TMI Blog2002 (2) TMI 310X X X X Extracts X X X X X X X X Extracts X X X X ..... shape of medical reimbursement were claimed to be exempt with a note. 4. The Assessing Officer during the course of assessment proceedings, asked the assessee to clarify how perks allowed to the assessee in respect of medical treatment were claimed as exempt. In his reply, dated 12-4-1994, the assessee submitted as under: "Please refer to your above mentioned questionnaires dated 25-6-1993 and in this regard I have to state as under: That as per section 17(2)(vi)(1) of Income-tax Act, the travelling expenses of employee and his one attendant is not allowable expenditure and it will be treated as perquisite in the case of employee whose total income exceeds Rs. one lakh but the I.T.A.T., Jaipur Bench held that the expenses incurred for the treatment of M.D. cannot be treated as perquisite in the hands of the Managing Director. I am also enclosing R.B.I.'s permit for issuing foreign exchange and also the copy of the application submitted to the R.B.I. for the expenses incurred." 5. During the course of assessment, the assessee also produced certificate from M/s. Upper India Steel Mfg. Engg. Co. Ltd. relating to medical expenses incurred on the assessee and tax deducted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be treated perquisite. In the view of the Assessing Officer expenditure incurred in excess of 'limit' laid down in proviso-VI to clause (2) of section 17 is to be treated as perquisite. The following expenditure with which I am concerned in this penalty matter were brought to tax as perquisite and as income falling under section 17 of the Income-tax Act:- (Rs.) (1) Air fare of S. Indermohan Singh Grewal, 32,510 Managing Director (2) Air fare of one attendant 32,510 (3) Air fair of Doctor 32,510 (4) Fee paid to Doctor 10,000 -------- 1,07,530. -------- 7. The above referred to addition is not shown to have been challenged in further appeal. The Assessing Officer also initiated penalty proceedings under section 271(1)(c) of the Income-tax Act. He rejected assessee's contention that the above expenditure was bonafidely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4-85 had no application to assessment year 1992-93 particularly when legal position had changed on account of amendment. It is, therefore clear that the assessee through a deliberate Act did not pay tax on items of perquisites which clearly was income of the assessee. Thus all the conditions of application of section 271(1)(c) are fully satisfied in this case and the learned CIT(A) cancelled the penalty by taking an erroneous view of the matter. 10. The learned counsel for the assessee, on the other hand, reiterated that these items were bonafidely claimed to be exempt in the light of decision of Tribunal and different courts. Otherwise, the assessee had already paid tax on those items. On account of assessee's bona fide belief that these items were not taxable, a question was raised in the return and in assessment proceedings. No evasion of tax was involved in this case. The tax stood paid and the assessee was entitled to refund. The assessee had placed all relevant facts on record and co-operated with the revenue. The learned counsel relied on written submission dated 13-2-2002 and upon the case law cited in his reply to notice dated 17-11-1994 under section 27 1 (1)(c) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered opinion, no penalty is exigible in this case. The assessee had throughout claimed that he acted bonafidely under the belief that expenditure incurred by his employer on his medical treatment outside India was exempt. Such a belief could have been formed on the basis of decision of Income-tax Appellate Tribunal in the case of Smt. Asha Golacha. In the said case, the Tribunal had held that reimbursement of medical expenses incurred abroad was not a perquisite under section 17(2) of the Income-tax Act. The Bench had considered various clauses of section 17(2) to reach the above conclusion. The assessee on the basis of above decision claimed that medical expenses incurred by the assessee were not liable to tax. A copy of said decision was annexed with the return. It was also stated that medical expenses incurred by the assessee's employer were being treated as exempt and not included in the returned income. This position was taken after tax was duly deducted from the assessee and a sum of Rs. 1,55,362 was treated as value of perquisite in the shape of medical treatment provided by the employer. On the facts and in the circumstances of the case, nothing has been concealed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of perquisites at Rs. 1,55,362 for the medical treatment provided by the employer. Assuming for the sake of argument that the assessee was aware of these details as also of the amendment made with effect from 1-4-1992, even then there is no case for levy of penalty. I have already narrated the circumstances which justify the assessee's right to contest deduction of tax at source. It has been noted that the assessee succeeded in establishing that wrong deduction of tax at source was made by his employer. The provisions of Income-tax Act are accepted to be complicated and can be interpreted in more than one way. The conditions which were introduced in clause (vi) of section 17(2) with effect from 1-4-1992 and which have been reproduced above after the figure of "one lakh" proceeds and states 'subject to such further conditions.... and guidelines issued by Reserve Bank of India'. It is reasonable to interpret that the conditions imposed are subject to permission of Reserve Bank of India. in other words, if expenditures are incurred with the approval of Reserve Bank of India, "then those expenditures would not be treated as perquisites. There are several similar provisions under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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