employer on non-monetary perquisites is not a tax deductible item for the employer. Thus, when the contracts reflect the tax-free remuneration arrangement with the employees, the employers lose the deduction in respect of tax paid on non-monetary perquisites (including on tax perquisites).
The exemption from multiple-level gross up seems to be coming at the cost of losing the corporate tax deduction in respect of such tax amount. It seems to be a number game and a matter of careful considerations on whether to adopt single gross up and lose corporate tax deduction or the multiple level gross up and claim a corporate tax deduction. However, Section 10(10CC) of IT Act may not give them any option.
The writer is senior tax professional, EY. Views expressed are personal.