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