1986 (12) TMI 100 - AT - Income Tax

Summary

Issues:
1. Disallowance of medical reimbursement expenses as perquisite under section 40A (5) of the IT Act.
2. Merger of orders between different appellate authorities.
3. Interpretation of whether reimbursement of medical expenses constitutes a perquisite or salary.

Analysis:

1. The case involved the disallowance of medical reimbursement expenses as perquisite under section 40A (5) of the IT Act. The Commissioner contended that certain payments made by the assessee, including medical reimbursement expenses, constituted perquisites and should be limited as per the law. The Commissioner initiated proceedings under section 263 of the IT Act to rectify the assessment made by the IAC, who had allowed the expenses in full, ignoring the restrictions imposed by the law. The Commissioner held that the claim of medical reimbursement expenses exceeded the prescribed limits and directed the IAC to revise the total income of the assessee accordingly.

2. The issue of merger of orders between different appellate authorities was raised by the assessee, arguing that the order of the IAC had merged with the order of the CIT (A) and could not be modified by the CIT. The Rajasthan High Court's judgment clarified that the order of the assessing authority does not merge with the order of the appellate authority in matters not disputed before them. The contention of the assessee regarding the merger of orders was rejected based on this clarification.

3. The interpretation of whether reimbursement of medical expenses constitutes a perquisite or salary was extensively discussed. The Tribunal held that medical reimbursement expenses cannot be treated as perquisites, citing various authorities supporting this view. However, it was noted that such reimbursements could be subject to overall restrictions under the law. The Tribunal also considered conflicting decisions on the issue but ultimately held that the order of the IAC was not erroneous or prejudicial to the interests of the Revenue. The appeal was dismissed, emphasizing that no circular supporting the non-disallowance of medical expenses was presented.

In conclusion, the Tribunal's decision upheld the disallowance of medical reimbursement expenses as perquisite under section 40A (5) of the IT Act, clarified the non-merger of orders between appellate authorities, and determined that medical expenses reimbursement does not constitute a perquisite but may be subject to certain restrictions under the law.