ORDER
Joginder Pall, AM.
1. This is an assessee’s appeal against the order of CIT(A)(C), Ludhiana for asst. yr. 1986-87.
2. The first issue relates to the fact that CIT(A) has wrongly confirmed reopening of assessment under Section 147/148 of the IT Act. The facts of the case are that the assessee has filed return on 30th June, 1986, declaring therein income of Rs. 1,42,041. Subsequently, the assessee filed revised return of income on 30th June, 1987. Assessment was completed on 21st Sept., 1988, at an income of Rs. 3,03,439, which was reduced in appeal to Rs. 2,64,890. Subsequently, the AO noticed while completing the assessment for asst. yr. 1988-89 that M/s Hero Cycles Ltd., in which the assessee was a director, has passed a resolution on 10th Sept., 1985, asking the assessee to go to America for medical treatment for which the company had agreed to bear the cost of treatment including travelling and stay expenses of the assessee and his wife. As a result, the assessee was reimbursed medical expenses of Rs. 4,89,277. The AO, therefore noticed 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 noticed under Section 148 which was served on the assessee on 13th Feb., 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 AO 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 AO included an amount of Rs. 48,086 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 assessee also contested the issue of reopening of the assessment. The main contention of the assessee before CIT(A) was that in the original return filed, the assessee had appended a note below the computation of income where the fact of reimbursement of medical expenses of Rs. 4,85,277 for treatment abroad was mentioned and it was claimed that the same was not taxable as treatment abroad was insisted upon by the employer. It was, therefore, contended that there was no failure or omission on the part of the assessee in disclosing all particulars necessary for assessment and, therefore, reopening of the assessment was not valid. The case of the Revenue was that the note below the computation sheet was inserted at a later stage written with ink and the same was not there in the original return filed. The CIT(A) noted that in the light of the facts on record, it could not be” conclusively established whether the note was there when the return was filed or it was inserted later on, but the reopening of the assessment under Section 147(a) was squarely covered under proviso to Section 147, which provides that where an assessment under Sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of The assessee to make a return under Section 139 or in response to a notice issued. Thus, the CIT(A) noted that notice under Section 148 was issued and served on the assessee within the stipulated period of four years as per proviso to Section 147 and, therefore, the reopening of assessment was valid. As regards merits of the addition of Rs. 4,84,066, the CIT(A) noted that at the time when the board had passed a resolution for the treatment of the assessee abroad, Shri Om Parkash Munjal was neither the managing director nor a wholetime director of the company since 1980. He was merely looking after day-to-day work of the company mainly on the marketing side. The amount by way of reimbursement of medical expenses was drawn at a time when he was not drawing any salary in the company as relationship between the employer and employee did not exist. Nevertheless the assessee was a director. Therefore, reimbursement 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 dt. 6th Jan., 1991 and Tribunal Jaipur Bench’s decision dt. 17th March, 1992 reported in Smt Asha Golcha v. Asstt. CIT (1992) 49 TTJ (Jp) 156: (1992) 42 JTD 7 (Jp) 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 AO in reopening the assessment and also the addition made. Aggrieved further, the assessee has now preferred this appeal before us.
4. The learned counsel for the assessee, Shri Subhash Aggarwal, reiterated the same submissions which were made before the authorities below. He submitted that the view of the note appended below the computation of income in the original return filed, there was no omission or failure on the part of the assessee to disclose all material facts necessary for assessment. Thus, the fact of receipt was within the knowledge of the AO at the time when he completed the assessment under Section 143(3). Subsequent action of the AO only constituted a change of opinion which is not permitted under Section 147 of the IT Act. Relying on the judgment of Punjab & Haryana High Court in the case of Sukhjit Starch & Chemicals Ltd. v. CIT (1997) 221 ITR 308 (P&H), the learned counsel submitted that reimbursement of medical expenses of the director of the company is not a benefit or amenity within the meaning of Sections 40(c) and 40A(5) of the Act and, therefore, the same cannot be disallowed. He also relied on the judgments of Patna High Court in the case of Ranchi Handloom Emporium v. CIT & Am. (2000) 235 ITR 604 (Pat), and submitted that amended provisions of Section 147 were not applicable to asst. yr. 1988-89 and there must be positive material available with the AO to show that income had escaped assessment due to omission or failure on the part of the assessee. He also relied on the decision of Gujarat High Court in the case of Desai Bros. v. Dy. CIT (1999) 240 ITR 121 (Guj), where it has been held that there must be a nexus between the material on record and belief that income had escaped assessment. The mere fact that deduction under Section 32AB was wrongly allowed could not constitute a reason to believe that income had escaped assessment. Relying on the judgment of Delhi High Court in the case of Jindal Photo Films Ltd. v. Dy. CIT (1998) 234 ITR 170 (Del), the learned counsel submitted that reopening of assessment by the AO was held to be invalid merely on account of the reason that assessee was not entitled to deduction under Section 80-1, which was allowed at the time of original assessment. He also cited the decision of Gujarat High Court in the case of Avani Corporation v. ITO (1999) 238 ITR 407 (Guj), where reopening of assessment was held to be invalid because it was reopened beyond the period of four years. Lastly he relied on the decision of Gujarat High Court in the case of Gujarat Silk Mills (P) Ltd. v. Dy. CIT (1999) 237 ITR 668 (Guj) 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 assessment. As regards the merits of the case, the learned counsel relied on the decision of Tribunal, Delhi Bench in the case of Brick India Ltd. v. Dy. CIT 59 JTD 240 (sic; dt. 28th Feb., 1996 in ITA No. 4487/Del/1991. The learned counsel also placed reliance on the decision of Tribunal Calcutta Bench in the case of J.N. Sapru v. Asstt. CIT (1996) 56 TTJ (Cal) 705 : (1996) 59 JTD 240 (Cal), where reimbursement of medical expenses was not held to be a perquisite within the meaning of Section 17(2)(iv) of the IT Act.
He also relied on the decision of Tribunal Chandigarh Bench in the case of Hero Cycles Ltd. v. Assn. CIT in ITA No. 835/Chd/1992, where it was held that medical reimbursement of expenses was not covered under Section 40A(5). This decision was with reference to asst. yr. 1988-89. He also relied on the decision of Delhi Bench of the Tribunal in the case of Dy. CIT v. S. Man Mohan Singh (1999) 63 TTJ (Del) 491, where the reimbursement of medical expenses to managing director was a gratuitous payment was held to be neither perquisite under Section 17(2)(iii) nor under Section 17(2)(iv) of the Act. He also relied on the decision of Tribunal, Bombay Bench in the case of Dr. R.C. Panjwani v. ITO in ITA No. 6822/Bom/1992, where reimbursement of medical expenses to assessee for coronary bypass surgery abroad was held to be not a perquisite. He, therefore, pleaded that the CIT(A) was not justified in confirming the addition.
5. The learned Departmental Representative, Smt. Sunita Puri, strongly relied on the orders of the authorities below. She pointed out that insertion in the computation sheet filed along with the return was made at a later date which is evident from the fact that note below the typed computation-sheet was written in hand and was not typed like the typed computation sheet. Besides, the assessee had also filed revised return on 30th June, 1986 and no such note was found recorded in the computation-sheet. In response to a specific query from the Bench as to whether the amount received as reimbursement of medical expenses was shown in Part-IIl of the return covering “particulars of income claimed to be exempt from tax and not included”, she submitted that no such amount was disclosed. She also promised to file copies of the return as filed by the assessee. She submitted the same on 22nd Sept., 2000, and the same shows that the amount was not mentioned in Part-III of the return. She submitted that the fact that the note did not exist at the time when the AO completed the assessee is evident from the fact that the same has not been discussed in the assessment order. She also submitted that even if this note existed at the time of filing the return, the same would not make any difference for reopening the assessment because negligence on the part of the AO would not preclude the AO from taking such action. For this proposition she relied on the decision of Tribunal, Chandigarh Bench in the case of Smt Renu Kairpaul v. ITO (1986) 24 TTJ (Chd) 47, where the Tribunal has held that action under Section 147 can be taken where income has escaped assessment due to inaction on the part of the ITO. She further submitted that in view of the amended provisions of Section 147 which are operative with retrospective effect in respect of pending matters, old provisions of the Act relating to reopening of assessment were not operative. She relied on the decision of Tribunal Delhi Bench in the case of Dr. Indra Chand Jain v. Dy. CIT (1997) 59 TTJ (Del) 699, and Cochin Bench in the case of Indo Marine Agencies (P) (Kerala) Ltd. v. Asstt. CIT (1995) 51 TTJ (Coch) 18. She also relied on the order of CIT(A) where the action of AO 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 decision 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 case 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 reimburse the medical expenses of the director was taken. She relied on the decision of Calcutta High Court in the case of Indian Oxygen Ltd. v. C1T (1994) 75 Taxman 604 (Cal), where the High Court has held that reimbursement of medical expenses paid in cash to its employees by assessee-company was “salary” for the purpose of Section 40A(5). Similar view has been expressed by the same very High Court in the case of Union Carbide Ltd. v. CIT (1994) 72 Taxman 63 (Cal). Bombay High Court has also expressed the same view in the case of Ceat Tyres of India Ltd. v. CIT. The learned Departmental Representative further relied on the judgment of Gujarat High Court in the case of Ambica Mills Ltd. v. CIT (1998) 231 ITR 583 (Guj), where cash reimbursement of medical expenses of managing director were considered to be liable for disallowance under Section 40(c)(i) and under Section 40A(5). She also relied on the decision of Tribunal. Hyderabad in the case of Dy. CIT v. P.O. Shanbagh (1995) 54 ITD 417 (Hyd) where the Tribunal has held that expenses on medical treatment of assessee met by his employer would partake the character of perquisite in assessee’s hands as but for the company incurring such expenditure, the same would have been the obligation of the assessee. Such perquisites were liable to tax under Section 17(2)(iv) of the Act. She further relied on the decision of Gujarat High Court in the case of Gujarat Steel Tubes Ltd. v. CIT (1994) 210 ITR 358 (Guj), where reimbursement of medical expenses incurred by director was considered to be benefit within the meaning of Section 40(c)(i). She also submitted that decision of the Punjab & Haryana High Court in Sukhjit Starch & Chemicals Ltd. v. CIT (supra), was not applicable to the facts of this case because the payment was not made to employee as the director was not the employee of the company at the relevant point of time. Relying on the decision of Bombay High Court in the case of Emil Webber v. CIT (1978) 114 ITR 515 (Bom), the learned Departmental Representative submitted that the definition of “income” in Section 2(24) of the Act is an inclusive definition and not an exhaustive one. This section mentions only certain heads of income but it does not mean that those heads which are in the nature of income would not be assessable if they can be fairly regarded as income of the assessee. She, therefore, submitted that the order of CIT(A) in confirming the addition does not warrant 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., cited supra, 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 AO 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 Departmental Representative show that Part-III of the return which specifically required the assessee to mention the details of income claimed exempt, was scored off to show as if no such income was claimed exempt. Besides, mention of the receipt of reimbursement of medical expenses is in ink and not in the typed form like the computation-sheet. Moreover, there is no discussion either in the assessment order or in the form of office-note recorded by the AO at the time of completing the original assessment under Section 143(3) that such claim was examined and income was found exempt. These factors perhaps show that note below the computation-sheet did not exist at the time when the return was filed. But, as mentioned by the C1T(A), even without this fact, the action of the AO in reopening the assessment -could be considered independent of each other in view of the amended provisions of Section 147 w.e.f. 1st April, 1989. Tribunal Delhi Bench in the case of Di. India Chand Jain, cited supra, has held that provisions of Sections 147 to 153 laid down procedural law and the amendments w.e.f. 1st April, 1989 will be retrospective, in the sense that these will apply to all matters which were pending on 1st April, 1989 will be retrospective, in the sense that these will apply to all matters which were pending on 1st April, 1989 and had not become dead on that date. Same view was expressed by Allahabad Bench of the Tribunal in the case of Upcom Cables Ltd. v. Dy. CIT (1997) 63 ITD 104 (All). This view was also expressed by the Cochin Bench in the case of Indo Marine Agencies (Kerala) (P) Ltd. v. Asstt. CIT (supra). The Delhi High Court in the case of Rakesh Aggarwal v. Asstt. CIT (1997) 225 ITR 496 (Del), has held that amended provisions w.e.f. 1st April, 1989 would be applicable to any subsequent assessment year or any assessment years, where reassessment proceedings have been initiated on or after 1st April, 1989. This view also finds support from the Commentary of Chaturvedi & Pithisaiia on p. 5057, Vol. 3, 5th Edn., where inter alia, it has been observed that the decision of Patna High Court in the case of Dhaniaj Singh & Co. v. CIT (1996) 218 ITR 312 (Pat), holding that prior to asst., yr. 1989-90, reopening would be covered by the provisions of Section 147 as these stood prior to their substitution is based on wrong assumption. In this case also, the assessment for the assessment year under reference was reopened under Section 147 by issue of notice under Section 148 in 1991 which means that the amended provisions of Section 147 would cover the 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 AO 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 AO was also required to establish and 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 on 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 13th Feb., 1991, i.e., within a period of four years from the end of assessment year. Therefore, the requirement of establishing escapement of income due to failure on the part of the assessee to disclose material facts necessary for the assessment would not be applicable to this case before reopening the assessee. As such, the mention of note in computation-sheet that this fact was disclosed in the return of income would not be very relevant in deciding the issue of reopening of assessment. From the plain reading of post-amended section, it is obvious that AO is now vested with wide powers of exercising jurisdiction under Section 147 of the Act. The only requirement of the section is that AO must have reason to believe that income chargeable to tax had escaped assessment. He is not required to establish that such escapement is on account of failure on the part of the assessee to disclose true and full facts as required under the old provisions, until the case is covered under proviso to Section 147. Recognising the fact of wider powers of the AO in the amended provisions, Delhi High Court in the case Rakesh Aggarwal v. Asstt. CIT (supra), has held that under the amended provisions, power to reopen the assessment is much wider and can be exercised even if an assessee had disclosed fully and truly all material facts. Expln. 1 to Section 147 also recognizes the fact that mere production of account books or other evidence from which material evidence could with due diligence have been discovered by the AO will not necessarily amount to disclosure within the meaning of the provisions of Section 147. Expln. 2 thereof simplifies the meaning of “income chargeable to tax” escaping assessment under the deeming provisions. The action of the AO in this case can be seen in the light of amended legal provisions of Section 147, wherein reimbursement of travelling expenses of sizeable amount were not included in the total income of the assessee and there is no discussion in the assessment order that this point was examined by the AO at the time of completing the assessment under Section 143(3). The decision of Tribunal, Chandigarh Bench in the case of Smt Renu Kairpaul v. ITO, cited supra, supports the view of the Departmental Representative that non-action on the part of the AO empowers the AO to proceed with the reopening of assessment. All that one has to see is whether income chargeable to tax has escaped assessment or not. Having regard to these facts and circumstances of the case, we hold that AO 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 AO.
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 AO. 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 IT Act is applicable to the facts of this case? The same issue came up for consideration before the Tribunal, Chandigarh in the case of Hero Cycles Ltd. v. Asstt. CIT (in ITA No. 835/Chd/1992 and ITA No. 1056/Chd/1992) [reported at (1999) 63 TTJ (Chd) 665– Ed.], where the issue involved was, whether medical expenses reimbursed by the company to Shri Om Prakash Munjal were hit by provisions of Section 40A(5) of the Act. It may be noted that the definition of “perquisite” mentioned in Sub-clause (iv) of Expln. 2(b) of Section 40A(5) is identical to the definition of benefit or perquisite mentioned in Section 2(24)(iv) of the Act. Item (iv) of Expln 2(b) also refers to “perquisite” to mean payment by the assessee of any sum in respect of any obligation which but for such payment, would have been payable by the employee. In the case of a director of a company, similar situation is recognized by Section 2(24)(iv) of the Act. This issue was considered by the Tribunal, Chandigarh in the above-mentioned case, where the question was whether reimbursement of medical expenses of the assessee for treatment abroad constitutes a perquisite in favour of the employee and whether but for the company incurring such expenditure it would have been the obligation of the assessee to bear such expenditure. After referring to the relevant provisions of the Act, the Tribunal has decided in para 2.5 of its order dt. 12th May, 1998, as under :
“2.5. We have carefully considered the submissions made by both the parties and have also perused the orders of the tax authorities. We have also seen the case law relied upon by both the parties. It is observed that AO has included all the expenses mentioned at p. 1 of the paper-book within the definition of ‘salary’ and worked out the disallowance by invoking the provisions of Section 40A(5), after allowing expenses to the extent of Rs. 7,14,000 in the case of seven directors. It is also observed from the provisions of Section 40A(5)(a), second proviso, that certain amounts have been excluded from the purview of Clause (a), e.g. value of travel concession or assistance mentioned in Section 10(5) provident fund and gratuity fund payment referred to in Section 36(l)(iv) or (v). Further, Expln. 2 has defined ‘salary’ for the purposes of Section 40A(5). Provisions of Section 17(1) and (3) have been applied, with certain modifications. The said Explanation also gives a definition of ‘perquisite’ in Clause (b) and Sub-clause (iv) mentions payment by the assessee of any sum in respect of any obligation which, but 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 CIT v. Mafatial Ganga Bhai Co. (P) Ltd. (1996) 219 ITR 644 (SC) as also Sukhjit Staich & Chemicals Ltd. v. CIT (1997) 221 ITR 308 (P&H), 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)(ii) as well in Sub-clause (iv) of definition of ‘perquisite’ as given in Clause (b) of Expln. 2 to Sub-section (5). In the present case, the expenses on the medical treatment of Shri 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 Shri O.P. Munjal. Here, it may be relevant to refer to the resolution of the Board of Directors, wherein it has been mentioned with reference to chest pain associated with breathlessness suggestive of angina pectoris, a heart disease, that ‘Shri O.P. Munjal does not want to go abroad for such treatment probably because it is quite expensive and that he has already incurred expenditure to the tune of Rs. 25,000 on medical treatment already undergone’. It is further mentioned that Shri Munjal was advised rest by the doctors for 5-6 months and that he had decided to take complete rest for the said period. The Chairman of the Board apprised the Members that Shri Munjal was mainly managing the marketing department and that there was no managing director or whole-time director appointed since the year 1980. He further stressed on the usefulness and necessity to the assessee-company of the services of Shri Munjal and proposed that in the ‘interest of the company the Board should insist upon him to undergo operation and ensure best treatment available anywhere in the world. The company thus decided to incur all the expenditure necessary for medical treatment including to and from travelling expenses, stay expenses incurred in India and abroad including that of his wife. A resolution to this effect was thus passed on 10th Sept., 1985. It is clear from the said resolution that Shri Munjal was not prepared to bear the expenses for his treatment abroad and that the company thought it necessary in the interest of business to meet the expenses on his treatment abroad for the heart aliment. In view of these facts and circumstances, we feel that it cannot be held that payment by the assessee-company in respect of medical expenses would have been borne by the employee himself. Thus, we feel that the said medical expenses cannot be brought within the definition of ‘perquisite’, as given in Expln. 2(b). We, therefore, feel that even though it is not a case of cash payment by the assessee-company to Shri O.P. Munjal on account of reimbursement of medical expenses, yet the ratio of the aforesaid decision and other decisions of the Tribunal cited by learned counsel particularly Udaipur Mineral Devp. Syndicate (P) Ltd. v. ITO (1992) 44 TTJ (Jp) 113 and CIT v. Steel Ingots (P) Ltd. (1996) 220 ITR 552 (MP) support the case of the assessee inasmuch as the said expenditure is also incurred by the assessee-company on the ground of commercial expediency. Accordingly, AO is directed to allow the expenditure of Rs. 2,39,566 out of disallowance of Rs. 4,28,923. Further, AO is directed to exclude the amounts failing 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 Expln. 2(b) as Shri Om Prakash 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 Expln. 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 Tribunal Chandigarh Bench, in ITA No. 679/Chd/1992 for asst. yr. 1988-89, where an amount of Rs. 2,42,131 being reimbursement of medical expenses was included in his income under Section 2(24)(iv) of the Act. On identical facts, addition of Rs. 2,42,131 made by the AO was deleted. The relevant para 4.5 of the Tribunal order is reproduced as under:
“4.5. We have carefully considered the rival submissions on this issue and have perused the order of the Departmental authorities. We have also seen the case law relied upon by the learned counsel and the decision of the Tribunal in the case of Hero Cycles Ltd. v. Asstt. CIT in ITA No. 835/Chd/1992 (supra). We feel that the submissions of the learned counsel have force and that similar issue has already been considered by the Tribunal at length in its order dt. 12th May, 1998 in ITA No. 835/Chd/1992. In view of the foregoing order and the decisions cited by the learned counsel, we feel that the addition of Rs. 2,42,131 made by the AO on account of reimbursement of medical expenses cannot be sustained. The same is, therefore, deleted.”
Thus, it was held that reimbursement of medical expenses for treatment abroad of the assessee did not constitute perquisite. Apart from the above, the decision of the Tribunal, Delhi Bench in the case of Dy. CIT v. Sardar Manmohan Singh (supra,), where gratuitous payment in the nature of reimbursement of medical expenses to managing director for treatment abroad was held to be not a taxable perquisite in the hands of the assessee. Both the learned Departmental Representative and the learned counsel for the assessee have cited a plethora of decisions to support their respective point of view. But the need for referring to those judgments/decisions would arise only if the matter is not covered by the earlier decisions of the same Bench on identical facts. We do find that while deciding this matter the Tribunal has taken due cognizance of the judicial opinion and facts of this case. Respectfully following the decisions of the Tribunal, Chandigarh Bench in the cases cited supra, we are of the view that reimbursement of medical expenses to Shri Om Parkash Munjal, director, does not constitute perquisite under Section 2(24)(iv) of the Act. Therefore CIT(A) was not justified in confirming the addition of Rs. 4,84,066 made by the AO. Accordingly, we set aside the order of CIT(A) and direct the AO to exclude the amount of Rs. 4,84,066 from the total income of the assessee. This ground of appeal is allowed.
10. The next ground of appeal relates to the fact that CIT(A) wrongly confirmed charging of interest under Section 217(1A). While completing the assessment the AO charged’interest under Section 217(1A). On appeal the CIT(A) confirmed the same on the ground that it was leviable under the provisions of the Act. The assessee is aggrieved and hence this appeal before us.
11. The learned counsel for the assessee submitted that this ground is consequential only. The AO is directed to allow consequential relief while giving appeal effect to CIT(A)’s order. Therefore, this ground of appeal is allowed.
12. In the result, the appeal is partly allowed.
