Valuation of perquisites - free meals.

Please clarify the following regarding perquisite valuation:

Rule 3 (7) (iii) of Income Tax Rules: “The value of free food and non-alcoholic beverages provided by the employer to an employee shall be the amount of expenditure incurred by such employer. The amount so determined shall be reduced by the amount, if any, paid or recovered from the employee for such benefit or amenity:

Provided that nothing contained in this clause shall apply to free food and non-alcoholic beverages provided by such employer during working hours at office or business premises or through paid vouchers which are not transferable and usable only at eating joints, to the extent the value thereof either case does not exceed fifty rupees per meal or to tea or snacks provided during working hours or to free food and non-alcoholic beverages during working hours provided in a remote area or an offshore installation.”

A company is providing free meal to all of its employees in its canteen which is run by a contractor (say Mr. A).

Case 1: The Company has contract with Mr. A which states that the company has to pay Rs. 30 (Breakfast), Rs. 70 (Lunch) to the contractor.

Query: Whether the perquisite of Rs. 20 (Rs. 70 – Rs. 50) is taxable in the hands of the employee?

Case 2: The Company has contract with Mr. A which states that the company will pay Rs. 2.5 lacs per month (Breakfast + Lunch). Say, the company has 100 employees which operates 25 days a month.

Query: How the perquisite will be valued?

Is the perquisite is valued in the below manner:

Cost of meal per employee/day (considering breakfast as meal) = [(2,50,000 / 25)/100] = Rs. 100

So, Rs. 100 will be the cost incurred by employer for “Breakfast + Lunch”.

If we assume that, the breakfast and lunch has the equal value then cost per meal will be,

Rs. 100/2 = Rs. 50 (Breakfast) = Rs. 50 (Lunch).

Whether the perquisite is taxable in the hands of the employee, since there is no restriction being imposed on no. of meal per day (generally, an employee can have 2 meals a day in office hours)?

Kindly clarify the above queries.

Thank you.