Food provided to Employee cannot be treated as Fringe Benefit: ITAT [Read Order]

Recently Kolkata bench comprising Judicial Member N.V.Vasudevan and Accountant Member M.Balaganesh confirmed that the food provided to employee is not a fringe benefit for the purpose of Income Tax Act, 1961.

Fringe benefits are benefits provided by an employer to an employee, independent contractor or partner, some of which are tax-exempt when certain conditions are met.

An appeal by the assessee was finally allowed after challenging the order of CIT (A) under section 263 of the Income Tax Act, 1961. The assessee in the instant appeal is a company carries on the business of manufacturing; dealing and exporting of jute goods filed a return of income later made additions by AO consequent to disallowance of speculation loss.

The CIT while exercising his power under section 263 was of the view that as per section 115 WA of the l.T.Act, food provided to employees are within the meaning of the term ‘fringe benefit’. The CIT found that the Assessing Officer failed to examine its applicability. During the scrutiny the same was explained by assesee was that expenditure on food to workers is reimbursement of fooding and refreshment expenses to the learners of job to fill the vacant posts in the Mill.

The assessee explained the situation were they treated food to employees as fringe benefit because there was a huge vacuum in the number of workmen available & required in order to meet the shortfall the Assessee provided facility to the local youths to learn the job of machine operation and other related functions. To keep them engaged to learn the job, the Assessee had to provide food. The expenses incurred under head “Food to Workers” was for the running of the business of the Assessee. After considering the above contention AO framed the FBT assessment by not including the same under FBT ambit, but it was not satisfied with the CIT (A).

Aggrieved by the order of CIT the assessee went in appeal before the Tribunal. Allowing the appeal, the tribunal observed that expenditure on food provided by the employer to the employees in an office or factory does not form part of the fringe benefit.

The bench declared that the CIT in the impugned order has not brought out facts as to how the expenditure in question will be a fringe benefit and why the plea of the assessee that the said expenditure falls within the exception of clause 115WB(2)(B)(i) of the Act is not correct. In these circumstances, the bench held that the CIT was not justified in invoking the jurisdiction u/s 263 of the Act on this issue.