Whether expenses disallowed under section 37 of the Income-tax Act on the plea that the expenses are personal in nature, would also be liable to FBT?
Section 37 of the Income-tax Act provides that any expenditure laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head ‘profits and gains of business or profession’. Accordingly, any expenditure that is incurred for personal purposes is not allowable as deduction. Sub -section (2) of section 115WB provides for a levy on fringe benefits estimated on a presumptive basis using certain expenses as a measure. To the extent the expenses incurred by the employer are personal in nature and have, therefore, been disallowed under section 37 of the Income-tax Act, such disallowance would not be liable to FBT. For example, let us assume a firm, being an employer, has incurred an expenditure of Rs. 100 towards tour and travel, of which Rs 40, is personal in nature. Therefore, the amount of Rs 40, being personal in nature, will be disallowed under section 37 of the Income-tax Act, and FBT will be le
