Fringe benefit tax on employee-welfare payments excludes recharacterisation as salary for TDS under section 192.

Uniform allowance, washing charges and similar employee-welfare payments, when treated as fringe benefits under Chapter XII-H and taxed in the employer's hands, were considered outside the definition of perquisite in section 17(2)(vi). On that basis, the same amounts could not be recharacterised as salary for deduction of tax at source under section 192. The Court noted that employee-welfare expenditure falls within section 115WB(2)(E) unless it is incurred to meet a statutory obligation or another stated exclusion, and accepted that the scheme is designed to avoid double taxation of the same benefit in the hands of both employer and employee.

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Issues: Whether uniform allowance, washing charges and similar employee-welfare payments, when subjected to fringe benefit tax in the employer's hands, remained liable to deduction of tax at source as salary under section 192.

Analysis: The payments were treated as employee-welfare expenditure falling within Chapter XII-H. The Court noted that section 17(2)(vi) excludes fringe benefits chargeable under Chapter XII-H from the ambit of perquisites, while section 115WB(2)(E) deems employee-welfare expenditure to be a fringe benefit unless it is incurred to fulfil a statutory obligation or other specified exclusions. As the payments were not shown to fall within the exclusion for statutory obligation, and FBT had been paid by the employer, the amount could not again be treated as salary for the purpose of TDS. The Court also accepted the principle that the legislative scheme avoids double taxation of the same benefit in the hands of both employer and employee.

Conclusion: The payments were not liable to TDS under section 192 once they were taxable as fringe benefits in the employer's hands, and the issue was decided in favour of the assessee.

Final Conclusion: The Revenue's appeals failed, and the Tribunal's view that no tax was deductible at source on the disputed employee-welfare payments was upheld.

Ratio Decidendi: Expenditure taxed as a fringe benefit under Chapter XII-H, and therefore excluded from the definition of perquisite, cannot be recharacterised as salary for deduction of tax at source under section 192.

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