Perks like free accomodation, electricity charges not taxed

 

There is a company ABC which has employees on its payroll. 
This company, through cross-holdings and other other means, is related to company XYZ.

1)The company XYZ gives free accommodation, bears society maintenance charges and electricity charges for the employees of company ABC.
2)Since ABC is not directly providing the perks, the employees are in fact enjoying them tax-free as the perks are not even reflecting in the Salary Certificates of the employees.
3)If perks are offered in such indirect manner, are they allowed tax-free?
4)If these perks are taxable, who is responsible to deduct/pay the taxes on the perks, the company ABC or the employees enjoying the perks? 
5)Or, is this a normal practice of Indian companies?

Replies (1)

Dear Sanjay,

Truly said perks will not be taxable in the hands of employees. However it will be important to note that expenditure of XYZ on providing such perks will be disallowed.

Case 1 :- Expenditure on perks charged as an expenditure in books of XYZ.

Expenditure will be disallowed in hands of XYZ as it is not wholly and exclusively for the purpose of business.

Employees of ABC will not be taxed for such perks received

Case 2 :- XYZ are showing such expenditure as a loan given to ABC then.

Employees will be liable to tax on such perks.

Expenditure deductible in hands of ABC.

 

NO OFFENCES TO OTHER REPLIES

 

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