High Court Of Rajasthan : Jaipur Bench
CIT vs. Raghu Sinha
Sections 17(2)(iii)
Asst. Year 1987-88
Y.R. Meena & Khem Chand Sharma, JJ.
IT Ref. Appln. No. 49 of 1995
16th April, 2003
Counsel Appeared : Anurup Singhi for J.K. Singhi, for the Revenue : Mahendra Gargiey, for the Assessee
JUDGMENT
BY THE COURT :
On an application under s. 256(1) of the IT Act, 1961 (hereinafter referred to as ‘the Act, 1961’), the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (for short ‘the Tribunal’), vide its order dt. 18th June, 1993, has referred the following question for the opinion of this Court : “Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in upholding the order of the CIT(A) taking the view that the medical expenditure amounting to Rs.5,20,230 reimbursed to assessee being in the employment of M/s National Engineering Industries Ltd., Jaipur, was not treatable as a perquisite in the hands of the assessee under s. 17 of the IT Act, 1961 ?”
2. During the period relevant to asst. yr. 1987-88, the assessee Shri Raghu Sinha was in the employment of M/s National Engineering Industries, Jaipur. In connection with the business of the employer the assessee left for USA on 30th Aug., 1986, and fell ill there. He was admitted in the hospital where he was to undergo coronary artery bypass surgery on 2nd Oct., 1986, and paid treatment expenses of Rs. 5,20,230. The expenditure incurred by the assessee was reimbursed by the employer-company with the permission of the Reserve Bank of India. The assessee has claimed before the AO that it is not a perquisite within the meaning given under s. 17(2) of the Act, 1961. The AO did not allow it as a deduction and held that it is a perquisite within the meaning of s. 17(2) of the Act, 1961. In appeal before the CIT(A), the CIT(A) held that the same was not taxable at all. In appeal before the Tribunal, Jaipur, the Tribunal relying upon the decision in the case of Mrs. Asha Golecha & Ors. vs. Asstt. CIT (1992) 44 TTJ (Jp) 156 : (1992) 42 ITD 7 (Jp) held that the medical expenditure incurred by the employee are reimbursed by the employer is not perquisite in the hands of assessee. Heard, learned counsel for the parties. Mr. Singhi, learned counsel appearing for the Revenue, submits that the relevant assessment year in this case is
198788 and prior to that the Department has issued a Circular No. 445, dt. 31st Dec., 1985 (F. No. 200/177/84-II IT-A1) [(1986) 54 CTR (St) 15] wherein the CBDT has clarified that reimbursement of medical expenses which are incurred in India in the public hospital by the employee that should not be taken as perquisite, if the expenses are genuine. Mr. Singhi submits that in view of the circular of the CBDT, which is applicable for the asst. yr. 1987-88, the Tribunal has committed error in holding that it is not perquisite within the meaning of s. 17(2) of the Act, 1961. Mr. Mahendra Gargiey, learned counsel appearing for the assessee, on the other hand, submits that whether the medical expenses reimbursed by the employer should be treated as benefit or as amenity provided by the employer to the employee under s. 40(a)(v) and payment made in cash whether it is covered by s. 40a(5) or s. 40A(5) of the Act, 1961, has been considered by the apex Court CIT vs. Mafatlal Gangabhai & Co. (P) Ltd., Etc.
(1996) 132 CTR (SC) 248 : (1996) 219 ITR 644 (SC) and the apex Court has taken a view that in case the reimbursement to an employee, the payment made by the employer contemplated by these words is not evidently a payment to the employee but to a third party. Not only that Expln. 2(v) also refers the cash payment but that too is not to the employee. Therefore, their Lordships of the Supreme Court have taken a view that the cash payment by assessee-employer to his/its employee do not fall within the ambit of s. 40(a)(v) or s. 40A(5)(a)(ii) of the Act,
1961.
Learned counsel for the assessee citing some decisions of the apex Court in Commonwealth Trust Ltd. vs. CIT (1997) 142 CTR (SC) 214 : (1997) 228 ITR 3 (SC) and of this Court in the case of CIT vs. Rajasthan Patrika Ltd. (2002) 178 CTR (Raj) 414 : (2002) 258 ITR 300 (Raj) and CIT vs. Ramdeo Samadhi (1986) 50 CTR (Raj) 61 : (1986) 160 ITR 179 (Raj) and submits that the reimbursement of the medical expenditure incurred outside of India should not be taken as perquisite within the meaning of s. 17(2) of the Act, 1961. Whether the medical reimbursement amount of Rs. 5,20,230 is perquisite or not within the meaning of s. 17(2) of the Act, 1961, we have to see the provisions. The relevant sub-s. (2) of s. 17 of the Act, 1961, reads as under : “(2) “perquisite” includes : (i) the value of rent-free accommodation provided to the assessee by his employer; (ii) the value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer; (iii) the value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following; (a) by a company to an employee who is a director thereof; (b) by a company to an employee being a person who had a substantial interest in the company; (c) by any employer including a company to an employee to whom the provisions of paras (a) and (b) of this sub-clause do not apply and whose income under the head “Salaries”whether due from or paid or allowed by, one or more employers, exclusive of the value of all benefits or amenities not provided by way of monetary payment, exceeds fifty thousand rupees;” Clause (iii) of sub-s. (2) of s. 17 of the Act, 1961, provides that the value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases i.e., to an employee by a company, by a company to an employee having substantial interest in the company or by an employer to its employee, then that should be treated perquisite within the meaning of cl. (iii) of sub-s. (2) of s. 17 of the Act, 1961. Even s. 40(a)(v) and s. 40A(5) talks about the payment in cash. Sub-s. (2) of s. 17 does not require or make any difference between the payment in cash or otherwise. When a doubt was raised whether the medical expenses incurred by the employer should be treated as perquisite within the meaning of s. 17(2) of the Act, 1961, the CBDT has made it clear that if the medical expenses are incurred on treatment of the employee in India and in a public hospital and the expenditure is genuine that should not be treated as perquisite in the hands of employee. But no such benefit has been extended to the employee if the treatment is outside India. Considering the intention of the legislation and clarification of the CBDT on the issue we find no justification to confirm the view taken by the Tribunal. Even the circular has not been considered by any of the Courts in their judgments referred to by the learned counsel for the assessee. Therefore, we are of the opinion that the Tribunal has committed error in not considering the reimbursement of Rs. 5,20,230 as perquisite in the light of the circular referred to above. In the result, we answer the question in negative i.e., in favour of the Revenue and against the assessee. The reference petition stands disposed of.
[Citation : 263 ITR 378]
