Communication Limited. v. Commissioner of Central Excise
and Customs, Cochin (2011) 12 SCC 608
shall be applicable here as well making
it a case of service and not sale of goods. This para is as under:“20. The charges paid by the subscribers for
procuring a SIM card are generally processing
charges for activating the cellular phone and
consequently the same would necessarily be
included in the value of the SIM card. There
cannot be any dispute to the aforesaid position as
the appellant itself subsequently has been paying
service tax for the entire collection as processing
charges for activating cellular phones and paying
the service tax on the activation. The appellant
also accepts the position that activation is a taxable
service. The position in law is therefore clear that
the amount received by the cellular telephone
company from its subscribers towards the SIM
cards will form part of the taxable value for levy of
service tax, for the SIM cards are never sold as
goods independent from services provided. They
are considered part and parcel of the services
provided and the dominant position of the
transaction is to provide services and not to sell the
material i.e. SIM card which on its own but without
the service would hardly have any value at all.”
23) We may also take note of the judgment of this Court in Sunrise
Associates v. Govt. of NCT of Delhi & Ors. (2006) 5 SCC 603
, where this Court
considered as to whether lottery tickets can be treated as goods
and after discussing the earlier judgment in H. Anraj v.
Government of Tamil Nadu (1986) 1 SCC 414
, pointed out that the primary test
would be as to whether such lottery tickets would constitute a
stock in trade of every dealer and, therefore, is a merchandise
which can be bought and sold in the market. This was followed in
another judgment in Yasha Overseas v. Commissioner of Sales
Tax & Ors.6 (2008) 8 SCC 681
, wherein again the test of 'flexibility in its utilisation
and its transferability were discussed and applied in the context of
REP licences' to determine whether such licences were goods or
not.
24) We may mention here that the appropriate test would be as to
whether such vouchers can be traded and sold separately. The
answer is in the negative. Therefore, this test of ascertaining the
same to be 'goods' is not satisfied.
Real Character Of The Transaction Is The Facility By The
Customers As Employers To Their Employees:
For all the aforesaid reasons, we are of the opinion that the
judgment of the High Court has not discussed and decided the
issue correctly and warrants interference. We, thus, allow these
appeals and set aside the judgment of the High Court by holding
that Sodexo Meal Vouchers are not 'goods' within the meaning of
Section 2(25) of the Act and, therefore, not liable for either Octroi
or LBT.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 4385-4386 OF 2015
SODEXO SVC INDIA PRIVATE LIMITED …..APPELLANT
VERSUS
STATE OF MAHARASHTRA & ORS. …..RESPONDENTS
Citation; AIR 2016 SC 413
The appellant company is conducting the business of
providing pre-printed meal vouchers which are given the
nomenclature of 'Sodexo Meal Vouchers'. As per the appellant, it
enters into contracts with its customers for issuing the said
vouchers. These customers are establishments/companies
having number of employees on their rolls. They provide food/
meals and other items to their employees up to a certain amount.
It is for this purpose that the agreement is entered into by such
establishments/companies with the appellant for issuing the said
vouchers. After receiving these vouchers for a particular
Civil Appeal Nos. 4385-4386 of 2015 Page 1 of 21Page 2
denomination, some are distributed by the companies to its
employees. For utilisation of these vouchers by such employees,
the appellant has made arrangements with various restaurants,
departmental stores, shops, etc. (hereinafter referred to as
'affiliates'). From these affiliates, the employees who are issued
the vouchers can procure the food and other items on
presentation of the said vouchers. The affiliates, after receiving
the said vouchers, present the same to the appellant and get
reimbursement of the face value of those vouchers after
deduction of service charge payable by the affiliates to the
appellant as per their mutual arrangement. In this manner, the
appellant, by issuing these vouchers to its customers, gets its
service charge from the said companies. Likewise, the appellant
also takes specified service charges from its affiliates. A
diagramatic representation of the business model of the appellant
is as under:
2) On the basis of the aforesaid arrangement made by the appellant
with its customers as well as its affiliates, the question that has
arisen for consideration is as to whether these vouchers can be
treated as 'goods' for the purpose of levy of Octroi or Local Body
Tax (LBT) or the aforesaid activity only amounts to rendering
service by the appellant. The issue has to be examined as per
the relevant provisions of the Maharashtra Municipal Corporation
Act [Act No. LIX of 1949] under which the Municipal Corporation
is entitled to levy and collect Octroi or LBT.
3) Before we advert to the relevant provisions of the Act, it would be
worthwhile to mention that in order to carry on the aforesaid
business, the appellant is compulsorily required to obtain
necessary approval/ authorisation from the Reserve Bank of India
(RBI), which requirement is spelt out from Section 7 of the
Payment and Settlement Systems Act, 2007. The appellant has
been granted a Certificate of Authorisation by the RBI to operate a
payment system for the issuance of Sodexo Meal Vouchers in the
form of 'Paper Based Vouchers' under the aforesaid provision.
4) The Payment and Settlement Systems Act, 2007 provides for the
Civil Appeal Nos. 4385-4386 of 2015 Page 3 of 21Page 4
regulation and supervision of payment systems in India and
designates RBI as the authority for that purpose and all related
matters. Under Section 2(1)(i) of the Payment and Settlement
Systems Act, 2007, a 'payment system' is defined as a system
that enables payment to be effected between a payer and a
beneficiary, involving clearing, payment or settlement service or
all of them but does not include a stock exchange. The appellant
is also required to adhere to the Pre-paid Issuance and Operation
of the Payments Instruments in India (Reserve Bank) Directions,
2009 issued under the Payment and Settlement Systems Act,
2007 and Revised Consolidated Guidelines, 2014. Thereunder,
'pre-paid payment instruments' are defined as payment
instruments that facilitate purchase of goods and services against
the value stored on such installments. The value stored on such
instruments represents the value paid for by the holders by ash,
by debit to a bank account, or by credit card. The amount so paid
by the customers is always kept in escrow account and is used
strictly only for settlement of vouchers and never accounted for or
used as income in the hands of the appellant. Accordingly, the
Certificate issued to the appellant contains the following terms
and conditions:
“The Payment System Provider shall adhere to the
provisions of the Payment and Settlement Systems
Civil Appeal Nos. 4385-4386 of 2015 Page 4 of 21Page 5
Act, 2007, regulations issued thereunder and the
directions/guidelines issued by the Reserve Bank
of India.
The authorization is only for issue of meal vouchers
and gift vouchers in the form of 'Paper based
vouchers' and 'Smartcard' or 'Smart Meal Card' and
subject to adherence of the 'Policy Guidelines for
issuance and operation of Pre-paid Payment
Instruments in India' (unless specific relaxation has
been permitted by the RBI)
Sodexo shall adhere to the provisions of the
prevention of Money Laundering Act and ruled
framed thereunder. Further, the guidelines on
Know Your Customer/Anti-Money Laundering/
Combating Financing of Terrorism issued by the
RBI to Banks, from time to time shall apply mutatis
mutandis to the entity.”
5) Thus, as per the aforesaid authorisation by the RBI, the business
operation that is carried out by the appellant, has the following
essential features:
(i) the payment system operated by the appellant involves issuance of
vouchers having a face value (meal and gift vouchers) to the
customers;
(ii) customers grant said vouchers to their employees (beneficiaries);
(iii) the employees use the vouchers to obtain/pay for food, meal or
goods;
(iv) vouchers can only be used in an affiliated network of restaurants
and shops (affiliates/redeemers);
(v) the affiliated restaurant/shop having delivered the food/meal/ good,
Civil Appeal Nos. 4385-4386 of 2015 Page 5 of 21Page 6
receives the voucher and turns it to the appellant who issued it for
reimbursement of the face value (redemption); and
(vi) when the vouchers are redeemed, the appellant reimburses to the
affiliate/redeemer the face value of the voucher and retains a
service fee in order to compensate for the attractiveness of the
system which has benefited to the affiliate's business. The
appellant pays service tax on such service fee charged.
6) Having taken note of the nature of business operation of the
appellant herein and the manner the same is statutorily regulated
by the Payments and Settlement Systems Act, 2007 and the
Rules framed thereunder, we revert to the issue that has to be
answered in the present case, namely, whether these Sodexo
Meal Vouchers are goods within the meaning of Section 2(25) of
the Act. For this purpose, it would be imperative to take note of
the definition of goods appearing in the aforesaid provision as well
as some other relevant provisions of this Act.
7) Section 2(25) of the Act provides the definition of 'goods', Section
2(31A) defines 'Local Body Tax' (LBT), and Section 2(42) contains
the definition of 'Octroi'. These two provisions read as under:
Civil Appeal Nos. 4385-4386 of 2015 Page 6 of 21Page 7
“2. Definitions.
In this Act, unless there be something repugnant in
the subject or context, –
xx xx xx
(25) “goods” includes animals;
xx xx xx
(31A) “Local Body Tax” means a tax on the entry of
goods into the limits of the City, for consumption,
use or sale therein, levied in accordance with the
provisions of Chapter XIB, but does not include
cess as defined in clause (6A) and octroi as
defined in clause (42);
xx xx xx
(42) “octroi” means a cess on the entry of goods
into the limits of a city for consumption, use or sale
therein; but does not include a cess as defined in
clause 6A or Local Body Tax, as defined in clause
(31A).”
8) As is clear from the reading of Section 2(31A), LBT is the tax on
the entry of goods into the limits of the city, when these goods are
for consumption, use or sale. The tax is to be levied in
accordance with the provisions of Chapter XIB. It, however,
specifically excludes Octroi, as defined in Section 2(42. It also
becomes clear that Octroi is a cess on the entry of goods into the
limits of a city for consumption, use or sale therein, but it does not
include a cess as defined in clause (6A) or LBT. Both these levies
are on the goods that enter into the limits of a city for
consumption, use or sale therein.
Civil Appeal Nos. 4385-4386 of 2015 Page 7 of 21Page 8
9) The charging section, for imposition of tax under the Act, is
Section 127. This provision enumerates various types of taxes.
Sub-section (1) thereof empowers the Corporation to impose two
kinds of taxes, namely, property tax and a tax on vehicles, boats
and animals. Sub-section (2) also authorises the Corporation to
impose certain other kinds of taxes which, inter alia, include
Octroi and a cess on entry of goods in lieu of Octroi. Clause
(aaa) was inserted in sub-section (2) by way of amendment
carried out vide Mah.27 of 2009, with effect from August 31, 2009,
whereby LBT was also included as another form of tax which
could be levied and this clause reads as under:
“(aaa) Local Body Tax on the entry of the goods
into the limits of the City for consumption, use or
sale therein, in lieu of octroi or cess, if so directed
by the State Government by Notification in the
Official Gazette;”
10) Procedure for levying such a tax is contained in Section 149 and
we would like to reproduce sub-section (1) thereof, which is as
under:
“149. Procedure to be followed in levying other
taxes.
(1) In the event of the Corporation deciding to levy
any of the taxes specified in sub-section (2) of
section 127, it shall make detailed provision in so
far as such provision is not made by this Act, in the
form of rules, modifying, amplifying or adding to the
Civil Appeal Nos. 4385-4386 of 2015 Page 8 of 21Page 9
rules at the time in force for the following matters,
namely:
(a) the nature of the tax, the rates thereof, the
class of classes of persons, articles or properties
liable thereto and the exemptions therefrom, if any,
to be granted;
(b) the system of assessment and method of
recovery and the powers exercisable by the
Commissioner or other officers in the collection of
the tax;
(c) the information required to be given of liability
to the tax;
(d) the penalties to which persons evading liability
or furnishing incorrect or misleading information or
failing to furnish information may be subjected;
(e) such other matters, not inconsistent with the
provisions of this Act, as may be deemed expedient
by the Corporation:
Provided that no rules shall be made by the
Corporation in respect of any tax coming under
clause (f) of sub-section (2) of section 127 unless
the State Government shall have first given
provisional approval to the selection of the tax by
the Corporation.”
11) In order to have the stock of all the relevant provisions of this Act,
another provision which needs to be noticed is Section 152P,
which relates to the provisions relating to LBT. It is to the
following effect:
“152P. Levy of Local Body Tax.
Subject to the provisions of this Chapter and the
rules, the Corporation, to which the provisions of
clause (aaa) of sub-section (2) of section 127
apply, may, for the purposes of this Act, levy and
Civil Appeal Nos. 4385-4386 of 2015 Page 9 of 21Page 10
collect Local Body Tax on the entry of goods
specified by the State Government by notification in
the Official Gazette, into the limits of the City, for
consumption, use or sale therein, at the rates
specified in such notification.”
12) What follows from the conjoint reading of the aforesaid provisions
is that LBT or Octroi is a tax 'on the entry of goods into the limits
of the city', which goods are meant for 'consumption, use or sale
therein'. In this backdrop, we have to find out the true nature of
the Sodexo Meal Vouchers and to ascertain whether they are
'goods'.
13) The appellant had resisted the imposition of LBT primarily on the
ground that it was providing services to the establishments with
whom it had entered into contracts and, therefore, such
agreements were for service and not for sale of any goods. The
High Court has negated the contention primarily on the ground,
which, in fact, is the sole ground, that the scheme postulates
printing of the paper vouchers by the appellant which are sold to
its customers. The said customers, in turn, provide the vouchers
to their employees who use these vouchers in the restaurants or
different places or outlets to get ready-to-eat items and beverages
of the face value printed on the said vouchers. Therefore, the
vouchers are used to pay the price for food items and beverages
Civil Appeal Nos. 4385-4386 of 2015 Page 10 of 21Page 11
distributed to users. The High Court, in the passing, has also
remarked that these vouchers are capable of being sold by the
appellant after they are brought into the limits of the city.
Therefore, the said vouchers have its utility and the same are
capable of being paid or sold and same are capable of being
delivered, stored and possessed. Thus, according to the High
Court, the test laid down by this Court in Tata Consultancy
Services v. State of Andhra Pradesh1
has been satisfied.
14) We may mention at this stage itself that the learned counsel for
the respondent hammered the aforesaid reasons given by the
High Court by adopting these reasons as his arguments. Learned
counsel for the appellant, on the other hand, referred to the
intrinsic nature of the transaction with the aid of RBI Policy on the
subject and certain judgments of this Court, on the basis of which
he was vociferous in his submission that in reality it was only a
service which was provided by the appellant with no element of
'goods' involved in the transaction.
15) We have already taken note of the nature of the transaction. After
going through the relevant provisions and the principle laid down
in various judgments explaining the features of 'services' and
1 (2005) 1 SCC 308
Civil Appeal Nos. 4385-4386 of 2015 Page 11 of 21Page 12
'goods', we are of the opinion that the Sodexo Meal Vouchers
cannot be treated as 'goods' for the purpose of levy of Octroi or
LBT. There are at least three fundamental and principal reasons
for coming to this conclusion, which we would like to discuss in
detail hereinafter.
(I) Exact Nature of Meal Vouchers:
16) The basic mistake which has been committed by the High Court is
to proceed on the basis that after printing of the paper vouchers,
these are sold by the appellant to its customers. A diagramatic
representation of the business model of the appellant, already
depicted above, would make it manifest that the vouchers are not
the commodity which are sold. If the face value of the said
vouchers is rps ₹50, by giving these vouchers to its customers,
the appellant only takes specified service charges from its
customers, which is normally 2 for 50 voucher. Likewise, when ₹ ₹
these vouchers are given by the customers to its employees and
the employees present the same to various affiliates with whom
the appellant had made the arrangements and those affiliates
supply the goods against those vouchers, while reimbursing the
cost of these vouchers to the said affiliates, the appellant again
takes service charges from these affiliates, which is again a sum
Civil Appeal Nos. 4385-4386 of 2015 Page 12 of 21Page 13
of 2. Thus, insofar as the appellant is concerned, it has made ₹
the arrangements with the affiliates for supply of goods against
those vouchers. This arrangement is made to help the customers
by simply facilitating the provision for making available food items,
etc. of a particular amount, represented by vouchers, to the
employees of these customers. No doubt, vouchers bear a
particular value and for such value, goods are provided to the
employees. However, these goods are not provided by the
appellant, but by the affiliates. The appellant is only a facilitator
and a medium between the affiliates and customers and is
providing these services. The intrinsic and essential character of
the entire transaction is to provide services by the appellant and
this is achieved through the means of said vouchers. Goods
belong to the affiliates which are sold by them to the customers'
employees on the basis of vouchers given by the customers to its
employees. It is these affiliates who are getting the money for
those goods and not the appellant, who only gets service charges
for the services rendered, both to the customers as well as the
affiliates.
17) It is to be borne in mind that the vouchers are not 'sold' by the
appellant to its customers, as wrongly perceived by the High
Civil Appeal Nos. 4385-4386 of 2015 Page 13 of 21Page 14
Court, and this fundamental mistake in understanding the whole
scheme of arrangement has led to wrong conclusion by the High
Court. The High Court has also wrongly observed that vouchers
are capable of being sold by the appellant after they are brought
into the limits of the city. These vouchers are printed for a
particular customer, which are used by the said customer for
distribution to its employees and these vouchers are not
transferrable at all.
(II) Transaction Regulated By RBI Guidelines:
18) As already pointed out above, without the sanction/ authorisation
of the RBI to operate such a payment system under the Payment
and Settlement Systems Act, 2007, nobody can operate such a
system, as the purpose of the said Act is to regulate the payment
and settlement thereof by means of 'Paper Based Vouchers'. An
insight into the Policy Guidelines dated March 28, 2014 issued by
the RBI to regulate such transactions would also clinchingly bears
out that the real nature of the transaction is to provide service and
by no stretch of imagination these vouchers can be termed as
'goods'. The very first para, viz. Para A, stipulates the purpose of
these Guidelines and Rules as follows:
“A. Purpose
To provide a framework for the regulation and
supervision of persons operating payment systems
Civil Appeal Nos. 4385-4386 of 2015 Page 14 of 21Page 15
involved in the issuance of Pre-paid Payment
Instruments (PPIs) in the country and to ensure
development of this segment of the payment and
settlement systems in a prudent and customer
friendly manner. For the purpose of these
guidelines, the term 'persons' refers to 'entities'
authorized to issue prepaid payment instruments
and 'entities' proposing to issue pre-paid payment
instruments.”
19) Introduction to these Guidelines mentions that the same are
passed after a comprehensive review of the extant Guidelines
and Instructions for the purpose of laying down the basic eligibility
criteria and the conditions for operations of such payment
systems in the country. Some of the definitions given in para 2
are reproduced below for better understanding of the system:
“2. Definitions
2.1 Issuer: Persons operating the payment
systems issuing pre-paid payment instruments to
individuals/organizations. The money so collected
is used by these persons to make payment to the
merchants who are part of the acceptance
arrangement directly, or through a settlement
arrangement.
2.2 Holder: Individuals/Organizations who
acquire pre-paid payment instruments for purchase
of goods and services, including financial services.
2.3 Pre-paid Payment Instruments: Pre-paid
payment instruments are payment instruments that
facilitate purchase of goods and services, including
funds transfer, against the value stored on such
instruments. The value stored on such instruments
represents the value paid for by the holders by
cash, by debit to a bank account, or by credit card.
The pre-paid instruments can be issued as smart
Civil Appeal Nos. 4385-4386 of 2015 Page 15 of 21Page 16
cards, magnetic stripe cards, internet accounts,
internet wallets, mobile accounts, mobile wallets,
paper vouchers and any such instrument which can
be used to access the pre-paid amount (collectively
called Prepaid Payment Instruments hereafter).
The pre-paid payment instruments that can be
issued in the country are classified under three
categories viz. (i) Closed system payment
instruments (ii) Semi-closed system payment
instruments and (iii) Open system payment
instruments.
2.4 Closed System Payment Instruments:
These are payment instruments issued by a person
for facilitating the purchase of goods and services
from him/it. These instruments do not permit cash
withdrawal or redemption. As these instruments do
not facilitate payments and settlement for third
party services, issue and operation of such
instruments are not classified as payment systems.
2.5 Semi-Closed System Payment Instruments:
These are payment instruments which can be used
for purchase of goods and services, including
financial services at a group of clearly identified
merchant locations/establishments which have a
specific contract with the issuer to accept the
payment instruments. These instruments do not
permit cash withdrawal or redemption by the
holder.
2.6 Open System Payment Instruments: These
are payment instruments which can be used for
purchase of goods and services, including financial
services like funds transfer at any card accepting
merchant locations (point of sale terminals) and
also permit cash withdrawal at ATMs/Bcs.
xx xx xx
2.8 Merchants: The establishments who accept
the PPIs issued by PPI issuer against the sale of
goods and services.”
20) In order to ensure that payment received from the customer is
Civil Appeal Nos. 4385-4386 of 2015 Page 16 of 21Page 17
paid to the affiliates against those vouchers, Para 8 provides for
the deployment of money collected. As per this, the amount thus
collected has to be kept in the escrow account and the persons,
like the appellant herein, are under obligation to use this amount
only for making payments to the participating merchant
establishments and other permitted payments.
21) Read in the aforesaid context, insofar as the appellant is
concerned, it is only a service provider on the touchstone of the
test laid down in Bharat Sanchar Nigam Ltd. & Anr. v. Union of
India & Ors.2
Paragrah 87 of this judgment, enumerating this
test, is reproduced below:
“87. It is not possible for this Court to opine finally
on the issue. What a SIM card represents is
ultimately a question of fact, as has been correctly
submitted by the States. In determining the issue,
however the assessing authorities will have to keep
in mind the following principles: if the SIM card is
not sold by the assessee to the subscribers but is
merely part of the services rendered by the service
providers, then a SIM card cannot be charged
separately to sales tax. It would depend ultimately
upon the intention of the parties. If the parties
intended that the SIM card would be a separate
object of sale, it would be open to the Sales Tax
Authorities to levy sales tax thereon. There is
insufficient material on the basis of which we can
reach a decision. However we emphasise that if
the sale of a SIM card is merely incidental to the
service being provided and only facilitates the
identification of the subscribers, their credit and
other details, it would not be assessable to sales
tax. In our opinion the High Court ought not to
2 (2006) 3 SCC 1
have finally determined the issue. In any event, the
High Court erred in including the cost of the service
in the value of the SIM card by relying on the
“aspects” doctrine. That doctrine merely deals with
legislative competence. As has been succinctly
stated in Federation of Hotel & Restaurant Assn.
Of India v. Union of India, (2005) 4 SCC 214: (SCC
pp.652-53, paras 30-31)
“ '...subjects which in one aspect and for one
purpose fall within the power of a particular
legislature may in another aspect and for
another purpose fall within another legislative
power'.
There might be overlapping; but the
overlapping must be in law. The same
transaction may involve two or more taxable
events in its different aspects. But the fact that
there is overlapping does not detract from the
distinctiveness of the aspects.”
22) Further, para 20 of the judgment of this Court in Idea Mobile
Communication Limited. v. Commissioner of Central Excise
and Customs, Cochin3
, shall be applicable here as well making
it a case of service and not sale of goods. This para is as under:
“20. The charges paid by the subscribers for
procuring a SIM card are generally processing
charges for activating the cellular phone and
consequently the same would necessarily be
included in the value of the SIM card. There
cannot be any dispute to the aforesaid position as
the appellant itself subsequently has been paying
service tax for the entire collection as processing
charges for activating cellular phones and paying
the service tax on the activation. The appellant
also accepts the position that activation is a taxable
service. The position in law is therefore clear that
3 (2011) 12 SCC 608
the amount received by the cellular telephone
company from its subscribers towards the SIM
cards will form part of the taxable value for levy of
service tax, for the SIM cards are never sold as
goods independent from services provided. They
are considered part and parcel of the services
provided and the dominant position of the
transaction is to provide services and not to sell the
material i.e. SIM card which on its own but without
the service would hardly have any value at all.”
23) We may also take note of the judgment of this Court in Sunrise
Associates v. Govt. of NCT of Delhi & Ors.4
, where this Court
considered as to whether lottery tickets can be treated as goods
and after discussing the earlier judgment in H. Anraj v.
Government of Tamil Nadu5
, pointed out that the primary test
would be as to whether such lottery tickets would constitute a
stock in trade of every dealer and, therefore, is a merchandise
which can be bought and sold in the market. This was followed in
another judgment in Yasha Overseas v. Commissioner of Sales
Tax & Ors.6
, wherein again the test of 'flexibility in its utilisation
and its transferability were discussed and applied in the context of
REP licences' to determine whether such licences were goods or
not.
24) We may mention here that the appropriate test would be as to
whether such vouchers can be traded and sold separately. The
4 (2006) 5 SCC 603
5 (1986) 1 SCC 414
6 (2008) 8 SCC 681
answer is in the negative. Therefore, this test of ascertaining the
same to be 'goods' is not satisfied.
(III) Real Character Of The Transaction Is The Facility By The
Customers As Employers To Their Employees:
25) Section 17 of the Income Tax Act, 1961, defines 'salary' in the
hands of the employees which becomes taxable under the
Income Tax Act. Various components of salary are enumerated
therein. Clause (viii) of sub-section (1) of Section 17 includes 'the
value of any other fringe benefit or amenity as may be prescribed'
as part of salary. Rule 3 of the Income Tax Rules prescribes the
method of 'valuation of perquisites'. We are concerned with Rule
3(7)(iii), which deals with the value of free food, etc. and reads as
under:
“(iii) The value of free food and non-alcoholic
beverages provided by the employer to an
employee shall be the amount of expenditure
incurred by such employer. The amount so
determined shall be reduced by the amount, if any,
paid or recovered from the employee for such
benefit or amenity:
Provided that nothing contained in this clause shall
apply to free food and non-alcoholic beverages
provided by such employer during working hours at
office or business premises or through paid
vouchers which are not transferable and usable
only at eating joints, to the extent the value thereof
in either case does not exceed fifty rupees per
meal or to tea or snacks provided during working
hours or to free food and non-alcoholic beverages
during working hours provided in a remote area or
an off-shore installation.”
26) Thus, the value of such free food and non-alcoholic beverage
provided by an employer to an employee is treated as
expenditure incurred by the employer and amenity in the hands of
the employee. It is this perquisite given by the customer to its
employees by adopting the methodology of vouchers and for its
proper implementation, services of the appellant are utilised.
27) For all the aforesaid reasons, we are of the opinion that the
judgment of the High Court has not discussed and decided the
issue correctly and warrants interference. We, thus, allow these
appeals and set aside the judgment of the High Court by holding
that Sodexo Meal Vouchers are not 'goods' within the meaning of
Section 2(25) of the Act and, therefore, not liable for either Octroi
or LBT.
There shall, however, be no order as to costs.
.............................................J.
(A.K. SIKRI)
.............................................J.
(ROHINTON FALI NARIMAN)
NEW DELHI;
DECEMBER 09, 2015.
Civil Appeal Nos. 4385-4386 of 2015 Page 21 of 21
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