TMI Blog2000 (9) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... velling and stay expenses of the assessee and his wife. As a result, the assessee was reimbursed medical expenses of Rs. 4,89,277. The Assessing Officer, therefore, noted that reimbursement of medical expenses to the assessee was income of the assessee chargeable to tax, which had escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. He, therefore, issued a notice under section 148 which was served on the assessee on 13-2-1991. During the course of reassessment, the contention of the assessee was that reimbursement of medical expenses did not constitute a perquisite in the hands of the assessee and, therefore, the same was not liable to tax. However, the Assessing Officer rejected the contention of the assessee and held that reimbursement of medical expenses was liable to tax under the head "income from other sources" under section 56 of the Act. After allowing deduction of Rs. 5,000, the Assessing Officer included an amount of Rs. 4,84,086 in the total income of the assessee. 3. Aggrieved, the assessee took the matter in appeal before the CIT(A), where apart from disputing the addition, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ursement of medical expenses constituted assessee's income under section 2(24)(iv) as this section reckoned any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by a person who has a substantial interest in the company, or by a relative of the director or such person, any sum paid by any such company in respect of any obligation which, but for such payment would have been payable by the director or other person aforesaid. She, therefore, held that reimbursement of medical expenses constituted benefit under section 2(24)(iv) of the Act which was liable to tax under section 56(1) of the Act, i.e. "income from other sources'. She also held that Board's Circular No. 603 dated 6-1-1991 and ITAT, Jaipur Bench's decision dated 17-3-1992 Smt. Asha Golcha v. Asstt. CIT [1992] 42 ITD 7, was not applicable to the facts of the case because at the relevant time when the assessee received reimbursement of medical expenses, he was not the employee of the company. Thus she confirmed the action of the Assessing Officer in reopening the assessment and also the addition made. Aggrieved further, the assessee has now preferred this appeal bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elied on the decision of Gujarat High Court in the case of Garden Silk Mills (P) Ltd. v. Dy. CIT [1999] 237 ITR 668, where the High Court has held that the expression "reason to believe" must be based on material. Mere change of opinion will not justify the reassessment. As regards the merits of the case, the learned counsel relied on the decision of ITAT, Delhi Bench in the case of Frick India Ltd. v. Dy. CIT59 ITD 240 (sic) dated 28-2-1996 in I.T.A. No. 4487(Del)/91. The learned counsel also placed reliance on the decision of ITAT, Calcutta Bench in the case of J.N. Sapru v. Asstt. CIT [1996] 59 ITD 240, where reimbursement of medical expenses was not held to be a perquisite within the meaning of section 17(2)(iv) of the I.T. Act. He also relied on the decision of ITAT, Chandigarh Bench in the case of Hero Cycles Ltd. v. Asstt. CIT in ITA Nos. 835 and 1056 (Chd.) of 1992, where it was held that medical reimbursement of expenses was not covered under section 40A(5). This decision was with reference to assessment year 1988-89. He also relied on the decision of Delhi Bench of the ITAT in the case of Dy. CIT V. S. Man Mohan Singh [1999] 63 TTJ (Delhi) 491, where the reimbursement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to reopening of assessment were not operative. She relied on the decisions of ITAT, Delhi Bench in the case of Dr. Indra Chand Jain v. Dy. CIT [1997] 59 TTJ (Delhi) 699, and Cochin Bench, in the case of Indo Marine Agencies (Kerala) (P.) Ltd. v. Asstt. CIT [1995] 51 TTJ (Coch.) 18. She also relied on the order of CIT(A) where the action of Assessing Officer in reopening of the assessment has been upheld by referring to the amended provisions of the Act. She further submitted that medical expenses reimbursed to the assessee abroad were rightly taxed under the head "income from other sources' because the assessee was not an employee of the company at the time when a decision to reimburse the expenses was taken. She also submitted that the assessee was not getting any salary at the relevant point of time. Distinguishing the decisions cited by the learned counsel for the assessee she submitted that those were applicable either to the cases where issue related to disallowance of such expenditure in the cases of company or in cases where the assessees were employees of the company. But in the instant case, the assessee was not the employee of the company at the time when decision to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrant any interference. 6. The learned counsel for the assessee in rebuttal stated that assessee was an employee as could be seen from Form No. 16. Therefore, it is not correct to say that the decision of Punjab Haryana High Court in the case of Sukhjit Starch Chemicals Ltd. is not applicable to the facts of the case. 7. We have carefully considered the rival submissions, examined the facts, evidence and material on record. We have also perused the orders of the authorities below and referred to the various decisions to which our attention was drawn. Now, the first issue that needs to be considered is, whether the Assessing Officer was justified in reopening the assessment under section 147 or not. Related to this issue is the other point i.e., whether insertion to the computation sheet filed along with the return was made at a later stage or the same existed as it is when return of income was filed. The CIT(A) has observed that there is no conclusive proof to the effect that the same was inserted at a later stage nor it could be said that it existed at the time of filing the return of income. Be that as it may, copies of return filed by the learned DR. show that Part-II ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reopened proceedings. 8. Now, if we refer to the amended provisions of section 147, we find that there are significant changes made therein. Prior to amendment of the provisions, the Assessing Officer could assume jurisdiction under section 147 only if there was positive information to the effect that income chargeable to tax had escaped assessment. Besides, the Assessing Officer was also required to establish that such escapement of income was on account of assessee's failure to disclose truly and fully all material facts necessary for assessment. Now this condition that escapement of income was due to the failure an the part of the assessee to disclose fully and truly all material facts necessary for his assessment would apply only if the assessment is proposed to be reopened in a case where the original assessment had been completed under section 143(3) or under section 147 after the period of four years from the end of the relevant assessment year. In this case, the assessment year in question is 1986-87 and notice under section 148 was served on the assessee on 13-2-1991 i.e., within a period of four years from the end of assessment year. Therefore, the requirement of es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot. Having regard to these facts and circumstances of the case, we hold that Assessing Officer was justified in reopening the assessment under section 147 for the assessment year under reference and the CIT(A) was correct in confirming the action of the Assessing Officer. 9. Now the next issue that needs to be addressed is, whether the CIT(A) was justified in confirming the addition of Rs. 4,84,066 made by the Assessing Officer. The CIT(A) has held that assessee was not an employee of the company at the time when board of directors had passed the resolution for bearing the medical expenses of the assessee abroad. By referring to the provisions of section 2(24)(iv), the CIT(A) has noted that the assessee being a director of the company was squarely covered by these provisions. She also held that but for company undertaking to bear the medical expenses of the assessee abroad, the assessee would have been liable to pay the expenses and, therefore, the same constituted assessee's income under section 2(24)(iv) of the Act. Now the only issue which requires to be considered is, whether section 2(24)(iv) of the I.T. Act is applicable to the facts of this case? The same issue came up fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut for such payment, would have been payable by the employee. Such payment would thus fall within the definition of expression 'perquisite'. We have also carefully seen the decision in 219 ITR 644 as also 221 ITR 308, wherein aforesaid decision of the Apex Court has been mentioned. The ratio of the said decisions is that cash payments made on account of reimbursement of medical expenses are not covered by the provisions of section 40A(5)(a)(ii) as well in sub clause (iv) of definition of 'perquisite' as given in clause (b) of Explanation 2 to sub-section (5). In the present case, the expenses on the medical treatment of Sh. O.P. Munjal have not been reimbursed in cash but have been incurred by the assessee-company on his medical treatment in the form of air-tickets for him and his wife, medical expenses incurred in U.S.A. and certain other incidental expenses aggregating to Rs. 2,39,566. If we closely look at the provisions of sub clause (iv) of the definition of 'perquisite' only such payments by the assessee would fall within the definition which relate to any obligation which, but for such payment, would have been payable by the employee, in this case Sh. O.P. Munjal. Here, it m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Rs. 2,39,566 out of disallowance of Rs. 4,28,923. Further, Assessing Officer is directed to exclude the amounts falling within the purview of second proviso to section 40A(5)(a) while computing ceiling amount of Rs. 1,02,000 under section 40A(5) and allow appropriate relief to the assessee." The Tribunal, after considering the facts and circumstances of the case, came to the conclusion that reimbursement of medical expenses could not be brought within the definition of "perquisite" as given in explanation 2(b) as Sh. Om Parkash Munjal was not prepared to bear the expenses for his treatment abroad and it was due to commercial expediency that the company pressurised the assessee to undertake such treatment. If the same did not constitute perquisite under Explanation 2(b) to section 40A(5), then the same would also not constitute benefit or perquisite under section 2(24)(iv) of the Act as both sections stand on identical footing. This issue also came up in assessee's own case before the ITAT, Chandigarh Bench in I.T.A. No. 679/Chandi/92 for assessment year 1988-89, where an amount of Rs. 2,42,131 being reimbursement of medical expenses was included in his income under section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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