FBT on Breverages and food staff

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This query is : Resolved

pradnya (Querist)

29 December 2008 currently i am doing audit of one software development company .They have small kitchen in the office.where they give tea, coffee, breadand sandwitches, ketchups, fruits,weekly juices.For they spent lot of money on milk, vegetable.Whether FBT is applicable on it.

CA. Dashrath Maheshwari

CA. Dashrath Maheshwari (Expert)

29 December 2008 The treatment of the facility of providing free meals or food is now under FBT regime and grouped together under "deemed fringe benefits" . Section 115WB(2)(B) from Asst Yr 2009-10 (FY 2008-09 ) is as under

(B) provision of hospitality of every kind by the employer to any person, whether by way of provision of food or beverages or in any other manner whatsoever and whether or not such provision is made by reason of any express or implied contract or custom or usage of trade but does not include

(i) any expenditure on, or payment for, food or beverages provided by the employer to his employees in office or factory;

(ii) any expenditure on or payment through paid vouchers which are not transferable and usable only at eating joints or outlets;

(iii) any expenditure on or payment through non-transferable pre-paid electronic meal card usable only at eating joints or outlets and which fulfils such other conditions as may be prescribed;

Answer 52 of CBDT Circular 9/2005 is on the matter of provision of food and beverages and makes the position clear as far as FBt is concerned

At times, employees order for food and beverages in the office premises while working after office hours. The employer reimburses the cost of such food and beverages to the employee. Would such reimbursement be considered as ‘any expenditure on, or payment for food or beverages provided by the employer to his employees in office or factory as per the exceptions provided by section 115WB(2)(B)(i) so as to be excluded from ‘fringe benefits’? In other words, for the exclusion to operate is it necessary that the employer has to pay to the supplier directly and not reimburse the employee?

52. The provisions of sub-clause (i) of clause (B) of sub-section (2) of section 115WB of the Income-tax Act provide for exemption from FBT only in respect of expenditure incurred on food or beverages procured by the employer for providing to his employees in an office or factory. Therefore, if an employer reimburses to the employee expenditure on food or beverages consumed by the employee in the office, such reimbursement would not fall within the scope of sub-clause (i) of clause (B) of sub-section (2) of section 115WB of the Income-tax Act and will be liable to FBT.

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