Applicability of fringe benefit tax to liaison offices in India

In an application filed with the Authority for Advance Rulings (AAR) by Singapore Tourism Board (STB), it was held that STB is liable to pay tax on fringe benefits extended to its employees in India. The ruling was made with reference to sub-section (2) of section 115WA, and sub-section (2) of section 115WB of the Income Tax Act, 1961 (ITA).

STB is a company incorporated in Singapore. The company had employees working in liaison offices in New Delhi, Mumbai and Chennai, and the expenses relating to the Indian offices were being reimbursed from the Singapore office of the company.

In its application to the AAR, STD sought an advance ruling on the issue of whether fringe benefit tax (FBT) was applicable to the expenses of its liaison offices in India. STB stated that these offices did not carry on any business activities, and that no income accrues to it in India.

Sumes Dewan is a partner and Shradha Puri is a senior associate at KR Chawla & Co Advocates & Legal Consultants. The firm is headquartered in New Delhi and has offices in Chennai, Bangalore and San Francisco, as well as a representative office in Singapore.