2008 (8) TMI 57 - HC - Income Tax

Assessee at the relevant time was sitting MLA and former Chief Minister of the State held that the remuneration received by the MLA or MP cannot be taxed under the head Income form salary but can be taxed under the head Income from other sources because there is no relationship of employer and employee further reimbursement for medical treatment taken by assessee cannot be treated as perquisite

Summary

Issues:
1. Challenge to Tribunal's order by revenue regarding addition of medical expenses to income.
2. Taxability of medical reimbursement received by MLA under different sections of the Income Tax Act.
3. Interpretation of Section 15 and Section 17 in relation to remuneration received by MLAs and MPs.

Analysis:
1. The appeal filed by the revenue challenged the Tribunal's order affirming the Commissioner of Income-tax's decision to set aside the assessing officer's addition of medical expenses to the income of the MLA. The Tribunal upheld the Commissioner's decision, leading to the revenue's appeal.

2. The case revolved around whether the medical reimbursement received by the MLA was taxable under various sections of the Income Tax Act. The Commissioner accepted the assessee's contention that such reimbursements are not taxable under the head "Income from Salary" but rather under "Income from other sources." The arguments regarding taxability under Section 2(24)(iii)(a), 2(24)(iii)(b), and Section 28(4)(b) were examined and found not applicable. The Tribunal affirmed this decision.

3. The High Court analyzed the provisions of Section 15 and Section 17 to determine the taxability of remuneration received by MLAs and MPs. It was established that for Section 15 to apply, there must be an employer-employee relationship, which is absent in the case of elected representatives like MLAs and MPs. As they are not employed but elected, their remuneration cannot be considered as salary under Section 15. Consequently, Section 17, extending the definition of 'salary,' does not apply to their remuneration. The Court concluded that the questions framed for appeal did not arise, and the impugned order was free from any legal error, leading to the dismissal of the appeal.

This detailed analysis of the judgment highlights the key issues addressed by the High Court regarding the taxability of medical reimbursements received by elected representatives and the interpretation of relevant sections of the Income Tax Act in this context.