S. 192 and S. 201 : Misuse of free meal coupons by employees : No presumption of misuse : Tax not deducted at source : No default.

66 TDS : Salary: S. 192 and S. 201 of Income-tax Act, 1961 : Misuse of free meal coupons by employees: No presumption of misuse : Tax not deducted at source on such amount : No default.

[CIT v. Reliance Industries Ltd., 308 ITR 82 (Guj.)]

The assessee-company distributed free meal coupons to its employees. It had entered into an agreement with A for this purpose. The assessee-company did not deduct tax at source on the amount paid to A, on the ground that it did not constitute perquisite. The AO held that the coupons had been misused by some of the employees. He therefore estimated certain amount as being taxable perquisite in the hands of the employees and passed orders u/s.201, u/s.201(1A) and u/s.271C of the Income-tax Act, 1961 for default of non-deduction of tax at source on such estimated amount. The Tribunal held that the assessee had not committed any default.

On appeal by the Revenue, the Gujarat High Court upheld the decision of the Tribunal and held as under :

“With regard to the free meal coupons the employer could not presume that a particular percentage of employees, out of the total work force, misused the facility so as to warrant deduction of tax at source. Furthermore, correspondingly such tax deducted at source had to be given credit in the assessment of the employee concerned and unless and until the tax deduction certificate specified the employee concerned there could be no corresponding credit given to the employee. The assessee could not be treated as being in default in respect of such sum.”