AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
1992 (3) TMI 139
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....ore, being prima facie of the view that the said assessment order was erroneous insofar as it was prejudicial to the interests of the Revenue since the aforesaid amount was not included in the assessee's income as perquisite under section 17 of the Income-tax Act, he served the assessee with a notice dated 15-3-1989 under section 263. In reply to this notice the written explanation dated 27-3-1989 of the assessee was that as a Managing Director, he attended the work of the company with the result that there was tremendous increase in the working and efficiency on account of his hard labour and that he was the driving force of the company. It was said that the assessee had to go to USA for medical check up and to undergo bypass surgery, if necessary as desired by the company, and that the reimbursement made by the company of these medical expenses was a voluntary act on grounds of commercial expediency. However, the learned Commissioner took the view that under section 17 of the Income-tax Act, 1961 provision of free medical facilities or reimbursement of medical expenses by an employer was treated as a perquisite in the hands of the employee. In this connection reliance was placed ....
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....d that the assessment order could neither be treated as erroneous nor as prejudicial to the interests of the revenue. He also relied upon the decision of the Bombay High Court in Mehboob Productions (P.) Ltd. v. CIT [1977] 106 ITR 758. On the other hand, on behalf of the Department Shri S.K. Kundra, the learned Senior Departmental Representative strongly relied upon the order of the learned Commissioner of Income-tax. He argued that since the late assessee became Managing Director with effect from 1-1-1980, he had the heart ailment prior to it and could not be said to have contracted it after his appointment. He submitted that it was not a professional hazrad and that there was no direct nexus between the assessee's medical check up in USA and the business of the company. He submitted that the amount in question was a perquisite in terms of section 17(2)(iii)(c) and section 17(2)(iv) of the IT Act, 1961. He also argued that the application for grant of foreign exchange was made by the late assessee and not by the company. Reference was also made by him to the Circular, dated 31-12-1985 of the CBDT. He pointed out that the fact that the amount had been allowed in the hands of the co....
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....re requested you to undergo the surgery. A sum of Rs. 1,51,190 was spent on medical treatment and same was reimbursed to you by way of staff welfare expenses. However, the income-tax officer . . . disallowed the said expenditure by assessment order dated 4-3-1987 after holding the said expenditure as your personal expenditure. Being aggrieved we preferred appeal but unfortunately the Commissioner (Appeals) by order dated 18-1-1989 rejected our claim and sustained the disallowance. On the above facts though we had requested you to undergo the medical treatment and had a source to reimburse the medical expenses but on account of its disallowance we hereby request you to repay the amount at your convenience.We are sure you shall not mind this letter and shall try to repay the amount at your own convenience." In the order dated 27-12-1991 in the case of M/s UMDS the following observations were made by the Tribunal in para 62 :-- "62. The rival submissions as also the decisions referred to above have been duly considered. The expenses were incurred on hotel, air tickets of the M.D. and Smt. Asha Golcha as also for medical bills of Houston, Brooklyn, daily expenses of both and local c....
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.... are incurred are not taxed. In fact, though the Board's Circular No. 445, dated 31-12-1985 (referred to in the order of the Commissioner and relied upon on behalf of the learned Departmental Representative) refers to expenditure incurred on medical treatment in a recognised public hospital in India and, therefore, the assessee's case could not be said to be covered by that Circular, but the fact remains that in principle the Board did accept that reimbursement of medical expenses such as operation fee, hospitalisation charges and cost of medicines, tests etc. actually incurred by the employer on an employee including the Managers/Directors and his family members were not to be treated as perquisites. In fact, in the case of Mehboob Productions (P.) Ltd., the Managing Director of the assessee-company went to USA with his wife to attend the function for the Awards by the Academy of Arts and Sciences, Hollywood. While he was in the USA, M suffered a serious heart attack for which he had to be hospitalised and expenditure was incurred in connection with his illness. After his return to India, the Board of Directors of that company passed a resolution to the effect that the entire expe....