FBT on car insurance

Hi Rahul,

Mr J P Aggarwal, the doyen of the group, has answered your query quite exhaustively. Indeed if we go by the CBDT circular, it's difficult to contend that car insurance is not "car running and maintenance" as envisaged u/s 115WB(2)(H). If your car isn't insured in respect of third-party indemnification, you can be challaned by traffic cops. So at least the third-party insurance is a necessary expense to run the car. But most of us go in for the comprehensive insurance cover these days, which covers the risk of damages to our car as well. May be we can make a case for not shelling out FBT on the component of insurance premium other than that attributable to third-party insurance at least, since we have an option not to take it!If you look up the Bare Act, Section 115WB(2)(H) says this:[(H) repair, running (including fuel), maintenance of motor cars and the amount of depreciation thereon]Notice the words within brackets "including fuel"? Pray, how on earth can you run a car without fuel (LPG/CNG is also a variant of fuel)? Expenditure on fuel is the prime expenditure you incur to get a car running. So where was the need to insert these words? This shows the lawmakers don't want to give a restrictive meaning to "running and maintenance" . This is also evident from even driver's salary and interest on car loan being subjected to FBT on the grounds that these constitute car running expenses!Car Insurance pe FBT lagega, mere vichar mein.Thanks,CA Sanjeev Bedi--- In http://us.mc508.mail.yahoo.com/mc/compose?to=ICAI_CIRC_MEERUT_CA%40yahoogroups.com, "CA J P Agarwal" wrote:>> Dear Friends,> > The CBDT circular on FBT (probably dated 28.7.05) covered salary paid to driver as well as garage rent to be included as motor car repair and maintenance for FBT, so as per CBDT insurance would also be covered (I don't remember if insurance was also specifically mentioned) on the reasoning of proximate purpose.> > Thus, if the matter is petty go by the CBDT but if you want to contest and you client is willing than you should contest it. Insurance is treated as different from repairs u/s 31 of IT Act and cannot be treated as repair or maintenance.> > Repairs and insurance of machinery, plant and furniture.> > 1531. 16In respect of repairs and insurance of machinery, plant or furniture used for the purposes of the business or profession, the following deductions shall be allowed-> > (i) the amount paid on account of current repairs thereto ;> > (ii) the amount of any premium paid in respect of insurance against risk of damage or destruction thereof.> > 18[Explanation. -For the removal of doubts, it is hereby declared that the amount paid on account of current repairs shall not include any expenditure in the nature of capital expenditure. ]> > > Now coming to wild theory of proximate purpose of CBDT, as described in CBDT circular , I don't think the proximate purpose of any business expenditure is to run the motor car but is to run the business and make profits. Now as per my wild theory, Expenses incurred for making profit is not covered by FBT so none of the expense would be covered by FBT.> > I would seek expert views.> > CA J P Agarwal> J P Associates> Jhansi> ----- Original Message ----- > From: Pramod Vaya > To: http://us.mc508.mail.yahoo.com/mc/compose?to=ICAI_CIRC_MEERUT_CA%40yahoogroups.com > Sent: Thursday, July 24, 2008 2:46 PM> Subject: Re: {amresh's-CA' s} FBT on car insurance> > > Dear Mr Rahul,> > Althought, it is not strictly falling in the definition of repairs and maintenance but still the insurance expenditure would fall under the category of maintenance of the vehicle. Therefore, it will be subject to FBT.> > I would find out in case, any case law support on this.> > Thanks> Pramod Kumar> > > On Wed, 23 Jul 2008 rahulblyca wrote :> >Dear Sir> >> >Whether FBT is payable on car insurance? As per my view car insurance> >is not a part of repair & maint.> >> >Pls. advice. If there is any case law, notification etc. pls. let me> >know.> >> >Regards> >> >CA Rahul Agarwal> >