1996 (2) TMI 118 - HC - Income Tax

Summary

Issues:
1. Validity of reopening assessment under section 147(b) of the Income-tax Act.
2. Classification of medical expenses as a perquisite for computing disallowance under section 40A(5) or 40(c).

Analysis:

Issue 1: Validity of Reopening Assessment under Section 147(b)
The case involved a public limited company whose assessment for the year 1978-79 was reopened under section 147(b) of the Income-tax Act. The company contested the reopening, arguing that it was impermissible. The Income-tax Officer, Commissioner of Income-tax (Appeals), and the Appellate Tribunal upheld the reopening. The Tribunal considered the reasons recorded by the Income-tax Officer, citing relevant case law and the effect of the law mentioned in the audit report. The Tribunal relied on the decision of the Supreme Court regarding the definition of "information" for reopening assessments under section 147(b). The Court concluded that the Income-tax Officer was justified in reopening the assessment under section 147(b) based on the law and information available.

Issue 2: Classification of Medical Expenses as a Perquisite
The second issue revolved around whether medical expenses reimbursed to employees should be considered a perquisite under section 40A(5) of the Income-tax Act. The company argued that medical expenses could not be classified as perquisites and therefore should not be disallowed. The Appellate Tribunal examined various decisions from different High Courts but found that the courts had followed earlier decisions without proper consideration. Despite the arguments presented by the company's counsel, the Court held that medical expenses and their reimbursements did not qualify as perquisites based on the statutory provisions of section 40A(5) and the definition of "perquisite" provided therein. The Court rejected the company's contention and ruled in favor of the assessee on this issue.

In conclusion, the High Court answered the first question in favor of the Department, upholding the validity of the assessment reopening under section 147(b). However, the Court answered the second question in favor of the assessee, ruling that medical expenses and consequent reimbursements should not be considered as perquisites for the purpose of disallowance under section 40A(5) of the Income-tax Act. The judgment was to be communicated to the Income-tax Appellate Tribunal for further action.