Syed Shah Mohammed Quadri, J. (Chairman), A.S. Narang and A. Sinha, Members o Fringe benefit tax--Transportation costIncurred by applicant, a non-resident company--Transportation cost incurred by applicant, a non-resident company, in providing the transportation facility for movement of offshore employees from their residence in home countries (outside India) to the place of work (rig in India) and back is liable to fringe benefit tax.
Whether the transportation costs incurred by the applicant on the to and fro journeys of employees from their residences in their home countries to the designated city in India and from there to the rig (in India) fall within the meaning of |conveyance| or |tour and travel (including foreign travel)| in clauses (F) and (Q) respectively of sub-section (2) of section 115WB of the Act. To resolve this controversy it is necessary to comprehend the connotation of terms, |residence|, |tour and travel|, |conveyance| and |transport|. They are not defined in Chapter XII-H of the Act and as they are not technical terms, they have to be given meaning as understood by English speaking people. [Para 7] The word |residence| takes its colour from the context in which it is used. Insofar as the said term is used in the context of FBT, it is clear that it connotes a place of abode where a person intends to dwell for a considerable length of time and not a place where a person is required to stay for a short duration in connection with his duties like the stay at the rig. In this view of the matter, apart from the fact that the contention is extraneous to the question, it is not possible to accept the contention of revenue that the rig is the residence of the off shore employees and therefore in coming and attending to duties on the rig, no transportation is involved. It would also be pertinent to mention that the offshore employees of the applicant cannot also be said to have residence in the designated city in India, which is a transit city. [Para 8] The terms |conveyance| and |transport| are used many a times interchangeably. They are almost synonymous though there is a subtle difference in them; conveyance is something which serves as a means of transportation, like a vehicle, helicopter, etc., transportation means movement of people or goods from one place to another. Further while conveyance is provided to one or more persons specifically for a purpose, transportation is a general facility which can be availed of by one and all. However, they are also used for both providing a vehicle, etc., for transportation as well as for transportation of personnel from one place to another. Similarly, tour and travel are used to denote movement from one place to another, one country to another, both for pleasure as well as for discharging of duty. One of the meanings of tour specifically refers to |on an oil rig|. [Para 9] The meaning of |tour and travel (including foreign travel)| in clause (Q) of sub-section (2) of section 115WB, will have to be understood in contradistinction to clause (b) of sub-section (1) of section 115WB. Whereas clause (b) of sub-section (1) brings free or concessional tickets provided by the employer for private journeys of his employees or their family members within the meaning of fringe benefits, clauses (F) and (Q) of sub-section (2) cover |conveyance| and |tour and travel| (including foreign travel), other than on private journeys | within the meaning of fringe benefits deemed to have been provided by the employer to his employees. It is noted above that for the first lap of the journey of the offshore employees from their home countries to the designated city in India, the applicant is providing free (round-trip) tickets; it would, therefore, fall under clause (Q) of sub-section (2). For the journeys from the chopper base in India to the rig for which the applicant is providing helicopters, it would amount to the employer providing conveyance. inasmuch as the transportation of the employees from their residence in their home countries to the rig falls within the above-mentioned clauses (F) and (Q) respectively of sub-section (2) of section 115WB of the Act; it cannot but be held that the fringe benefits shall be deemed to have been provided by the applicant to the employees in the course of its business; therefore, the applicant is liable to pay fringe benefit tax under the Act. While considering applicability of FBT to the transportation costs incurred by the applicant on the employees, it must be remembered that if the transportation of offshore employees of the applicant falls within sub-section (1) of section 115WB, the provisions of sub-section (3) thereof would, subject to the terms contained therein, apply. But if such transportation falls within the purview of deemed fringe benefits within the meaning of sub-section(2), the provisions of sub-section (3) cannot be called in aid to claim relief provided therein. [Para 10] It is interesting to note question No. 24 and answer thereto in the said Circular No. 8, dt. 29-8-2005.
That question deals with the case of a foreign company, which sends its employees on tour to India; the answer provides that the liability to pay FBT would depend upon whether or not the company is an employer in India. A foreign company is treated as an employer in India provided it has employees based in India; if such foreign company has no employees based in India, it is not an employer in India and is not liable to pay FBT in India. It has been pointed out above that the applicant has three categories of employees", (i) employees working on land and dealing with administration; (ii) Indian employees working on the rig; and (iii) foreign employees transported to India for the purpose of working on the rig. Therefore, the employer though a foreign company will be treated as employer in India inasmuch as a section of its employees are based in India. It is worthwhile to point out that the liability of the foreign company to pay fringe benefit tax on sending its employees on tour and travel to India depends on whether the foreign company is an employer in India and not whether the employees are working in India. After a careful reading of the questions and answers in the circular it has been pointed out above that question No.104 relating to transportation of the employees whether free or on subsidized basis for journeys from their residence to the place of work and from the place of work to their residence, refers to the residences of the employees within India and that the same position will govern sub-section (3) of section 115WB. [Para 11] For the reasons mentioned above, the transportation cost incurred by |the applicant| in providing the transportation facility for movement of offshore employees from their residence in home countries (outside India) to the place of work (rig in India) and back is liable to fringe benefit tax. [Para 12] 1. This application by a non-resident - R & B Falcon (A) Pty Ltd. - is filed under Section 245Q(1) of the IT Act, 1961 (for short "the Act").
The applicant is incorporated under the laws of the Commonwealth of Australia. It is engaged in the business of providing mobile offshore drilling rig (MODR) along with crew on a day rate charter hire basis to drill offshore wells. On 10th Oct., 2003 the applicant entered into a contract with ONGC for supplying MODR along with equipment and offshore crew. The employees of the applicant work on the MODR on commuter basis. Under this system an employee works on MODR for 28 days (called on days) which is then alternated by a 28 days field break (called off days) when he stays at the place of his residence. The members of the crew are residents of various countries like Australia, USA, UK, etc.
They are transported from their home country to the MODR in two laps - the first is from the nearest designated base city at the place of residence in the home country to a designated city in India for which the applicant provides free air tickets of economy class and the second is from that city in India to MODR through helicopter especially hired by the applicant for this purpose. On completion of 28 days they are transported back from MODR to the designated base city in their home country in the same manner. They are not paid any The fringe benefit tax (for short 'FBT') was introduced by the Finance Act, 2005. To clarify the provisions relating to FBT, the CBDT issued Circular No. 8 of 2005 on 29th Aug., 2005 [(2005) 197 CTR (St) 85]. The applicant claims that the answer to question No. 104 in the said circular shows that it is not liable to FBT and that subsequently Section 115WB(3) of the Act was amended by Finance Act, 2006 to exclude from the operation of FBT any free or subsidized transportation facility provided by the employer to his employees for journeys by the employees from their residence to the place of work or such place of work to the place of residence. On these facts, the applicant seeks advance ruling of the Authority on the following question: Whether transportation cost incurred by R & B Falcon (A) Pty Ltd. (hereinafter referred to as the "applicant") in providing transportation facility for movement of offshore employees from their residence in home country to the place of work and back is liable to fringe benefit tax ("FBT")? 2. The jurisdictional Commissioner (for short 'the CIT') submitted his comments to the application. It is stated that the employees of the applicant had to work and sleep on the rig for 28 days and there is no element of transportation of these employees from the place of work to their residence on day-to-day basis during that period. The expenses incurred on transportation of the employees from the home country to the place of work in India is covered under Section 115WB(1)(a) and also under Section 115WB(2)(F) as deemed fringe benefits. No tax is being paid by employees for the transportation, therefore the expenses incurred by the applicant have to be treated as fringe benefits under the Act. The CBDT issued Circular No. 8 of 2005, dt. 29th Aug., 2005 to explain the operation of the FBT in the form of questions and answers.
The applicant has incorrectly placed reliance on question No. 104 and the answer thereto. As per the clarification given in the answer to the question No. 7 in the circular such benefits as are provided by the applicant to its employees are covered under FBT and it is only when they cannot be guantified, they will not be brought under FBT. Answers to question Nos. 34 and 78 would show that the applicant falls within the ambit of Clause (F) to Sub-section (2) of Section 115WB of the Act.
It is added that the applicant has a PE in India and has been filing returns of its income under Section 44BB of the Act. Since its employees have been working on the rig in India, the applicant would be the employer in India and as such is liable to FBT on the travel cost.
3. Mr. Mukesh Bhutani, learned Counsel appearing for the applicant, submits that three categories of employees are working under the applicant (1) employees based on land who attend to the administration, etc. (ii) Indian employees working on the rig and (iii) foreign nationals (employees) who are transported to the rig from outside India; and this application relates to the third category of employees.
Having regard to the nature of duties to be performed by the offshore employees on the rig, namely, staying during on days (for 28 days) on the rig and staying off days (for 28 days) at the place of their residence, they are being transported by the applicant from their home country to a designated airport in India by airplane and from there to the rig by helicopter; such transportation of offshore employees does not fall within the charge of FBT under Section 115WA of the Act.
According to him the position is made clear by the CBDT Circular No. 8 of 2005 which clearly excludes such transportation of employees from the ambit of the charge of FBT; further, the same position is also made clear by Section 115WB(3). The plea of the CIT, contends the learned counsel, that as the residence of the offshore employees is rig, no transportation is involved during on days and the transportation of the employees from their home country to the rig is not covered by Sub-section (3) of Section 115WB and that it is liable to FBT in view of the provisions of Sections 115WB(1)(a) and 115WB(2)(F), is untenable in law. Mr. Y.S. Rawat, the CIT, Dehradun, on the other hand, has argued that the employees are carried in batches to the rig and they are alternated after each period of 28 days; the employees live on the rig for 28 days while they are on work there, therefore, the place of residence of the employees is the rig and as such no transportation of offshore employees is involved during the period when they work on rig.
Mr. Rawat submits that the transportation of offshore employees from their residence to the rig can be conveniently divided into four sectors; (i) place of residence to airport in the home country, (ii) from airport of the home country to a designated city in India, (iii) from the designated city in India to the chopper, and (iv) from the chopper base to the rig where the employees work and reside for 28 days; for the first sector no conveyance/transportation is provided by the employer to the employees but for the rest of the three sectors, the employer provides conveyance/transportation which falls under Section 115WB(2)(F) and (Q). He has taken us through various questions and answers, contained in the said circular, in his endeavour to bring home the point that the applicant is liable to FBT.Since the controversy in this case centres round the scope of FBT, it will be apposite to refer to the material provisions of the Act. By the Finance Act, 2005 Chapter XII-H which comprises of Sections 115W to 115WL, was inserted in the Act w.e.f. 1st April, 2006.
115WA. Charge of fringe benefit tax - (1) In addition to the income-tax charged under this Act, there shall be charged for every assessment year commencing on or after the 1st day of April, 2006, additional income-tax (in this Act referred to as fringe benefit tax) in respect of the fringe benefits provided or deemed to have been provided by an employer to his employees during the previous year at the rate of thirty per cent on the value of such fringe benefits.
(2) Notwithstanding that no income-tax is payable by an employer on his total income computed in accordance with the provisions of this Act, the tax on fringe benefits shall be payable by such employer.
Section 115WB defines 'fringe benefits' which is in the following term: 115WB. Fringe benefits - (1) For the purposes of this Chapter, "fringe benefits" means any consideration for employment provided by way of- (a) any privilege, service, facility or amenity, directly or indirectly, provided by an employer, whether by way of reimbursement or otherwise, to his employees (including former employee or employees); (b) any free or concessional ticket provided by the employer for private journeys of his employees or their family members; and (c) any contribution by the employer to an approved superannuation fund for employees.
(2) 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 for, the following purposes, namely- The following Clause (Q) shall be inserted after Clause (P) in Sub-section (2) of Section 115WB by the Finance Act, 2006 w.e.f. 1st April, 2007: (3) For the purposes of Sub-section (1), the privilege, service, facility or amenity does not include perquisites in respect of which tax is paid or payable by the employee [or any benefit ox amenity in the nature of free or subsidized transport or any such allowance provided by the employer to his employees for journeys by the employees from their residence to the place of work or such place of work to the place of residence].
Section 115WC lays down the method of valuing the fringe benefits and Sections 115WD to 115WL are procedural provisions, which are not relevant for the present discussion.
4. It may be seen that Section 115W contains definitions of terms used in the said Chapter. Clause (b) of Section 115W defines the terms "fringe benefit tax" or "tax" to mean the tax chargeable under Section 115WA which is the charging section for the purpose of this Chapter. An analysis of Section 115WA would bring out the following ingredients: (i) on or after 1st April, 2006 additional income-tax referred to as FBT shall be charged for every assessment year; (ii) FBT is leviable in respect of the fringe benefits provided or deemed to have been provided by an employer to his employees during the previous year; (iv) even when no income-tax is payable by an employer on his total income computed in accordance with the provisions of the Act, the tax on fringe benefits is nonetheless payable by such employer.
The expression "fringe benefits" is defined in Sub-section (1) of Section 115WB to mean any consideration for employment provided by an employer by way of: (a) any privilege, service, facility or amenity, directly or indirectly, whether by way of reimbursement or otherwise, to his employees (including former employee or employees); (b) any free or concessional ticket for private journeys of his employees or their family members; and (c) any contribution to an approved superannuation fund for employees.
Further if in the course of his business or profession the employer has incurred any expenditure on or made any payment for any of the purposes enumerated in Clause (A) to (Q) of Sub-section (2) of Section 115WB the fringe benefits shall be deemed to have been provided by the employer to his employees. We are concerned here with Clause (F) "conveyance" and Clause (Q) "tour and travel (including foreign travel)" of Sub-section (2) which, among others, are specified as deemed fringe benefits. The said clauses read as follows: The rigour of FBT leviable on the fringe benefits defined in Sub-section (1) is to some extent mitigated by Sub-section (3) of Section 115WB which is clarificatory in nature. It is important to note that no relief is provided in the case of levy of FBT on the deemed fringe benefits specified in Sub-section (2). The relief is composed of fringe benefits embodied in two limbs of Sub-section (3), which are excluded from the purview of Sub-section (1). They are (i) "the privilege, service, facility or amenity in the nature of perquisites in respect of which tax is paid or is payable by the employee"; and (ii) "any benefit or amenity in the nature of free or subsidized transport or any such allowance provided by the employer to his employees for journeys by the employees from their residence to the place of work or such place of work to the place of residence". The rationale of the first limb of Sub-section (3) appears to be to avoid double taxation on the same privilege, service, facility or amenity in the nature of perquisites.
5. On the above analysis of provisions of Sections 115WA and 115WB, it is seen that FBT is in addition to the income-tax and is payable by the employer on the value of the fringe benefits provided or deemed to have been provided as consideration for employment even if he is not liable to pay income-tax on his total income computed in accordance with the provisions of the Act [see The Population Council Inc., In re (2006) 205 CTR (AAR) 97 : (2006) 286 ITR 243 (AAR). Any privilege, service, facility or amenity directly or indirectly provided by the employer to his employees either by way of reimbursement or otherwise; any free or concessional tickets provided by the employer for private journeys of the employees or their family members and any contribution by the employer to an approved superannuation fund fall within the meaning of fringe benefits. We have noted above that Sub-section (2) of Section 115WB enumerates deemed fringe benefits. It may be noticed here that Sub-section (1) of Section 115WB does not take in its fold free or concessional tickets provided by an employer to his employees for the purpose of journeys outside India. A combined reading of Sub-sections (1) and (2) of Section 115WB of the Act would show that the ambit of privilege, service, facility or amenity, provided directly or indirectly, by an employer to his employees by way of reimbursement or otherwise does not take in its ambit 'conveyance' and 'tour and travel (including foreign travel)', otherwise the said expressions could not have been the elements of the deeming provision in Sub-section (2).
Insofar as FBT on the fringe benefits of free and concessional tickets by the employer to his employees or their family members is concerned, it is confined to private journeys only. In the instant case providing free air tickets for the round-trip, the first sector (from the home State of employees to the designated city in India and the return journey) cannot be termed as private journeys. They are undertaken for the purpose of the employment.
It would be pertinent to refer to Sub-section (3) of Section 115WB which excludes for the purpose of Sub-section (1) 'perquisites' (on which tax is paid or is payable by the employees) and any benefit or amenity in the nature of free or subsidized transport or any such allowance provided by the employer to his employees for journeys by the employees from their residence to the place of work or such place of work to the place of residence, from the concept of the privilege, service, facility or amenity. The term "perquisites" in Sub-section (3) is not defined in the definition Clause - s. 115W. We have, therefore, to understand "perquisites" as defined in Section 17(2) of the Act. The point whether the benefit or amenity provided by the employer satisfies the requirements of perquisites need not detain us because perquisites get excluded from the purview of FBT only when the employees have paid or are liable to pay tax on them. It is nobody's case that the employees have paid or are liable to pay tax on such perquisites.
Consequently the benefit/amenity in the nature of free or subsidized transport or any such allowance provided by the employer to his employees for journeys by the employees from their residence to the place of work or such place of work to the place of residence, will not (sic) attract FBT.6. Now it may be recalled that we have held above that Sub-section (1) of Section 115WB does not take in its fold free or concessional tickets provided by an employer to his employees for the purpose of journeys outside India, therefore, it follows that the transportation costs incurred by the applicant in bringing the offshore employees from the place of their residence outside India to the rig (in India) will not fall within the second limb of Sub-section (3) of Section 115WB.After the introduction of FBT (by inserting Chapter XII-H in the Act), the CBDT issued Circular No. 8 of 2005 on 29th Aug., 2005 to clarify the scope of the charge of FBT and the provisions contained in the said chapter. Para 1 of the circular which is introductory is in the following terms: The Finance Act, 2005 has introduced a new levy, namely, fringe benefit tax (hereafter referred to as FBT) on the value of certain fringe benefits. The provisions relating to levy of this tax are contained in Chapter XII-H (Sections 115W to 115WL) of the IT Act, 1961. This circular seeks to provide a harmonious, purposive and contextual interpretation of the provisions of the Finance Act, 2005 relating to the FBT so as to further the objective of this levy.
Question No. 104 of Circular No. 8 of 2005, which is said to be the precursor of the clause inserted by the Finance Act, 2006 in Sub-section (3) of Section 115WB of the Act and the answer thereto read as follows: 104. Whether expenditure incurred by the employer for the purposes of providing free or subsidized transport for journeys to employees from their residence to the place of work or such place of work to the place of residence would attract FBT? Ans. The free or subsidized transport provided to employees for journeys from their residence to the place of work or such place of work to the place of residence is in lieu of conveyance/transportation allowance, which is not liable to FBT. Accordingly, the expenditure incurred by the employer for the purposes of providing free or subsidized transport for journeys to employees from their residence to the place of work or such place of work to the place of residence will not be liable to FBT.From a cursory reading of the above question and the answer, it appears that the free or subsidized transport provided to employees for journeys from their residence to the place of the work or such place of work to the place of residence if in lieu of conveyance/transportation allowance, is not liable to FBT and therefore the expenditure incurred by the employer thereof will not be liable to FBT. The gist of the aforementioned question and answer is to be found in the amended Sub-section (3) of Section 115WB. However, a careful reading and the context of question No. 104 and the answer and our finding on the second limb of Sub-section (3) of Section 115WB, would disclose that the journeys of the employees spoken of therein relate to journeys from the residence of the employees within India to the place of work in India.
The transportation of employees in the instant case, according to the applicant as well as for purposes of the question, is from their residences in the home countries (outside India) to the place of work in India (the rig). Mr. Rawat has argued that the transportation of the employees falls within Clause (F) and Clause (Q) of Sub-section (2) of Section 115WB and Mr. Bhutani's contention is that such transportation of the employees would be within the purview of Sub-section (3) of Section 115WB.The next point that we would be concerned with, is whether the transportation costs incurred by the applicant on the to and fro journeys of employees from their residences in their home countries to the designated city in India and from there to the rig (in India) fall within the meaning of "conveyance" or "tour and travel (including foreign travel)" in Clause (F) and (Q) respectively of Sub-section (2) of Section 115WB of the Act.
To resolve this controversy it is necessary to comprehend the connotation of terms, 'residence', 'tour and travel', 'conveyance' and 'transport'. They are not defined in Chapter XII-H of the Act and as they are not technical terms, they have to be given meaning as understood by English speaking people. The dictionary meanings of these words are as follows: Residence - The place of a person's home or habitation; the place where he abides;... It is of importance as determining domicile and liability of taxation.
Tour - ...a spell of work or duty on military or diplomatic service, on an oil rig, etc. the period of time to be spent at a particular post (see tour of duty)....
Travel - ...from place to place as a sales representative, working for a particular firm or dealing in a specified commodity ... Move; proceed; pass, esp., deliberately or systematically from point to point....
Conveyance - The action of carrying or transporting; a means of transport....
Transport - Carry (people or goods) from one place to another by means of vehicle, aircraft or ship....
7. In the Model Convention on Income and Capital issued by OECD term 'residence' is explained in the context of the tie-breaker rule. It is stated "the residence is that place where the individuals own or possess a home; this home must be permanent, that is to say, the individual must have arranged and retained it for his permanent use as opposed to staying at a particular place under such conditions that it is evident that the stay is intended to be of short duration". It is stated that the concept of residence implies arranging a dwelling place available to him at all times continuously and not occasionally for the purpose of stay which, owing to the reasons for, it is necessarily for short duration like for pleasure, business travel, education travel, attending course, etc. Mr. Bhutani also invited attention to the observation of the Hon'ble Supreme Court in Smt. Jeewanti Pandey v.Kishan Chandra Pandey (1981) 2 SCC 517. There the Hon'ble Court in considering the concept of residence for the purpose of Section 19(ii) of the Hindu Marriage Act, 1955, pointed out that in ordinary sense 'residence' was more or less of a permanent character. A perusal of the judgment of the Hon'ble Supreme Court in Sukh Lal and Ors. v. State Bank of India and Ors. would show that a place of residence need not necessarily be permanent and exclusive but it must be occupied with the intention of setting up a fixed though not permanent abode and that sojourn for a purely temporary purpose would not constitute residence and the place of sojourn would not be deemed to be a place of residence. From the above discussion it follows that the word "residence" takes its colour from the context in which it is used. Insofar as the said term is used in the context of FBT, it is clear to us that it connotes a place of abode where a person intends to dwell for a considerable length of time and not a place where a person is required to stay for a short duration in connection with his duties like the stay at the rig. In this view of the matter, apart from the fact that the contention is extraneous to the question, it is not possible to accept the contention of Mr. Rawat that the rig is the residence of the offshore employees and therefore in coming and attending to duties on the rig, no transportation is involved. It would also be pertinent to mention that the offshore employees of the applicant cannot also be said to have residence in the designated city in India, which is a transit city.
The terms "conveyance" and "transport" are used many a times interchangeably. They are almost synonymous though there is a subtle difference in them; conveyance is something which serves as a means of transportation, like a vehicle, helicopter, etc.; transportation means movement of people or goods from one place to another. Further while conveyance is provided to one or more persons specifically for a purpose, transportation is a general facility which can be availed of by one and all. However, they are also used for both providing a vehicle, etc. for transportation as well as for transportation of personnel from one place to another. Similarly, tour and travel are used to denote movement from one place to another, one country to another, both for pleasure as well as for discharging of duty. One of the meanings of tour specifically refers to ' on an oil rig'.
8. The meaning of 'tour and travel (including foreign travel)' in Clause (Q) of Sub-section (2) of 115WB will have to be understood in contra distinction to Clause (b) of Sub-section (1) of Section 115WB.Whereas Clause (b) of Sub-section (1) brings free or concessional tickets provided by the employer for private journeys of his employees or their family members within the meaning of fringe benefits, Clause (F) and (Q) of Sub-section (2) cover 'conveyance' and 'tour and travel' (including foreign travel), other than on private journeys, within the meaning of fringe benefits deemed to have been provided by the employer to his employees. We have noted above that for the first lap of the journey of the offshore employees from their home countries to the designated city in India, the applicant is providing free (round-trip) tickets; it would, therefore, fall under Clause (Q) of Sub-section (2).
For the journeys from the chopper base in India to the rig for which the applicant is providing helicopters, it would amount to the employer providing conveyance. Inasmuch as the transportation of the employees from their residence in their home countries to the rig falls within the abovementioned Clause (F) and (Q) respectively of Sub-section (2) of Section 115WB of the Act; it cannot but be held that the fringe benefits shall be deemed to have been provided by the applicant to the employees in the course of its business; therefore, the applicant is liable to pay FBT under the Act. While considering applicability of FBT to the transportation costs incurred by the applicant on the employees, it must be remembered that if the transportation of offshore employees of the applicant falls within Sub-section (1) of Section 115WB the provisions of Sub-section (3) thereof would, subject to the terms contained therein, apply. But if such transportation falls within the purview of deemed fringe benefits within the meaning of Sub-section (2), the provisions of Sub-section (3) cannot be called in aid to claim relief provided therein.
In our view question No. 7 and the answer thereto of the circular are of no consequence in this case. That question and the answer deal with valuation of fringe benefits and apply where no provision for computing the value of any particular fringe benefit exists and therefore no FBT is leviable even if such fringe benefit falls within Clause (a) of Sub-section (1) of Section 115WB. It is interesting to note question No. 24 and answer thereto in the said circular. That question deals with the case of a foreign company, which sends its employees on tour to India; the answer provides that the liability to pay FBT would depend upon whether or not the company is an employer in India. A foreign company is treated as an employer in India provided it has employees based in India; if such foreign company has no employees based in India, it is not an employer in India and is not liable to pay FBT in India. It has been pointed out above that the applicant has three categories of employees - (i) employees working on land and dealing with administration; (ii) Indian employees working on the rig; and (iii) foreign employees transported to India for the purpose of working on the rig. Therefore, the employer though a foreign company will be treated as employer in India inasmuch as a section of its employees are based in India. It is worthwhile to point out that the liability of the foreign company to pay FBT on sending its employees on tour and travel to India depends on whether the foreign company is an employer in India and not whether the employees are working in India.
After a careful reading of the questions and answers in the circular it has been pointed out above that question No. 104 relating to transportation of the employees whether free or on subsidized basis for journeys from their residence to the place of work and from the place of work to their residence, refers to the residences of the employees within India and that the same position will govern Sub-section (3) of Section 115WB.9. For the reasons mentioned above, we rule on the aforementioned question that the transportation cost incurred by R & B Falcon (A) Pty Ltd. (hereinafter referred to as the "applicant") in providing the transportation facility for movement of offshore employees from their residence in home countries (outside India) to the place of work (rig in India) and back is liable to FBT.