Income Tax Act, 1961 - Sections 17 and 192 - Free meals coupon
issued to employees - Some of them misusing the same - Whether
company is liable to deduct TDS from the value of such free
coupons provided – Held, No.
COMMISSIONER OF INCOME-TAX (TDS) v.
RELIANCE INDUSTRIES LTD. [(2008)
Brief Facts : The assessee-company distributed free food/meal
coupons to its employees for purchase of meals as per company’s
policy. For that purpose, it had entered into an agreement with
‘A’. The employees were provided with coupons of ‘A’ at the rate
of Rs.50 per day. The assessee-company claimed that amount
paid to ‘A’ for food/meal coupons given to the employees was
not taxable perquisite within the meaning of rule 3(7) (iii) and,
therefore, it did not deduct the tax at source on that amount. The
Assessing Officer found that some of the coupons had been
misused by some of the employees for purchase of grocery items,
cosmetics items, etc. from shops/super stores selling such items.
The Assessing Officer, therefore, estimated certain amount as
being taxable perquisite in hands of the employees and initiated
proceedings for non-compliance with requirement of deducting
tax at source by the assessee under section 192. On appeal, the
Commissioner (Appeals) held that the assessee could not be liable
for such misuse. However, thereafter, the Commissioner
(Appeals) estimated 30 per cent value of the coupons as having
been misused and treated the assessee-company in default for
levy of interest towards short deduction of tax and levy of penalty.
On cross appeals, the Tribunal held that the assessee had not
defaulted in any manner for non-deduction of tax at source. The
Revenue appealed to the High Court.
Decision : Appeal dismissed.