FBT and disallowance u/s 40A(9)

Hi Mr Devarajan,

Why do you need to pay FBT on contribution to a staff welfare fundat all? Since such an expense gets disallowed u/s 40A(9), the matteris settled there. The government can't both disallow an amount andexpect us to pay FBT on it as well. The idea behind FBT was to curbthe practice of perquisites enjoyed collectively by employees goinguntaxed in their hands owing to it being practically impossible toattribute an appropriate quantum of those benefits to the individualemployees. While the employer got to knock such expenses off hisincome. The government felt—-not entirely unjustifiably—-it wasgetting swindled out of its legitimate share of revenue—-since oneperson's expense is another person's income, if the former savestax, the latter ought to pay tax to even the scales. Since itwouldn't have been practical to attribute a collective expense likelabour welfare to individual employees and make them pay tax on it,the government made the employer cough up a fringe benefit tax at acertain percentage of the expenses incurred on the workforce.Since in your case we have a specific provision for the disallowanceof contribution to any unrecognized fund, the amount will bedisallowed and there would be no question of paying up the FBT onit.May be if you want to camouflage the nature of this expense in orderto claim it under the head labour welfare, then you'd have to paythe FBT on it.Thanks,CA Sanjeev Bedi--- In

ICAI_CIRC_MEERUT_CA@yahoogroups.com, "Devarajan.V." wrote:>> Any contribution to staff benefit fund other than PF, Gratuityetc.> will not be allowed as business expenditure u/s 40A(9). In suchcase,> whether this should be taken under employee welfare for thepurpose of> calculating FBT?>> CA Devarajan.V>