TDS on value of free food coupens

Last updated: 15 January 2009

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Court :
Gujrat

Brief :
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.

Citation :
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.