1988 (1) TMI 103 - AT - Income Tax

Summary

Issues Involved
1. Assessability of reimbursement of medical expenses as perquisites for the assessment years 1983-84 and 1984-85.
2. Validity of the Commissioner's assumption of jurisdiction under section 263.
3. Limitation period for passing the order under section 263.

Detailed Analysis

1. Assessability of Reimbursement of Medical Expenses as Perquisites
The primary issue was whether the reimbursement of medical expenses for the treatment of the assessee's wife should be treated as perquisites under section 17 of the Income-tax Act for the assessment years 1983-84 and 1984-85. The Commissioner of Income Tax (CIT) noted that the amounts received by the assessee exceeded the permissible limit of Rs. 5000 per annum as per Circular No. 376, dated January 6, 1984, and thus, the excess amounts should be considered as perquisites. The assessee argued that according to the Circular dated December 31, 1985, such reimbursements should not be treated as perquisites if incurred in recognized hospitals. However, the Tribunal upheld the CIT's order, stating that the benefits of the 1985 Circular were applicable only from the assessment year 1986-87 onwards. The Tribunal emphasized that the earlier Circulars, which allowed a maximum exemption of Rs. 5000, were applicable for the relevant assessment years.

2. Validity of the Commissioner's Assumption of Jurisdiction under Section 263
The assessee contended that the CIT's assumption of jurisdiction under section 263 was erroneous because the medical reimbursements should not be treated as perquisites. The Tribunal, however, upheld the CIT's jurisdiction, stating that the CIT was correct in invoking section 263 to revise the assessment orders. The Tribunal noted that the CIT had the authority to modify the assessments to include the excess medical reimbursements as perquisites, as per the prevailing Circulars applicable to the relevant assessment years.

3. Limitation Period for Passing the Order under Section 263
The assessee argued that the CIT's order dated December 18, 1986, was barred by limitation since the assessment orders were passed on August 31, 1984, and the limitation period ended on August 31, 1986. However, the Tribunal clarified that due to the amendment brought by the Taxation Laws (Amendment) Act, 1984, effective from October 1, 1984, the limitation period was extended to two years from the end of the financial year in which the assessment was made. Therefore, the CIT's order was within the permissible time limit, as the limitation period expired on March 31, 1987.

Conclusion
The Tribunal concluded that the CIT's order was valid and within the limitation period. The reimbursement of medical expenses exceeding Rs. 5000 per annum should be treated as perquisites for the assessment years 1983-84 and 1984-85, as per the applicable Circulars. The Tribunal expressed a hope that the department should consider the assessee's case sympathetically if an application for relief is made, considering the hardship highlighted by the Circular dated December 31, 1985. The appeals were dismissed.