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Issues Involved:
1. Taxability of medical and living expenses as perquisites under section 17(2)(iv) of the Income-tax Act. 2. Interpretation of the term "perquisite" under the Income-tax Act. 3. Applicability of CBDT Circulars on medical reimbursements. Detailed Analysis: 1. Taxability of Medical and Living Expenses as Perquisites under Section 17(2)(iv) of the Income-tax Act: The primary issue was whether the medical and living expenses incurred by the company for the assessee's treatment in London could be considered a perquisite under section 17(2)(iv) of the Income-tax Act. The Income Tax Officer (ITO) and the Commissioner of Income Tax (Appeals) held that these expenses were perquisites and taxable as income from salary. However, the Tribunal found that the payment was discretionary and not a contractual obligation. The expenses were incurred on a sympathetic and humanitarian basis and did not arise from the terms of employment. Therefore, the Tribunal concluded that these expenses should not be taxed as perquisites under section 17(2)(iv). 2. Interpretation of the Term "Perquisite" under the Income-tax Act: The Tribunal referred to various legal precedents to interpret the term "perquisite." It emphasized that for a payment to be considered a perquisite, it must arise out of the terms of employment, and the employee must have a vested right to claim it. The Tribunal cited cases such as Blakiston v. Cooper, Moorhouse (Inspector of Taxes) v. Dooland, and CIT v. L. W. Russel to support its view. The Tribunal found that the medical and living expenses were not part of the contractual terms and were paid on a discretionary basis. Thus, they did not qualify as perquisites. 3. Applicability of CBDT Circulars on Medical Reimbursements: The Tribunal also considered various Circulars issued by the Central Board of Direct Taxes (CBDT) regarding the taxation of medical reimbursements. These Circulars suggested that medical reimbursements were taxable as perquisites but provided certain exemptions. However, the Tribunal noted that these Circulars assumed that such reimbursements were perquisites, a premise it found questionable. The Tribunal concluded that the Circulars did not apply in this case because the payments were discretionary and not contractual. Conclusion: 1. Not Paid Under Terms of Employment: The medical and living expenses were not paid under the terms of employment but were discretionary payments. 2. Discretionary Payment: The company was under no obligation to pay these expenses, indicating they were discretionary. 3. No Personal Advantage: The payment did not confer any personal advantage to the assessee. 4. Chronological Order: The expenses were incurred by the company before any obligation was incurred by the assessee. 5. Gratuitous or Humanitarian Payment: The payment was made on a gratuitous or humanitarian basis. Therefore, the Tribunal deleted the inclusion of Rs. 2,55,258 as a perquisite under section 17(2)(iv) of the Income-tax Act.
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