COMMISSIONER OF INCOME-TAX Vs. RELIANCE INDUSTRIES LTD.

JUDGEMENT

(1.) ALL these six appeals are taken up for hearing together as they emanate out of a common order dated June 22, 2007, made by the Income -tax Appellate Tribunal, Ahmedabad, in various cross -appeals filed by the appellant -Revenue and the respondent -assessee in the following circumstances.

(2.) THE facts, as briefly stated by the Tribunal, are that the assessee, viz., M/s. Reliance Industries Ltd. ('RIL' for short) distributed free food/meal coupons as per companies policy to its employees for purchase of meal. For this purpose, the assessee -company had entered into an agreement with M/s. Accor Radha Krishna Services Pvt. Ltd. ('the Accor' for short). The employees at Hazira, Surat were provided with coupons of 'Accor' of Rs. 1,300 per month at the rate of Rs. 50 per day. The total amount paid by the assessee -company to 'Accor' under the agreement for the meal coupon for the period April, 2003, to March 31, 2004, was Rs. 3.12 crores. The assessee -company claimed that amount paid to 'Accor' food meal coupons made to the employees was not taxable perquisite within the meaning of Rule 3(7)(iii) of the Income -tax Rules. It, therefore, did not deduct the tax at source on this amount.

(3.) THE Assessing Officer thus framed four orders, two under Section 201 of the Income -tax Act, 1961 ('the Act') and two under Section 201(1A) of the Act in relation to the first period from April, 2003, to November, 2003, and the second period from December, 2003, to March, 2004. Furthermore, two orders under Section 271C of the Act were also framed levying penalties for non -compliance with the requirement of deducting tax at source by the respondent -assessee under Section 192 of the Act. According to the Assessing Officer, in the light of Rule 3(7)(iii) of the Income -tax Rules, 1962 (the Rules) the value of free meals provided by an employer to an employee had to be treated as perquisite within the meaning of Section 17(2) of the Act for being taxed under the head 'Salaries', but the amount had to be reduced if any amount against such expenditure incurred by the employer was recovered from the employee concerned. That the proviso under the said Clause (iii) of Sub -rule (7) of Rule 3 provided for an exception but the respondent -assessee was not entitled to claim the benefit of the proviso because, according to the Assessing Officer, the coupons had been misused by some of the employees. The Assessing Officer, therefore, estimated certain amount as being taxable perquisite in the hands of the employees and initiated proceedings under Sections 201, 201(1A) and 271C of the Act for such violation and for this purpose worked out that 90 per cent. value of the coupons issued by the contracting party in agreement with the employer -assessee having been misused by the employees, the assessee had failed to discharge statutory liability of deducting tax at source under Section 192 of the Act.