Uniform Allowance to Employees not Taxable as Fringe Benefits: ITAT [Read Order]

The Kolkata bench of the Income Tax Appellate Tribunal ( ITAT ) has held that the uniform allowance to the employees is not taxable as fringe benefits under the Income Tax Act, 1961.

The assessee filed its return of fringe benefit on 30.10.2007 showing value of expenses liable to fringe benefit at Rs.32,75,705/-. The assessee provides uniform to the staff to perform a special kind of duty while providing services in the hotel premises. Each day the uniform is provided at the beginning of the shift and taken back at the end of the duty hours. This is the custom prevailing in the hotel industry. In the provision of uniform, there is no element welfare involved as no benefit flows to the employees by wearing such uniform and it is worn in the hotel only. The Assessing Officer treated the allowance as fringe benefits.

The assessee argued that the uniform supplied to the employees is the policy of the assessee and supply of uniforms are necessary for the purpose of carrying on its business. It was also argued that providing uniform to the employees cannot be regarded as benefit or welfare facility and it is a statutory obligation in terms of standing orders framed by the assessee.

The Tribunal observed that the wearing of uniform is out of compulsion arising from the employment of the assessee and it is not an option and claimed the expenses incurred for staff uniform shall be excluded from chargeable expenditure under the head “Employees Welfare”.

“The CIT(A) opined that the said clothes were not protective ones and they are not uniforms and not compulsory uniform under the statute. We find that the employees’ uniforms have traditionally been used as a functional necessity. It is noted from the record that the assessee assumed the financial responsibility for supplying and maintaining the freshly cleaned clothing to the employees for wearing to work each day. Though they are personalized uniforms provided they are not available for employees’ personal use. The uniforms that are put on by the employees when they arrive at work and were taken off at the end of work. The said uniforms, it appears laundered and maintained by the assessee. It is clear that the said clothing (uniforms) are not available for general or personal wear of the employees and when the clothing is not actually used for general or personal wear, in our opinion, are not taxable under fringe benefits,” the Tribunal said.