Akil Kureshi, J. - Leave to amend.
2. Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal raising following question:—
"Whether the Appellate Tribunal has substantially erred in holding that the pro-rate medical allowances given by the Employer to the employees is taxable as perquisite in their hands under the head "Salary" as per sub-clause (iiia) and (iiib) of section 2(24) r.w.s. 17 of the income Tax Act and thereby liable for TDS u/s. 192 of the I.T.Act, 1961 or not?"
3. The issue pertains to the requirement of the employer to deduct tax at source while making medical reimbursement to the employees. According to the Revenue, the assessee-company had the structure of paying fixed monthly medical allowance as per the rates prescribed for different categories of the employees. This payment had no relation to the medical expenditure actually incurred by the employee for himself or the family. According to the Revenue therefore, this amount would form part of perquisite as referred to in Section 17(2) of the Income Tax Act, 1961 ['the Act' for short] and that therefore, invited the requirement of deducting tax at source.
4. The Tribunal, by the impugned judgment, reversed the decision of the Revenue Authorities by noting that it was the case of the Revenue that the employees had not actually been reimbursed such amount or that the same was excessive. Learned counsel Mr. J.P. Shah for the assessee would additionally point out that the company would obtain a declaration from the employee that such reimbursement is not in excess of the medical expenditure actually incurred. In this context he relied on the decision of this Court in case of CIT v. Oil & Natural Gas Corpn. Ltd. [2002] 254 ITR 121/125 Taxman 698.
5. Section 17(2) of the Act refers to term "perquisite" as to include range of benefits to be paid by the employer to the employees. Proviso to said sub-section, however, provides that nothing in this clause shall apply to in clause (v) where any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or the treatment of any member of his family, so, however that such sum does not exceed Rs. 15,000/- in the previous year. Thus, reimbursement of medical expenditure actually incurred by the employee on himself or his family or upto a ceiling of Rs. 15,000/- would not be included in the term "perquisite". This is precisely what are the facts in the present case. The Revenue does not contend that the ceiling of Rs. 15,000/- was breached. Prime objection of the Revenue appears to be the fixed reimbursement commensurate with the level of the employee irrespective of the demand for medical reimbursement. The company, however, when ensured that such reimbursement was not in excess of actual expenditure incurred by the employees, this objection of the Revenue also cannot survive.
6. In the result, tax appeal is dismissed.