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TMI Blog1988 (1) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... enal failure of the kidneys. On the ground that the ITO did not consider the assessability of these amounts in the assessments made by him, a show-cause notice was issued. The assessee, in reply, relied on a circular of the Central Board of Direct Taxes dated 31-12-1985 and submitted that reimbursement of such medical expenses was not to be treated as a perquisite. The Commissioner did not accept the claim and observed as under in paragraph 3 of his common order : "3. Since the assessee relies on the circular of the Central Board of Direct Taxes, it is necessary to set the matter straight. In Circular No. 336, dated 16-4-1982 the board had explained that the provision of ordinary medical facilities by an employer to an employee or his family is not to be included in the total income of the employee provided such amount did not in any financial year exceed one month salary. In Circular No. 376, dated 6-1-1984 the Central Government re-considered the matter and directed that the reimbursement of medical expenses will be taxable only if the amount exceed Rs. 5000 per annum. The circular dated 31-12-1985 now referred to by the Counsel for the assessee lays down that reimbursement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m, the time limit for passing the order u/s. 263 ended on 31-8-1986. The commissioner order was passed on 18-12-1986 and, therefore, it was hit by limitation. 4. Taking the point of limitation first, the learned Departmental Representative submitted that there was as exhaustive discussion on this point in an order of the Tribunal in the case of N. Mahalingam v. WTO [1986] 19 ITD 747 [Mad.]. He submitted that with effect from 1-10-1984 the period of limitation for passing an order under section 263 by virtue of Taxation Laws [Amendment] Act, 1984, was two years from the end of the Financial year in which the assessment was made. The assessments in the present case were made on 31-8-1984. Therefore, limitation would have expired only on 31-3-1987. The order of the commissioner passed on 18-12-1986 was, therefore, in time. 5. We have considered the submissions of the learned counsel for the assessee and the learned Departmental Representative on the point of limitation and we find that the issue stands concluded by the order of the Tribunal in the case of N. Mahalingam where we have gone into all the aspects in detail. the view canvassed on behalf of the Revenue has to be upheld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been made that the Board should reiterate its earlier instructions of 1955. 4. After carefully considering the matter, the following clarification is issued with the approval of the Central Government. 5. The provision of ordinary medical facilities made by an employer to an employee or his family free of charge or reimbursement of such medical expenses to the employee after they are incurred by him, is not to be included in the total income of the employee provided that such amount does noting any financial year exceed one month's salary of the employee. 'Salary ' for this purpose will include dearness allowance, where paid, but will not include any other allowance/perquisite. This will apply to all classes of employees, including managers /directors. 6. These instructions may be brought to the notice of all officers working in your charge. Yours faithfully, (Sd.) V. B. Srinivasan, Secretary, Central Board of Direct Taxes. [F. No. 200/108/77-IT (AI)]." This was followed by a Circular of the Board, i.e., Circular No. 376. dated January, 6, 1984. This latter Circular stated that it would come into force from the assessment year 1984-85 onwards. This Circular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstructions. It has been requested that reimbursement of medical benefits/medical facilities provided by an employer may not be taxed as perquisites. 3. The matter has been carefully considered. The present circular no doubt hits these employees of the public and private sectors on whose medical treatment fairly large amounts have been incurred by their employers and who an their own could never have afforded the expenditure on such unavoidable treatment. The present policy also discriminates against the employees of public sector undertaking as also those working in the private sector against Government employees in whose cases the Government permits reimbursement of expenses on medical treatment or provides free medical attention through Central Government Health Services. 4. In view of the above, the Board have decided that reimbursement of medical expenses, such as operation fees, hospitalization charges and cost of medicines, tests, etc., actually incurred in India by the employer on an employee, including managers/ directors, and his family members will not be treated as perquisite provided this expenditure is incurred on medical treatment in a recognised public hospital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee seeks relief in terms of the Circular of 31-12-1985. This Circular which we have set out earlier in full, states that the clarifications would come into force from the assessment year 1986-87 onwards. If the Circular is construed as one conferring a benefits beyond the terms of the Act. then on a very strict inter-pretation according to the letter of law, the benefit can be given only from the assessment year 1986-87 onwards and not before that. This being so, we cannot persuade ourselves to hold that the CIT was in error in invoking his powers under section 263 in withdrawing the benefit over and above the amount of Rs. 5,000 which was the.maximum then admissible in terms of the Board's Circulars for the assessment year 1983-84 and 1984-85. We are unable to subscribe to the view sought to be canvassed for the assessee that those Circulars only applied to employees and not to reimbursement made to their families. A member of the family cannot stand on a better footing than the employee himself. Therefore, on a strict interpretation of law, we would uphold the order of the CIT. 8. In a case where it is felt that a genuine hardship has resulted, it is not foreign for a Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in whose cases the Government permits reimbursement of expenses on medical treatment or provides free medical attention through Central Government Health Services." The Circular of December 31, 1985 enlarges the benefit in terms of para 4, thereof (which bears repetition) and is as under : "In view of the above, the Board have decided that reimbursement of medical expenses, such as operation fees, hospitalisation charges and cost of medicines, tests, etc., actually incurred in India by the employer on an employee, including managers/directions, and his family members will not be treated as perquisite provided this expenditure is incurred on medical treated as perquisite provided this expenditure is incurred on medical treatment in a recognised public hospital in India. The genuineness of the expenditure will, however, be examined by the assessing officer at the time of assessment." his enlarged benefit was directed by the Board to remove the hardship caused to employees who could never on their own afford expenditure on unavoidable treatment and also to remove to discrimination between employees of public sector undertakings and those working in the private sector vis-a-vis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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