause and is seeking legal opinion under the overall guidance of the State Government.

"Since we are a State Government undertaking, the matter has been referred to the State Finance Department, which is expected to take up the issue with the Union Finance Ministry. Hopefully, there will be a clarification soon."

Explaining the nuances of clause 2 of Section 115WB, Mr Narayan Jain, tax advocate and consultant on tax matters for CTC, said that FBT shall be deemed to have been provided by the employer if he has in the course of the business made any payment for a set number of purposes.

"Any expenditure incurred or payment made to fulfil any statutory obligation or mitigate occupational hazards or provide first aid facilities in the hospital or dispensary run by the employer shall not be considered as expenditure for employees' welfare."

Among these are included items such as conveyance, tour and travel, use of hotel, boarding and lodging facilities and repair, running (including fuel) and maintenance of motor cars, and the amount of depreciation thereon (relevant in the case of transport companies).

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