Fringe benefit tax requires an employer-employee nexus; free samples to doctors were held outside the levy.

Fringe benefit tax under Chapter XXII-H of the Income-tax Act applies only where fringe benefits are provided or deemed to be provided by an employer to employees. Free samples distributed by a pharmaceutical company to doctors and others did not satisfy that foundational employer-employee nexus, so the expenditure could not be brought within the levy. The revenue failed to establish taxability on that basis, and the earlier view relied on the same principle. The free samples were therefore not liable to fringe benefit tax.

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Issues: Whether free samples distributed by a pharmaceutical company to doctors and others could be brought to fringe benefit tax in the absence of an employer-employee relationship between the assessee and the recipients.

Analysis: Fringe benefit tax under Chapter XXII-H of the Income-tax Act, 1961 is attracted only where fringe benefits are provided or deemed to have been provided by an employer to its employees. The charging provision makes the employer-employee relationship the basis of the levy. The distribution of free samples to doctors and others did not involve any such relationship, and the revenue had not established that the expenditure fell within the taxable net on that footing. The earlier view relied upon by the Tribunal also proceeded on the same principle that the levy cannot stand without the foundational employer-employee nexus.

Conclusion: The free samples distributed to doctors and others were not liable to fringe benefit tax, as the essential employer-employee relationship was absent.

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