QUESTIONS & ANSWERS
Improper use of food coupons
QUESTION: There is a widespread misuse of food coupons with such coupons being accepted by many shops, including some super markets in lieu of cash apparently encashing the same, possibly because of the outlets they have as food joints. Is there any risk for the employer for non-deduction of tax at source from the food coupons for improper use of the food coupons?
ANSWER: Improper use of food coupons is a patent abuse of the concession and would render such employees liable to tax on the value of the coupons.
It is because the exemption under proviso to Rule 3(7)(iii) is meant for food coupons used for food and non-alcoholic beverages provided at food joints during working hours paid through vouchers, the cost of which is met by the employer. But the employer, not being privy to the misuse of the food vouchers, cannot be responsible for non-deduction of tax on this part of salary becoming liable to tax because of the misuse by the employee. It was so held in CIT v Reliance Industries Ltd. (2009) 308 ITR 82 (Guj). Such tax has to be collected only from the employees who misuse them. Apparently, no step is being taken by the tax administration to curb such misuse.
S. RAJARATNAM
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