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TMI Blog1984 (5) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... atment which included the services of a qualified nurse who was attending on him day and night. In August, 1967, the board of directors of the assessee-company decided to reimburse such medical expenses of the managing director as may be incurred by him. For the assessment year 1968-69 (year ending on March 31, 1968), the assessee-company reimbursed medical expenses of Rs. 33,941, which comprised payments to the nursing home, doctors, nurses and purchase of medicines. The ITO had rejected the claim of the assessee-company as he was of the view that such payment was hit by the provisions of s. 40(c)(iii) of the Act, but on appeal, the AAC restricted the allowance to Rs. 9,408. On further appeal, the Tribunal allowed the claim of the assessee-company in its entirety holding that the payments were made to fulfil the legitimate needs of the business of the company and they were neither excessive nor unreasonable. For the assessment years 1969-70 and 1970-71, the assessee-company had claimed deductions of Rs. 40,319 and Rs. 41,197, towards the medical expenses reimbursed to its managing director. It may be noted that s. 40(c)(iii) was omitted by the Finance Act of 1965 with effect fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any travel concession or assistance referred to in clause (5) of section 10 ; (c) passage moneys or the value of any free or concessional passage referred to in sub-clause (i) of clause (6) of section 10; (d) any payment of tax referred to in sub-clause (vii) of clause (6) of section 10 ; (e) any sum referred to in sub-clause (vii) of clause (1) of section 17 (f) any sum referred to in sub-clause (v) of clause (2) of section 17 (g) the amount of any compensation referred to in sub-clause (i) or any payment referred to in sub-clause (ii) of clause (3) of section 17 ; (h) any payment referred to in clause (iv) or clause (v) of subsection (1) of section 36; and (i) any expenditure referred to in clause (ix) of sub-section (1) of section 36: Provided further that nothing in this sub-clause shall apply to any expenditure which results directly or indirectly in the provision of any benefit or amenity or perquisite to an employee whose income chargeable, under the head 'Salaries' is seven thousand five hundred rupees or less. Explanation 1.-The provisions of this sub-clause shall apply notwithstanding that any amount not to be allowed under this sub-clause is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that s. 40(c)(iii) did not lay any limit beyond which expenditure was not to be allowed. The Tribunal held that s. 40(a)(v) which came into effect from April 1, 1969, prescribed a limit over and above which any expenditure on providing amenities, benefits or perquisites to an employee had to be disallowed. The Tribunal was of the view that what was to be allowed was 1/5th of salary or Rs. 1,000 per month, whichever was less. Accordingly, the Tribunal accepted the submission of the Department that the allowance of reimbursement of medical expenses had to be restricted to Rs. 12,000 for each of the assessment years in question and not 1/5th of the salary and commission paid to the managing director as was held by the AAC. The Tribunal thus partially accepted the appeal of the Revenue and dismissed the cross-objections of the assessee-company. At the instance of the assessee-company this reference was made. The learned counsel for the Revenue raised a preliminary objection that the present reference was not maintainable, as it did not arise out of the cross-objections filed by the assessee-company and was duly against the appeal filed by the Revenue before the Tribunal. We think th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use (a)(v) of s. 40 of the Act, did not include any cash payment made by the company to its employee within the meaning of the words " any benefit, amenity or perquisite. " In support of his contentions, Mr. Ved Vyas referred to various decisions which may be noticed. In CIT v. Kanan Devan Hills Produce Co. Ltd. [1979] 119 ITR 431, the Calcutta High Court held that any cash payment directly made to the employee cannot be considered to be a perquisite within the meaning of s. 40(c)(iii) of the Act, which provision corresponds to s. 40A(5). The question before the court was whether the overseas allowance, managing allowance, devaluation allowance and transport allowance did not fall within the expression " benefit, amenity or perquisite " within the meaning of s. 40(c)(iii) of the Act. The court observed as follows (p. 437): " In our view, in their ordinary meaning, the words 'which results directly or indirectly in the provision of any benefit or amenity or perquisite whether convertible into money or not' in cl. (c)(iii) of s. 40 excludes cash paid directly to an employee as there is no question of convertibility to money where cash would be paid. This interpretation is rein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under s. 40(c)(iii) or s. 40(a)(v) of the Act. The court answered the question in favour of the assessee following its decision in Indian Leaf Tobacco De. Co. [1982] 137 ITR 827 (Cal). In CIT v. Venkataraman [1978] 111 ITR 444, the Madras High Court had occasion to consider a similar provision as contained in s. 2(6C)(iii) of the Indian I.T. Act, 1922, which defined income as including " the value of any benefit or perquisite, whether convertible into money or not obtained from a company ". It was held that " from this language it is clear that the benefit or perquisite " contemplated cannot be money itself. If it is money, the question of its value being taken into account or the benefit or perquisite being converted into money will not arise ". It was also observed that the same section made a distinction between " benefit or perquisite " on the one hand and " any sum paid " on the other indicating that the benefit or perquisite contemplated by the section was other than money. In CIT v. Manjushree Plantations Ltd. [1980] 125 ITR 150 (Mad), the question was whether the leave allowance was not a perquisite and, therefore, the allowance of the same would not fall to be rest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er than dearness allowance. That the term "benefit, amenity or perquisite " is opposed to salary evidently indicated that these together would exhaust what an employee would obtain in terms of the return for his services. The court thus differed from the view of other High Courts and observed : " It is immaterial whether the benefit, perquisite or amenity may or may not be convertible into money ". With respect we are unable to agree with the line of reasoning adopted by the Kerala High Court. The term " benefit or amenity or perquisite " could not include cash payments, otherwise the words immediately following this term become redundant. Such type of construction has to be avoided. As a matter of fact, the use of the words " whether convertible into money or not" goes to show that the term "benefit or amenity or perquisite " cannot relate to cash payments. Any cash payment could well be part of the salary as given in s. 17 of the Act. It cannot certainly be benefit or amenity or perquisite whether convertible into money or not Definition of salary given in s. 40(a)(v) is restricted in its applicability only to this clause for the purpose of calculation of the value of the benef ..... X X X X Extracts X X X X X X X X Extracts X X X X
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