Food to employees in office or factory does not form part of fringe benefit

Auckland International Ltd. Vs. C.I.T. (ITAT Kolkata)

As far as the sum of Rs. 49,01,555/- which was the expenditure on account of food to workers is concerned, the assessee pointed out that under the provisions of section 1 15WB(2)(B)(i) any expenditure on, or payment for, food or beverages provided by the employer to his employees in office or factory shall not be included as fringe The assessee explained the reasons why food and beverages were provided to the workers. The Assessee pointed out that due to exodus of the large number of skilled and semi-skilled workmen to other state and number of employees retired from the services in past few years, there was a huge vacuum in the number of workmen available & required. 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. The Assessee pointed out that the turnover of the Assessee was Rs. 84 crore and after considering the explanation of the Assessee as above and duly examining the same, the AO framed the FBT assessment by not including the same under FBT ambit. Therefore there was no error in the order of the AO.

Further it is clear from the impugned order of CIT that in the scrutiny assessment proceedings, the AO called for an explanation from the assessee on this aspect and the assessee had explained that the expenditure was on food provided to workers to learn and to keep work force available at all time. The AO has accepted the explanation of the assessee and did not include the expenditure on providing food s part of the fringe benefit for levying of fringe benefit tax. It is clear from the provision of section 115WB(2)(B)(i) of the Act that expenditure on food provided by the employer to the employees in an office or factory does not form part of the fringe benefit. Firstly the AO has examined this issue while concluding this issue u/s 143(3) of the Act. Secondly, the view taken by the AO is a possible view. Thirdly, 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, we are of the view that the CIT was not justified in invoking the jurisdiction u/s 263 of the Act on this issue. To this extent the order of CIT is quashed.

Full Text of the ITAT Order is as follows:-

This is an appeal by the Assessee against the order dated.25.03.2014 of C.I.T., Central-I, Kolkata passed u/s 263 of the Income Tax Act, 1961 (Act).

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