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TMI BlogLimit on allowance in respect of benefit, amenity or perquisite under clause (c) (iii)/clause (a)(v) - Reimbursement of certain expenses/payments whether form part of perquisite to be restricted to one-fifth of salaryX X X X Extracts X X X X X X X X Extracts X X X X ..... or not, to an employee (including any sum paid by the company in respect of any obligation which but for such payment would have been payable by such employee) would be admissible as a deduction in computing the company's income, only to the extent of one-fifth of the amount of salary payable to the employee. Section 40(c)(iii) was replaced by section 40(a)(v) with effect from assessment year 1969-70 and was applicable to all assessee-employers, not restricted to companies only. 2. The question for consideration is whether the benefits given to the employees in the form of provision of medical facilities or reimbursement of medical expenses, electricity, gas, gardener, rent-free accommodation, motorcar and bonus or commission should fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the employees. If the bonus is paid gratuitously without there being any legal or contractual obligation, the payment is in the nature of a perquisite and has, among other perquisites, to be linked to one-fifth of the salary for allowance under section 40(c)(iii)/40(a)(v). As regards payment of commission to the employees the question whether it form part of "salary" or "perquisite" has to be decided on the facts of each case. If the terms and conditions of service are such that commission ispaid not as a bounty or benefit but is paid as part and parcel of the remuneration for services rendered by the employee, such payment may partake of the nature of salary rather than as a benefit or perquisite. If, however, on the terms and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 40(a)(v), any expenditure which results, directly or indirectly, in the provision of any benefit or amenity or perquisite, whether convertible into money or not, to an employee (including any sum paid by the assessee in respect of any obligation which but for such payment would have been payable by such employee) shall be admissible as a deduction in the computation of the assessee-company's total income only to the extent of one-fifth of the amount of the salary payable to the employee. 3. A question has been raised whether bonus or commission paid to the employee should also be included in the value of "any benefit or amenity or perquisite" for the purpose of limiting the deduction to one-fifth of the salary as explained above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission and bonus should be included in the value of "any benefit or amenity or perquisite" for the purpose of limiting the deduction thereof to one-fifth of the salary as per the above section. 2. So far as the reimbursement of medical expenses is concerned, it will clearly be a benefit or amenity or perquisite to be included in the value of perquisites for the purpose of limiting the permissible deduction to one-fifth of the salary. As regards payment by way of commission and bonus, however, the question of including these payments as "benefit, amenity or perquisite" will depend upon the facts of each case. Where bonus and commission are paid as apart of the employee's regular salary as agreed to between the company and the employee in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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