Section 115WC is the valuation engine. Section 115WA charges 30% on 'the value of fringe benefits', and that value is computed only here. The section assigns category-wise percentages (20% of clauses A-L; 50% of M-P; 5% of Q), plus actual cost (net of recovery) for tickets, employer's superannuation contribution exceeding Rs.1,00,000 per employee, and the fair market value (net of amount paid) of specified security/sweat equity valued on the date the option vests. Sub-section (2) provides concessional 5% (or Nil) rates for designated businesses (hotels, aircraft, shipping, construction, pharmaceuticals, computer software, carriage by motor car).
Historical context / FA amendment trail
Inserted by the Finance Act, 2005 w.e.f. AY 2006-07. Clause (1)(ba) (FMV of specified security/sweat equity) and the related machinery were inserted by the Finance Act, 2007 (ESOP FBT), with Rules 40C/40D prescribing the valuation method. The sector concessions in sub-section (2) were refined by Finance Acts 2006-2008. Inapplicable from AY 2010-11 (s.115WM).
Operative consequences
• Value is a fixed percentage of the relevant expense (20%/50%/5%), not the actual benefit enjoyed.
• If a benefit falls in s.115WB(1)(a) but has no valuation method here, it is not chargeable (Circular 8/2005; R & B Falcon).
• Sector concessions (5% or Nil) recognise that for those industries the expense is predominantly business cost.
• ESOP/sweat-equity value = FMV on date option vests, less amount paid by/recovered from the employee (Rules 40C/40D).
• Superannuation contribution is taxed only to the extent it exceeds Rs.1,00,000 per employee.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Block 1 reproduces the statutory text verbatim from the Income-tax Act, 1961 (text as printed; the Chapter remains on the statute book but is inapplicable from AY 2010-11 by s.115WM). The Finance Act, 2026 makes no substantive change to Chapter XII-H. Not legal advice.
Case Laws & Commentary
Section 115WC — Value of Fringe Benefits
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Chapter: XII-H — Income-tax on Fringe Benefits (Fringe Benefit Tax). Inserted by the Finance Act, 2005 with effect from assessment year 2006-07.
Operative life: FBT was levied for assessment years 2006-07 to 2009-10. By section 115WM (inserted by the Finance (No. 2) Act, 2009), the Chapter does not apply from assessment year 2010-11 onwards. The sections were NOT omitted — they remain on the statute book but are switched off prospectively.
Finance Act, 2026: Makes no substantive amendment to Chapter XII-H. (The Finance Act, 2026 carries only consequential cross-references to sections 115WD/115WH in a penalty provision; the FBT charge, scope and machinery are untouched.)
Part: A — Meaning of certain expressions.
Function: The exclusive valuation/computation code for FBT — fixes the percentage of each category of expense that is deemed to be the taxable value.
A. SECTION COMMENTARY
Section 115WC is the valuation engine of the Chapter. Section 115WA charges 30% on 'the value of fringe benefits', and that value is computed only under section 115WC. The section lays down category-wise percentages: 20% of the expenses in clauses (A) to (L) of 115WB(2); 50% of clauses (M) to (P); 5% of clause (Q) [tour and travel]; the actual cost (net of recovery) for free/concessional tickets under 115WB(1)(b); employer's superannuation contribution exceeding Rs. 1,00,000 per employee under 115WB(1)(c); and the fair market value (net of amount paid by the employee) of specified security/sweat equity under 115WB(1)(d), valued on the date the option vests.
Sub-section (2) provides sector-specific concessional percentages (5% instead of 20%, or Nil) for designated businesses — hotels (hospitality), aircraft and shipping (hospitality, hotel, aircraft), construction (conveyance), pharmaceuticals and computer software (conveyance and hotel), and carriage by motor car (motor cars). These recognise that for such industries the relevant expense is predominantly business cost, not an employee benefit.
A point of considerable practical importance flows from this section: if a benefit falls within the general definition in 115WB(1)(a) but section 115WC provides NO method of computing its value, it is not chargeable to FBT. CBDT Circular No. 8/2005 expressly says so, and the Supreme Court in R & B Falcon noted this proposition with approval. In effect, 115WC both quantifies the charge and, by its silence, delimits it.
The 'fair market value' for specified security/sweat equity under clause (ba) is to be determined in accordance with the method prescribed by the Board (Rule 40C / 40D framed for this purpose), measured on the date the option vests, reduced by the amount actually paid by or recovered from the employee. This valuation interacts with sections 115WKA and 115WKB (recovery of FBT from the employee and the consequences of that recovery).
B. STATUTORY POSITION (verbatim text)
Section 115WC, Income-tax Act, 1961 (sub-section (2) reproduced in operative substance; the repetitive industry clauses are condensed with ellipses where the identical '"five per cent" instead of "twenty per cent"' formula recurs):
115WC. (1) For the purposes of this Chapter, the value of fringe benefits shall be the aggregate of the following, namely:—
(a) cost at which the benefits referred to in clause (b) of sub-section (1) of section 115WB, is provided by the employer to the general public as reduced by the amount, if any, paid by, or recovered from, his employee or employees: Provided that in a case where the expenses of the nature referred to in clause (b) of sub-section (1) of section 115WB are included in any other clause of sub-section (2) of the said section, the total expenses included under such other clause shall be reduced by the amount of expenditure referred to in the said clause (b) for computing the value of fringe benefits;
(b) the amount of contribution, referred to in clause (c) of sub-section (1) of section 115WB, which exceeds one lakh rupees in respect of each employee;
(ba) the fair market value of the specified security or sweat equity shares referred to in clause (d) of sub-section (1) of section 115WB, on the date on which the option vests with the employee as reduced by the amount actually paid by, or recovered from, the employee in respect of such security or shares. Explanation.—For the purposes of this clause,— (i) "fair market value" means the value determined in accordance with the method as may be prescribed by the Board; (ii) "option" means a right but not an obligation granted to an employee to apply for the specified security or sweat equity shares at a predetermined price;
(c) twenty per cent of the expenses referred to in clauses (A) to (L) of sub-section (2) of section 115WB; (d) fifty per cent of the expenses referred to in clauses (M) to (P) of sub-section (2) of section 115WB; (e) five per cent of the expenses referred to in clause (Q) of sub-section (2) of section 115WB.
(2) Notwithstanding anything contained in sub-section (1),— (a) in the case of an employer engaged in the business of hotel, the value of fringe benefits for the purposes referred to in clause (B) of sub-section (2) of section 115WB shall be "five per cent" instead of "twenty per cent" referred to in clause (c) of sub-section (1); (aa) in the case of an employer engaged in the business of carriage of passengers or goods by aircraft, the value of fringe benefits for the purposes referred to in clause (B) ... shall be "five per cent" instead of "twenty per cent"...; (ab) in the case of an employer engaged in the business of carriage of passengers or goods by ship, the value of fringe benefits for the purposes referred to in clause (B) ... shall be "five per cent" ...; (b) in the case of an employer engaged in the business of construction, the value of fringe benefits for the purposes referred to in clause (F) ... shall be "five per cent" ...; (c) in the case of an employer engaged in the business of manufacture or production of pharmaceuticals, the value of fringe benefits for the purposes referred to in clauses (F) and (G) ... shall be "five per cent" ...; (d) in the case of an employer engaged in the business of manufacture or production of computer software, the value of fringe benefits for the purposes referred to in clauses (F) and (G) ... shall be "five per cent" ...; (da) ... carriage of passengers or goods by aircraft, ... clause (G) ... "five per cent" ...; (db) ... carriage of passengers or goods by ship, ... clause (G) ... "five per cent" ...; (e) ... carriage of passengers or goods by motor car, ... clause (H) ... "five per cent" ...; (f) in the case of an employer engaged in the business of carriage of passengers or goods by aircraft, the value of fringe benefits for the purposes referred to in clause (I) of sub-section (2) of section 115WB shall be taken as Nil.
Note: In sub-section (2), clauses (aa)-(e) each repeat the identical formula 'shall be "five per cent" instead of "twenty per cent" referred to in clause (c) of sub-section (1)'; that recurring phrase is condensed with ellipses above for readability while preserving the operative substance. Clause (f) (aircraft, clause (I) expenses) is reproduced verbatim — value 'taken as Nil'.
C. AUTHORITIES
Valuation under section 115WC has not been the subject of a stand-alone reported merits decision; the governing propositions come from the binding circular (approved by the Supreme Court) and from the architecture settled in R & B Falcon.
C-1 No valuation method = no charge; valuation code is exclusive
CBDT Circular No. 8/2005 dated 29 August 2005 (Explanatory Notes on FBT — 'FAQ' Circular)
Nature: Administrative circular issued under section 119 by the Central Board of Direct Taxes; the principal contemporaneous exposition of Chapter XII-H, answering 103 frequently-asked questions on the scope, valuation and machinery of FBT.
Key clarifications: Among other things the Circular states that 115WB(2) provides an 'expansive' definition that enlarges the scope of 115WB(1); that where there is no provision in section 115WC for valuing a particular benefit, that benefit — even if a 'general fringe benefit' under 115WB(1)(a) — is not liable to FBT; that a foreign company is liable to FBT only if it is an 'employer in India' (i.e. has employees based in India); and that sales discounts/rebates to customers or wholesale dealers are selling expenses outside clause (D) of 115WB(2).
Binding effect: Approved in R & B Falcon (A) Pty. Ltd. v. CIT (2008) 301 ITR 309 (SC), which held that CBDT's interpretation 'should ordinarily be held to be binding, save and except where it violates any provisions of law or is contrary to any judgment rendered by the courts.' This follows the settled line that beneficial circulars bind the Revenue — Navnit Lal C. Javeri v. K.K. Sen (1965) 56 ITR 198 (SC); UCO Bank v. CIT (1999) 237 ITR 889 (SC); CCE v. Dhiren Chemical (2002) 254 ITR 554 (SC).
R & B Falcon (A) Pty. Ltd. v. CIT (2008) 301 ITR 309 (SC) [AAR ruling reported at R & B Falcon (A) Pty. Ltd., In re (2006) 289 ITR 369 (AAR)]
Court / Bench: Supreme Court of India; judgment dated 6 May 2008. The first and, to date, the only decision of the Supreme Court construing the fringe-benefit-tax provisions of Chapter XII-H.
Facts: An Australian non-resident company supplied a Mobile Offshore Drilling Rig with crew to ONGC on a day-rate charter-hire basis. Its foreign offshore employees worked 28 'on' days on the rig and then returned to their home countries (Australia, U.K., U.S.A.) for 28 'off' days. The employer bore the cost of transporting them from a base city in the home country to a designated Indian city (economy air ticket) and onward to the rig by helicopter. The company sought an advance ruling on whether this transportation cost was liable to FBT.
Issues: (i) Whether the exemption in section 115WB(3) (which is expressed to apply 'for the purposes of sub-section (1)') is confined to 'general fringe benefits' under 115WB(1) or also covers the 'deemed fringe benefits' under 115WB(2); and (ii) whether the word 'residence' in section 115WB(3) must be read as residence in India.
Held: The Supreme Court held that sub-sections (1) and (2) of section 115WB 'operate in different fields' — 115WB(1) charges benefits directly provided as consideration for employment, while 115WB(2) creates a legal fiction deeming certain enumerated expenses to be fringe benefits. The exemption in 115WB(3) is, by its own terms, restricted to sub-section (1) and does NOT extend to the deemed fringe benefits in sub-section (2). On the second issue the Court reversed the AAR: there is nothing in 115WB(3) requiring the employee's residence to be in India, so the words 'in India' cannot be read in; the provision applies even where the employee resides abroad, provided the expenditure is genuinely on transport from residence to place of work and back.
Ratio / Significance: Foundational authority on the architecture of FBT: (a) the deeming provision in 115WB(2) is an independent expansion of charge, not a mere illustration of 115WB(1); (b) an exemption that opens with 'for the purposes of sub-section (1)' cannot be stretched to sub-section (2); (c) a statute must be read as a whole so that no part is rendered otiose; and (d) CBDT's interpretation of its own statute, being executive/contemporanea construction, is ordinarily binding on the Department 'save and except where it violates any provision of law or is contrary to any judgment'. The Court emphasised that FBT was introduced to bring about equity and to avoid double taxation of the same benefit in the hands of both employer and employee.
Proposition: Tax cannot be recovered twice in respect of the same liability; once the recipient has paid the tax on an amount, the same amount cannot again be recovered from the payer though interest/consequences may follow for the default period.
Why relevant: Embodies the no-double-recovery principle that underlies section 115WB(3) (perquisite already taxed in the employee's hands is excluded) and sections 115WKA-115WKB (mechanism to avoid the employee being taxed again where the employer recovers the FBT).
C-3 Valuation in practice — web-verified Tribunal authorities
Tribunal decisions on what enters (and what does not enter) the value of fringe benefits.
Jyoti Ltd. v. DCIT (ITAT, Ahmedabad) — A.Y. 2007-08
Tribunal: Income-tax Appellate Tribunal, Ahmedabad; appeal against the order of CIT(A)-IV, Baroda dated 28-2-2014.
Facts: The Assessing Officer added Rs. 49,04,112, being a provision made towards contribution to an approved superannuation fund, treating it as a fringe benefit under section 115WB(1)(c) read with section 115WC.
Held: Fringe benefit tax under section 115WB(1)(c) is attracted only on an actual contribution to the approved superannuation fund; and, by section 115WC(1)(b), only the contribution exceeding Rs. 1,00,000 in respect of each employee is taken as the value. A mere provision or accrual, without actual contribution, does not attract FBT. The addition made on the provision was deleted.
Significance: Distinguishes a 'contribution' (actual payment) from a book 'provision', and confirms that the Rs. 1,00,000-per-employee threshold in section 115WC(1)(b) is the measure of value for superannuation-fund FBT.
Facts: The assessee filed its FBT return showing the value of fringe benefits at Rs. 24,48,731. The Assessing Officer completed the assessment under section 115WE(3) at Rs. 16,82,781 and made additions towards employees' gratuity/pension fund, festival/gifts/pooja expenses, repair and maintenance of motor car (including depreciation), travel, and employees' welfare expenses (Rs. 12,86,704), discarding the assessee's detailed submissions.
Held: On a perusal of the details on record, the disputed amounts related to employees' welfare-type expenses (in the nature of hotel, advertisement, guest-house and food expenses) which could not be included in the value of fringe benefits, and the details had been wrongly discarded by the Assessing Officer and the CIT(A). The employees' welfare addition was deleted.
Significance: A recent Tribunal application of the principle that an expense must, in substance, be an employee fringe benefit before it can be valued under section 115WC, and that the details placed on record cannot be ignored.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced verbatim from the Income-tax Act, 1961 (text as printed in the Act, the Chapter remaining on the statute book but rendered inapplicable from assessment year 2010-11 onwards by section 115WM). Citations are stated as reported; rulings of the Authority for Advance Rulings and orders of the Tribunal are flagged as such. Where a section has not been judicially construed, that is stated candidly and the nearest governing authority (including the machinery provisions imported by section 115WL) is given. This material is for professional reference and is not legal advice.
Function in the statutory architecture
Section 115WC is the valuation engine. Section 115WA charges 30% on 'the value of fringe benefits', and that value is computed only here. The section assigns category-wise percentages (20% of clauses A-L; 50% of M-P; 5% of Q), plus actual cost (net of recovery) for tickets, employer's superannuation contribution exceeding Rs.1,00,000 per employee, and the fair market value (net of amount paid) of specified security/sweat equity valued on the date the option vests. Sub-section (2) provides concessional 5% (or Nil) rates for designated businesses (hotels, aircraft, shipping, construction, pharmaceuticals, computer software, carriage by motor car).
Historical context / FA amendment trail
Inserted by the Finance Act, 2005 w.e.f. AY 2006-07. Clause (1)(ba) (FMV of specified security/sweat equity) and the related machinery were inserted by the Finance Act, 2007 (ESOP FBT), with Rules 40C/40D prescribing the valuation method. The sector concessions in sub-section (2) were refined by Finance Acts 2006-2008. Inapplicable from AY 2010-11 (s.115WM).
Operative consequences
• Value is a fixed percentage of the relevant expense (20%/50%/5%), not the actual benefit enjoyed.
• If a benefit falls in s.115WB(1)(a) but has no valuation method here, it is not chargeable (Circular 8/2005; R & B Falcon).
• Sector concessions (5% or Nil) recognise that for those industries the expense is predominantly business cost.
• ESOP/sweat-equity value = FMV on date option vests, less amount paid by/recovered from the employee (Rules 40C/40D).
• Superannuation contribution is taxed only to the extent it exceeds Rs.1,00,000 per employee.
______________________________________________________________________________________________
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Block 1 reproduces the statutory text verbatim from the Income-tax Act, 1961 (text as printed; the Chapter remains on the statute book but is inapplicable from AY 2010-11 by s.115WM). The Finance Act, 2026 makes no substantive change to Chapter XII-H. Not legal advice.
Case Laws & Commentary
Section 115WC — Value of Fringe Benefits
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Chapter: XII-H — Income-tax on Fringe Benefits (Fringe Benefit Tax). Inserted by the Finance Act, 2005 with effect from assessment year 2006-07.
Operative life: FBT was levied for assessment years 2006-07 to 2009-10. By section 115WM (inserted by the Finance (No. 2) Act, 2009), the Chapter does not apply from assessment year 2010-11 onwards. The sections were NOT omitted — they remain on the statute book but are switched off prospectively.
Finance Act, 2026: Makes no substantive amendment to Chapter XII-H. (The Finance Act, 2026 carries only consequential cross-references to sections 115WD/115WH in a penalty provision; the FBT charge, scope and machinery are untouched.)
Part: A — Meaning of certain expressions.
Function: The exclusive valuation/computation code for FBT — fixes the percentage of each category of expense that is deemed to be the taxable value.
A. SECTION COMMENTARY
Section 115WC is the valuation engine of the Chapter. Section 115WA charges 30% on 'the value of fringe benefits', and that value is computed only under section 115WC. The section lays down category-wise percentages: 20% of the expenses in clauses (A) to (L) of 115WB(2); 50% of clauses (M) to (P); 5% of clause (Q) [tour and travel]; the actual cost (net of recovery) for free/concessional tickets under 115WB(1)(b); employer's superannuation contribution exceeding Rs. 1,00,000 per employee under 115WB(1)(c); and the fair market value (net of amount paid by the employee) of specified security/sweat equity under 115WB(1)(d), valued on the date the option vests.
Sub-section (2) provides sector-specific concessional percentages (5% instead of 20%, or Nil) for designated businesses — hotels (hospitality), aircraft and shipping (hospitality, hotel, aircraft), construction (conveyance), pharmaceuticals and computer software (conveyance and hotel), and carriage by motor car (motor cars). These recognise that for such industries the relevant expense is predominantly business cost, not an employee benefit.
A point of considerable practical importance flows from this section: if a benefit falls within the general definition in 115WB(1)(a) but section 115WC provides NO method of computing its value, it is not chargeable to FBT. CBDT Circular No. 8/2005 expressly says so, and the Supreme Court in R & B Falcon noted this proposition with approval. In effect, 115WC both quantifies the charge and, by its silence, delimits it.
The 'fair market value' for specified security/sweat equity under clause (ba) is to be determined in accordance with the method prescribed by the Board (Rule 40C / 40D framed for this purpose), measured on the date the option vests, reduced by the amount actually paid by or recovered from the employee. This valuation interacts with sections 115WKA and 115WKB (recovery of FBT from the employee and the consequences of that recovery).
B. STATUTORY POSITION (verbatim text)
Section 115WC, Income-tax Act, 1961 (sub-section (2) reproduced in operative substance; the repetitive industry clauses are condensed with ellipses where the identical '"five per cent" instead of "twenty per cent"' formula recurs):
115WC. (1) For the purposes of this Chapter, the value of fringe benefits shall be the aggregate of the following, namely:—
(a) cost at which the benefits referred to in clause (b) of sub-section (1) of section 115WB, is provided by the employer to the general public as reduced by the amount, if any, paid by, or recovered from, his employee or employees: Provided that in a case where the expenses of the nature referred to in clause (b) of sub-section (1) of section 115WB are included in any other clause of sub-section (2) of the said section, the total expenses included under such other clause shall be reduced by the amount of expenditure referred to in the said clause (b) for computing the value of fringe benefits;
(b) the amount of contribution, referred to in clause (c) of sub-section (1) of section 115WB, which exceeds one lakh rupees in respect of each employee;
(ba) the fair market value of the specified security or sweat equity shares referred to in clause (d) of sub-section (1) of section 115WB, on the date on which the option vests with the employee as reduced by the amount actually paid by, or recovered from, the employee in respect of such security or shares. Explanation.—For the purposes of this clause,— (i) "fair market value" means the value determined in accordance with the method as may be prescribed by the Board; (ii) "option" means a right but not an obligation granted to an employee to apply for the specified security or sweat equity shares at a predetermined price;
(c) twenty per cent of the expenses referred to in clauses (A) to (L) of sub-section (2) of section 115WB; (d) fifty per cent of the expenses referred to in clauses (M) to (P) of sub-section (2) of section 115WB; (e) five per cent of the expenses referred to in clause (Q) of sub-section (2) of section 115WB.
(2) Notwithstanding anything contained in sub-section (1),— (a) in the case of an employer engaged in the business of hotel, the value of fringe benefits for the purposes referred to in clause (B) of sub-section (2) of section 115WB shall be "five per cent" instead of "twenty per cent" referred to in clause (c) of sub-section (1); (aa) in the case of an employer engaged in the business of carriage of passengers or goods by aircraft, the value of fringe benefits for the purposes referred to in clause (B) ... shall be "five per cent" instead of "twenty per cent"...; (ab) in the case of an employer engaged in the business of carriage of passengers or goods by ship, the value of fringe benefits for the purposes referred to in clause (B) ... shall be "five per cent" ...; (b) in the case of an employer engaged in the business of construction, the value of fringe benefits for the purposes referred to in clause (F) ... shall be "five per cent" ...; (c) in the case of an employer engaged in the business of manufacture or production of pharmaceuticals, the value of fringe benefits for the purposes referred to in clauses (F) and (G) ... shall be "five per cent" ...; (d) in the case of an employer engaged in the business of manufacture or production of computer software, the value of fringe benefits for the purposes referred to in clauses (F) and (G) ... shall be "five per cent" ...; (da) ... carriage of passengers or goods by aircraft, ... clause (G) ... "five per cent" ...; (db) ... carriage of passengers or goods by ship, ... clause (G) ... "five per cent" ...; (e) ... carriage of passengers or goods by motor car, ... clause (H) ... "five per cent" ...; (f) in the case of an employer engaged in the business of carriage of passengers or goods by aircraft, the value of fringe benefits for the purposes referred to in clause (I) of sub-section (2) of section 115WB shall be taken as Nil.
Note: In sub-section (2), clauses (aa)-(e) each repeat the identical formula 'shall be "five per cent" instead of "twenty per cent" referred to in clause (c) of sub-section (1)'; that recurring phrase is condensed with ellipses above for readability while preserving the operative substance. Clause (f) (aircraft, clause (I) expenses) is reproduced verbatim — value 'taken as Nil'.
C. AUTHORITIES
Valuation under section 115WC has not been the subject of a stand-alone reported merits decision; the governing propositions come from the binding circular (approved by the Supreme Court) and from the architecture settled in R & B Falcon.
C-1 No valuation method = no charge; valuation code is exclusive
CBDT Circular No. 8/2005 dated 29 August 2005 (Explanatory Notes on FBT — 'FAQ' Circular)
Nature: Administrative circular issued under section 119 by the Central Board of Direct Taxes; the principal contemporaneous exposition of Chapter XII-H, answering 103 frequently-asked questions on the scope, valuation and machinery of FBT.
Key clarifications: Among other things the Circular states that 115WB(2) provides an 'expansive' definition that enlarges the scope of 115WB(1); that where there is no provision in section 115WC for valuing a particular benefit, that benefit — even if a 'general fringe benefit' under 115WB(1)(a) — is not liable to FBT; that a foreign company is liable to FBT only if it is an 'employer in India' (i.e. has employees based in India); and that sales discounts/rebates to customers or wholesale dealers are selling expenses outside clause (D) of 115WB(2).
Binding effect: Approved in R & B Falcon (A) Pty. Ltd. v. CIT (2008) 301 ITR 309 (SC), which held that CBDT's interpretation 'should ordinarily be held to be binding, save and except where it violates any provisions of law or is contrary to any judgment rendered by the courts.' This follows the settled line that beneficial circulars bind the Revenue — Navnit Lal C. Javeri v. K.K. Sen (1965) 56 ITR 198 (SC); UCO Bank v. CIT (1999) 237 ITR 889 (SC); CCE v. Dhiren Chemical (2002) 254 ITR 554 (SC).
R & B Falcon (A) Pty. Ltd. v. CIT (2008) 301 ITR 309 (SC) [AAR ruling reported at R & B Falcon (A) Pty. Ltd., In re (2006) 289 ITR 369 (AAR)]
Court / Bench: Supreme Court of India; judgment dated 6 May 2008. The first and, to date, the only decision of the Supreme Court construing the fringe-benefit-tax provisions of Chapter XII-H.
Facts: An Australian non-resident company supplied a Mobile Offshore Drilling Rig with crew to ONGC on a day-rate charter-hire basis. Its foreign offshore employees worked 28 'on' days on the rig and then returned to their home countries (Australia, U.K., U.S.A.) for 28 'off' days. The employer bore the cost of transporting them from a base city in the home country to a designated Indian city (economy air ticket) and onward to the rig by helicopter. The company sought an advance ruling on whether this transportation cost was liable to FBT.
Issues: (i) Whether the exemption in section 115WB(3) (which is expressed to apply 'for the purposes of sub-section (1)') is confined to 'general fringe benefits' under 115WB(1) or also covers the 'deemed fringe benefits' under 115WB(2); and (ii) whether the word 'residence' in section 115WB(3) must be read as residence in India.
Held: The Supreme Court held that sub-sections (1) and (2) of section 115WB 'operate in different fields' — 115WB(1) charges benefits directly provided as consideration for employment, while 115WB(2) creates a legal fiction deeming certain enumerated expenses to be fringe benefits. The exemption in 115WB(3) is, by its own terms, restricted to sub-section (1) and does NOT extend to the deemed fringe benefits in sub-section (2). On the second issue the Court reversed the AAR: there is nothing in 115WB(3) requiring the employee's residence to be in India, so the words 'in India' cannot be read in; the provision applies even where the employee resides abroad, provided the expenditure is genuinely on transport from residence to place of work and back.
Ratio / Significance: Foundational authority on the architecture of FBT: (a) the deeming provision in 115WB(2) is an independent expansion of charge, not a mere illustration of 115WB(1); (b) an exemption that opens with 'for the purposes of sub-section (1)' cannot be stretched to sub-section (2); (c) a statute must be read as a whole so that no part is rendered otiose; and (d) CBDT's interpretation of its own statute, being executive/contemporanea construction, is ordinarily binding on the Department 'save and except where it violates any provision of law or is contrary to any judgment'. The Court emphasised that FBT was introduced to bring about equity and to avoid double taxation of the same benefit in the hands of both employer and employee.
C-2 Specified security / sweat equity valuation — interaction with recovery (cognate)
CIT v. Hindustan Coca-Cola Beverages (P) Ltd. (2007) 293 ITR 226 (SC)
Proposition: Tax cannot be recovered twice in respect of the same liability; once the recipient has paid the tax on an amount, the same amount cannot again be recovered from the payer though interest/consequences may follow for the default period.
Why relevant: Embodies the no-double-recovery principle that underlies section 115WB(3) (perquisite already taxed in the employee's hands is excluded) and sections 115WKA-115WKB (mechanism to avoid the employee being taxed again where the employer recovers the FBT).
C-3 Valuation in practice — web-verified Tribunal authorities
Tribunal decisions on what enters (and what does not enter) the value of fringe benefits.
Jyoti Ltd. v. DCIT (ITAT, Ahmedabad) — A.Y. 2007-08
Tribunal: Income-tax Appellate Tribunal, Ahmedabad; appeal against the order of CIT(A)-IV, Baroda dated 28-2-2014.
Facts: The Assessing Officer added Rs. 49,04,112, being a provision made towards contribution to an approved superannuation fund, treating it as a fringe benefit under section 115WB(1)(c) read with section 115WC.
Held: Fringe benefit tax under section 115WB(1)(c) is attracted only on an actual contribution to the approved superannuation fund; and, by section 115WC(1)(b), only the contribution exceeding Rs. 1,00,000 in respect of each employee is taken as the value. A mere provision or accrual, without actual contribution, does not attract FBT. The addition made on the provision was deleted.
Significance: Distinguishes a 'contribution' (actual payment) from a book 'provision', and confirms that the Rs. 1,00,000-per-employee threshold in section 115WC(1)(b) is the measure of value for superannuation-fund FBT.
Bilfinger Neo Structo Pvt. Ltd. v. ACIT, 2022 TAXSCAN (ITAT) 1154 (ITAT, Ahmedabad) — A.Y. 2007-08
Tribunal / Bench: Income-tax Appellate Tribunal, Ahmedabad (Shri P.M. Jagtap, Vice President, and Ms. Suchitra Kamble, Judicial Member).
Facts: The assessee filed its FBT return showing the value of fringe benefits at Rs. 24,48,731. The Assessing Officer completed the assessment under section 115WE(3) at Rs. 16,82,781 and made additions towards employees' gratuity/pension fund, festival/gifts/pooja expenses, repair and maintenance of motor car (including depreciation), travel, and employees' welfare expenses (Rs. 12,86,704), discarding the assessee's detailed submissions.
Held: On a perusal of the details on record, the disputed amounts related to employees' welfare-type expenses (in the nature of hotel, advertisement, guest-house and food expenses) which could not be included in the value of fringe benefits, and the details had been wrongly discarded by the Assessing Officer and the CIT(A). The employees' welfare addition was deleted.
Significance: A recent Tribunal application of the principle that an expense must, in substance, be an employee fringe benefit before it can be valued under section 115WC, and that the details placed on record cannot be ignored.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced verbatim from the Income-tax Act, 1961 (text as printed in the Act, the Chapter remaining on the statute book but rendered inapplicable from assessment year 2010-11 onwards by section 115WM). Citations are stated as reported; rulings of the Authority for Advance Rulings and orders of the Tribunal are flagged as such. Where a section has not been judicially construed, that is stated candidly and the nearest governing authority (including the machinery provisions imported by section 115WL) is given. This material is for professional reference and is not legal advice.