NEW DELHI: Broadcasters in India are contemplating moving the court against the fringe benefit tax (FBT) levied by the government from this year on taxpayers.
The contention of broadcasters is likely to be that it’s unconstitutional and breaches certain fundamental rights.
According to a senior executive of television company having operations in India, the proposal on seeking legal redressal is being studied by a sub-committee of the Indian Broadcasting Foundation (IBF), which is an apex body of broadcasting companies.
The details of the proposed case against the Central government are not clear as things are still being worked out and legal consultations taking place.
The much-debated FBT legislation seeks to levy tax on any privilege, service, facility, amenity provided by the employer to the employee. There are various categories of expenditure on which the levy is charged.
A 30 per cent FBT has to be paid by the employer on a defined base. However, the tax liability for some sectors — pharma, construction, computer software — is lower because of a reduction in the base for valuation of expenses.
News channels, for example, are likely to contend that FBT should not be levied on allowances given to editorial professionals for news gathering purpose as the money is being used for discharging legitimate professional duties.
Broadcasters might also plead that if the FBT is to be levied on TV companies, then it should be brought at par with sectors like computer software that pay lower tax.
An admission of a case relating to FBT in one of the courts in the state of Andhra Pradesh has encouraged broadcasting companies to explore knocking the judiciary’s doors.
Earlier this month, The Economic Times a legal battle over the controversial fringe benefit tax has begun with the Andhra Pradesh High Court granting interim relief to a taxpayer who filed a writ petition challenging the validity of the levy.
The interim order says that the revenue department shall receive an advance tax of 5 per cent (against 20 per cent) from the petitioner and further action should be subject to the outcome of the petition. The petitioner is a private sector company in the publication business.
The HC, however, has made it clear that the interim relief is only to the petitioner and shall not extend to other tax payers.
The revenue department is nevertheless worried about the possible spate of legal wrangles over the FBT legislation. It has sounded out its legal cells to appoint counsels to argue cases where taxpayers already have or plan to challenge the FBT legislation, ET reported.
The AP court is understood to have issued a notice to the Central government to reply to the writ petition. The petitioner challenged the FBT legislation on the grounds of legislative competence and discrimination in classification.
The contention was that the classification for the purpose of levying a confessional tax to certain categories of taxpayers is discriminatory and should be extended to the newspaper industry, the newspaper report stated.