9911796707
TMI Blog1981 (3) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... ced by the recoveries made from the managed companies on account of the services rendered to such companies by the said employees? " This reference arises out of the assessments for the assessment years 1966-67 and 1967-68, for which the relevant previous years were calendar years 1965 and 1966. As per the terms of the contract the assessee-company was required to reimburse the entire nursing expenses of its employees and officers. To avoid any heavy expenditure in any particular year the company took medical insurance policy from a Nursing Home Benefit Association on the individual life of each employee for which it was required to pay premia of Rs. 150 to Rs. 510 per year in the cases of different employees. The ITO treated the amount of premia as the expenditure which resulted directly or indirectly, in the provision of a benefit or amenity or perquisite to the employees for working out the disallowable item u/s. 40(c)(iii) of the Act. The claim of the assessee, on the other hand, was that the premia as such did not result in any such benefit or amenity or perquisite. The ITO, however, rejected the assessee's contention. On appeal, the AAC, however, accepted such view. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company, would reimburse the entire medical expenses to the employees. The Tribunal was of the view that the assessee in order to minimise the hardship took; medical insurance policies for which it paid certain premia. The right of the employee to claim the reimbursement continued, even after taking that policy, from the assessee directly. The Tribunal was also told that the assessee either after reimbursing the employee or even before, made a claim from the insurance company which normally was not accepted in full. The amount which was received by the assessee-company from the insurance-company was held as its own money and the employee was not concerned with its disposal. The employees continued to receive the reimbursement of the actual expenses incurred in their nursing. These facts found by the .Tribunal are not controverted. Therefore, the Tribunal was of the view that it could not be said that the insurance premium was an expenditure which resulted directly or indirectly in the provision of any benefit or amenity or perquisite to the employees. In the opinion of the Tribunal, the perquisite to the employee Was the reimbursement of the medical expenses by the assessee which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compensation referred to in clause (i) or any payment referred to in clause (ii) of sub-section (3) of that section or any payment referred to in clause (iv) or clause (v) or any expenditure referred to in clause (ix) of subsection (1) of section 36 shall not be taken into account: 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. " Bearing in mind with what we are concerned, we must actually construe the effect of the section. We have to bear in mind that the section indicates that normally sums or amounts, which were deductible under ss. 30 to 39, could not be allowed as deductions because of the express terms of s. 40. Now, this section, therefore, as it stood at the relevant time, limits the claim for deductibility, so that the claim for deductibility of the assessee is in accordance with the terms which are used. This is an aspect which has to be kept in view. Secondly, it appears to us that the amounts refer-red to in s. 40 in the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d accrue being the income of the employee as mentioned in the provisions of the section and the liability of the employer-company remains unchanged and that is not discharged and the employee as such had not derived any benefit from such taking out of the policy. In the case of a particular employee or in the case of some employees or in the case of large number of employees no legal expenses may be incurred. The assessee would have to incur the expenditure in taking out the policies. Therefore, the assessee, being the company, had its own benefit to safeguard the liabilities. There is no question of safeguarding or creating way benefit directly or indirectly to the employees. The Supreme Court in a different context in the case of CIT v. L. W. Russel [1964] 53 ITR 91 (SC), at p. 97 observed as follows: " It implies that a right is conferred on the employee in respect of those perquisites. One cannot be said to allow a perquisite to an employee if the employee has no right to the same. It cannot apply to contingent payments to which the employee has no right till the contingency occurs. In short the employee must have a vested right therein." It is true that there the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt is the appropriate approach. In the case of CIT v, Kanan Devan Hills Produce Co Ltd. [1979] 119 ITR 431 (Cal), the court was concerned directly with s. 40(c)(iii) of the I.T.Act, 1961, and was of the view that the phrase " whether convertible into money or not " does not govern only the expression "perquisite" . The words in the section are " any benefit or amenity or perquisite" If the phrase " whether convertible into money or not" was intended to govern only the word " perquisite ", then the correct grammatical form would have been " any benefit or any amenity or any perquisite whether convertible into money or not ". There the facts were entirely different. It was held that the amounts paid as " overseas allowance ", " managing allowance ", " devaluation allowance " and " transport allowance " to the employees of the assessee-company did not fall within the expression " benefit ", " amenity " or " perquisite " within the meaning of s. 40 (c) (iii) of the Act. As we have mentioned before, in view of the finding made by the Tribunal that this policy really was taken by the assessee, as the employer, in discharge of his own obligations which remains unaffected, in our opi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
