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Pick-up & drop facility for employees not taxable: ITAT
September, 14th 2009

Pick-up and drop transport facility provided by employers is not a perquisite and hence not liable to tax, according to a recent ruling by a tax tribunal.

In a decision that has implications for the sectors such as BPO and IT, the Mumbai Income-Tax Apellate Tribunal (ITAT) has held that companies providing such a facility were not liable to deduct tax on the expenditure incurred on it.

ITAT has held that a specific explanation had been provided in the Income-Tax Act, which does not consider transport facility provided by employer to employees from residence to office and back a taxable perquisite. It said collective transport benefit was not even taxed as salary or as a fringe benefit under the FBT regime.

Moreover, it was not possible to compute the value of transport facility attributable to each employee, as the service was in the nature of a composite service collectively provided to employees throughout the year, it said, adding that no tax was required to be deducted at source on expenditure incurred by a company on transport facility.

The ruling was given in a case pertaining to ITeS and BPO company, Transworks Information Services. The company gave a transport allowance of Rs 800 per month to its employees as well as provided a conveyance facility.

The I-T Department had contended that the company was an assessee in default for not deducting tax at source on the expenditure incurred on the pick-up, drop facility and transport allowance given to employees. As an assessee in default, the company would have been liable to pay tax as well as penal interest on the tax for the period it was not deducted.

The commissioner appeals upheld the order given by the assessing officer that had held the company an assessee in default. It had said employees could not enjoy double benefit by way of conveyance facility and transport allowance, and tax was needed to be deducted on the expenditure incurred on the transport service.

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