Law: Income Tax Act, 1961

Section: 40(c),40A(5)

Income-tax------Business expenditure---Company----Disallowance of expenditure--¬Expenditure on providing benefit or amenity to Director--Reimbursement of medical expenses is not a benefit or amenity within the meaning of Ss.40(c) & 40-A(5)---Indian Income Tax Act, 1961, Ss.40(c) & 40-A(5). The reimbursment of medical expenses of the director of a company is not a benefit or amenity within the meaning of sections 40(c) and 40-A(5) of the Income Tax Act, 1961, and cannot be disallowed. CIT v. Mafatlal Gangabhai Co. (P.) Ltd. (1996) 219 ,ITR 644 (SC) CIT v Indian Engineering and Commercial Corporation (P.) Ltd. (1993) 201 ITR 723 (SC) ref. JUDGMENT N.K. AGGARWAL, J. --- The following questions have been referred for opinion by the Income-tax Appellate Tribunal, Amritsar, under section 256(1) of the Income-tax Act,, 1961 (hereinafter referred to as "the Act"): "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in confirming the disallowance of Rs.6,561 made under section 40(c) of the Income-tax Act, 1961? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the reimbursement of medical expenses is a benefit or amenity within the meaning of sections 40(c) and 40-A(5) of the Income Tax Act, 1961?" The facts relevant to the questions may be briefly stated hereinafter: The assessee-company was engaged in the manufacture of starch and its derivatives. The accounting year ended on December 31, 1977, relevant to the assessment year 1978-79, on which the assessment was made by the Assessing Officer. The assessee-company had made certain payments by way of salary, medical expenses, commission and had also provided certain benefits and amenities by way of rent-free accommodation and provision of furniture and fixtures to its Managing Director, Shri B.K. Sardana. The said Managing Director died in the month of September, 1977. The total amount paid to Shri B.K. Sardana, including medical expenses amounting to Rs.6,885, during the previous year relevant to the assessment year 1978-79 was to the tune of Rs.63,131. The Assessing Officer excluded the sum of Rs.2,570 paid on account of…

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