2003 (4) TMI 69 - HC - Income Tax

Whether Tribunal was justified in upholding the order of the Commissioner of Income-tax (Appeals) taking the view that the medical expenditure amounting to Rs. 5,20,230 reimbursed to the assessee being in the employment of National Engineering Industries Ltd., Jaipur, was not treatable as a perquisite in the hands of the assessee under section 17 of the Income-tax Act, 1961? - 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 the negative, i.e., in favour of the Revenue and against the assessee.

Summary

Issues:
Whether medical expenditure reimbursed to an employee by the employer is a perquisite under section 17 of the Income-tax Act, 1961.

Analysis:
The case involved a question regarding the taxability of medical expenditure reimbursed to an employee by the employer. The employee, in this case, underwent treatment in the USA and incurred expenses amounting to Rs. 5,20,230, which were later reimbursed by the employer. The Assessing Officer treated the reimbursement as a perquisite under section 17(2) of the Act, 1961. However, the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal held that the medical expenditure was not taxable as a perquisite. The Tribunal relied on a previous decision and the employee's argument that the reimbursement should not be treated as a benefit or amenity provided by the employer.

The Revenue argued that a circular issued by the Central Board of Direct Taxes clarified that medical expenses incurred in public hospitals in India should not be considered as a perquisite, but this clarification did not extend to expenses incurred outside India. The Revenue contended that the Tribunal erred in not treating the reimbursement as a perquisite based on this circular. On the other hand, the assessee's counsel cited various court decisions to support the argument that medical expenses incurred outside India should not be treated as a perquisite under section 17(2) of the Act, 1961.

The court analyzed the relevant provisions of section 17(2) of the Act, 1961, which define "perquisite" to include benefits or amenities provided by the employer to the employee. The court noted that the Central Board of Direct Taxes clarified that medical expenses incurred in public hospitals in India should not be treated as a perquisite but did not extend this benefit to expenses incurred outside India. The court concluded that the Tribunal erred in not considering the reimbursement as a perquisite in light of the circular. Therefore, the court ruled in favor of the Revenue, holding that the medical reimbursement of Rs. 5,20,230 should be treated as a perquisite under section 17(2) of the Act, 1961.

In conclusion, the court's decision emphasized the importance of considering the specific circumstances and relevant provisions of the law when determining the taxability of reimbursements to employees, especially in cases involving medical expenses incurred both within and outside India.