TaxTMI 
TaxTMI 
2022 (2) TMI 474
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....al of the present appeals are, the assessee, a resident company, is stated to be engaged in the business of issuing meal vouchers to its clients/customers through which certain benefits in kind is provided by the clients to their employees. The employees of the clients/customers use these meal vouchers at specified places, such as, restaurants, eating places, caterers, super markets, etc., who are affiliates of the assessee for accepting the meal vouchers as payments towards purchase of food items or non alcoholic beverages. To verify tax deduction at source (TDS) compliance of the assessee, a survey under section 133(2A) of the Act was conducted at the business premises of the assessee on 21/01/2016. In course of such survey action, the assessing officer noticed that while the assessee had deducted tax at source on certain payments made to one category of affiliates, i.e. caterers; however, it has not deducted tax at source on payments made to other affiliates, such as, restaurants, super markets and food establishments. Noticing this, the assessing officer issued a show cause notice to the assessee to explain why it should not be treated as an assessee in default in terms of sect....
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....t the affiliates have to do specific work before claiming reimbursement from the assessee. The works to be performed are as under:- 1. Examining the security features of the sodexo vouchers 2. Cancellation of vouchers with specific stamp after supplying food &other articles in lieu of meal vouchers 3. All valid vouchers shall be kept in reimbursement envelope and after duly filling up reimbursement form supplied by M/s Sodexo 4. All valid vouchers shall be delivered by the AE as per there imbursement Calendar supplied by M/s Sodexo 5. Reimbursement claims shall be delivered at designated collection centers of M/s Sodexo 6. For every reimbursement envelope M/s Sodexo will charge delivery fee from the affiliates 7. Vouchers delivered by Affiliates shall be scrutinized by M/s Sodexo and amount determined by Sodexo shall be conclusive and final. 8. In the event of any difference in amount paid by M/s Sodexo and claim made by affiliates, the amount determined by Sodexo is final and same shall be acceptable by Affiliate as reimbursement value payable by Sodexo. 9. Amount determined by Sodexo shall be payable to affiliate through account payee cheque or any other mode of....
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....e receives the face value of the voucher alongwith service charge for providing the voucher. He submitted, the face value of the vouchers issued to the customers is to be exclusively used to settle/reimburse the face value of the vouchers when they are presented to the affiliates. He submitted, the face value of the vouchers received from clients/customers, as per RBI guidelines has to be kept in an escrow account for onward payment to the affiliates on settlement of the meal vouchers. Thus, he submitted, the face value of the vouchers kept in the escrow account do not represent the income of the assessee, but is a liability to be discharged to the affiliates who have accepted the meal vouchers as payment made towards the user of the vouchers for purchase of food or non alcoholic beverages. He submitted, since, the face value of the voucher is a liability to be discharged to the affiliates, it was not routed through the profit and loss account but was shown in the balance-sheet as a liability. He submitted, the service charges received by the assessee from the customers for issuance of meal vouchers is shown as income and offered to tax. Similarly, the service charges received from....
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....ct. 10. We have carefully considered the rival submissions and perused the material on record. The factual matrix reveals that the assessee is operating a semi-closed prepaid payment system being authorized by RBI in terms of section 7 of the Payment and Settlement System Act, 2017. Under the aforesaid scheme, the assessee issues printed paper vouchers to be utilized for purchase of food and non-alcoholic beverages at certain specified establishments. For better appreciation, a diagrammatic representation of assessee's business model is depicted below : 11. As could be seen from the above, the client/customer approaches the assessee for purchase of paper printed meal vouchers having a certain face value. After receiving the consideration for the face value along with certain service charges, the assessee issues the meal vouchers to the customers. The customers, in turn, provide these vouchers to their employees as perquisite. The employees use the vouchers to obtain/pay for food, meal and non alcoholic beverages at certain establishments known as affiliates running network of restaurants, super markets etc. The assessee enters into agreement with the affiliates, in terms of which....
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....ustomers by facilitating the provision for making available food items etc. of a particular amount represented by the vouchers to the employees of the customers. The Hon'ble Court observed, though, the vouchers bear a particular value and for such value goods are provided to the employees, however, the goods are not provided by the assessee but by the affiliates. The assessee is only a facilitator and medium between the affiliate and customer and is merely providing some services. The Hon'ble Court observed, the intrinsic and essential character of the entire transaction is to provide services by the assessee and this is achieved through the means of the vouchers. The goods belong to affiliates which are sold by them to customer's employees on the basis of vouchers given by the customer to its employees. It is the affiliates, who are getting money for goods and not the assessee who only gets service charges for the services rendered both to the customers as well as the affiliates. 13. Thus, from the aforesaid observations of the Hon'ble Supreme court, it is very much clear that rather than the assessee availing certain services or getting some work done through affiliates, it is t....
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....ort other than by railways; (d) catering; (e) 44 (e) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer or its associate, being a person placed similarly in relation to such customer as is the person placed in relation to the assessee under the provisions contained in clause(b) of sub-section (2) of section 40A,]but does not include manufacturing or supplying product according to the requirement or specification of a customer by using material purchased from a person, other than such customer for associate of such customer].] 14. On a careful reading of the provision it becomes very much clear that except one of the categories i.e. catering, the payment of the face value of meal vouchers to affiliates would not come within the definition of work either as per the general meaning or even under the extended meaning of work as per section 194C of the Act. In so far as catering is concerned, the admitted factual position is, the assessee has deducted tax on the payment made to caterers, who basically are in house facilities established by customers of the assessee. Thus, under no circumsta....