Indian Compressors Ltd., New Delhi V. DCIT, New Delhi

ITA 1558/DEL/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6864 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 16-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Commercial expediency; TDS
• Section: 234B; 37(1); 37; 12; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C, NEW DELHI BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.1558/DEL/2017 ASSESSMENT YEAR: 2012-13 M/S. INDIAN COMPRESSORS LTD., 33 & 35, OKHLA INDUSTRIAL AREA, PHASE-III, NEW DELHI VS. DCIT, CIRCLE-12(1), NEW DELHI PAN :AAACI0752Q (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST OR DER DATED 03/01/2017 PASSED BY THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-18, NEW DELHI [IN SHORT THE LD. CIT(A)] FOR ASSESSMENT YEAR 2012-13 RAISING FOLLOWING GROUNDS: 1. THAT HAVING REGARD TO FACTS AND CIRCUMSTANCES O F THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ASS ESSMENT MADE BY THE ASSESSING OFFICER AT RS. 1,93,24,080/- INSTEAD OF RS. 1,74,44,220/- AS DECLARED IN THE RETURN OF INCOME. APPELLANT BY SHRI SAUBHAGYA AGARWA L , ADV. RESPONDENT BY SHRI RAGHUNATH, SR.DR DATE OF HEARING 29.08.2019 DATE OF PRONOUNCEMENT 31.10.2019 2 ITA NO.1558/DEL/2017 2. THAT THE LD. COMMISSIONER HAS ERRED IN FACTS AN D IN LAW IN SUSTAINING THE ORDER OF THE ASSESSING OFFICER BASED ON SURMISES AND CONJECTURES AND IGNORING RELEVANT EVIDENCE PLACED O N RECORD. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD., COMMISSIONER ERRED IN NOT APPRECIATING THE FACT THA T THE AO HAS MADE AN ADDITION OF RS. 3,21,062/- INCURRED ON FORE IGN TRAVEL OF A DIRECTOR OF THE APPELLANT ON THE GROUND THAT THERE MAY BE AN ELEMENT OF PERSONAL AND PLEASURE TRIP CANNOT BE RULED OUT W ITHOUT BRINGING ANY OTHER MATERIAL FACT ON RECORD. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , EVEN IF THERE WAS SOME PERSONAL ELEMENT IN THE EXPENDITURE, DISALLOWA NCE OF THE WHOLE SUM CANNOT BE MADE. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD., COMMISSIONER ERRED IN NOT APPRECIATING THE FACT THA T THE APPELLANT HAD INCURRED EXPENDITURE ON THE MEDIACL TREATMENT O F ITS DIRECTOR MR. G.L. DIDWANIA ONLY ON THE GROUNDS OF COMMERCIAL EXP EDIENCY, SO THAT IT COULD CONTINUE TO MAKE USE OF HIS KNOWLEDGE . 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD., COMMISSIONER IN NOT APPRECIATING THE FACT THAT MR. G.L. DIDWANI A WAS THE FOUNDER OF THE APPELLANT COMPANY AND POSSESSED IMMENSE KNOW HOW AND THAT IT WAS IN THE APPELLANTS INTEREST TO CONTINUE TO UTILISE THE KNOWLEDGE AND THAT IT WAS COMMERCIALLY EXPCUIV* AP PELLANT TO INCUR THIS EXPENDITURE. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD., COMMISSIONER ERRED IN HOLDING THAT NO EVIDENCE WAS PROVIDED TO THE AO WHEN, TO THE CONTRARY ALL MEDICAL BILLS WERE FUR NISHED TO THE AO. 8. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD., COMMISSIONER ERRED IN RELYING UPON THE FACT THAT MR . G.L. DIDWANIA HAD NOT OFFERED THE SUM TO TAX AS PERQUISITE WHEN T HE FACT HAD ABSOLUTELY NO BEARING ON THE CASE OF THE APPELLANT. 9. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD., COMMISSIONER ERRED IN NOT APPRECIATING THAT THE CAS E LAWS QUOTED WERE DIRECTLY APPLICABLE TO THE CASE OF THE APPELLA NT. 10. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD., COMMISSIONER ERRED IN HOLDING THAT THE APPLLANT HAS NOT BEEN ABLE TO PROVIDE COMPLETE DETAILS FOR REQUISITE EXAMINATION WHERAS IN FACT ALL DETAILS HAD BEEN PROVIDED AT THE TIME OF ASSESSMENT AND NO SPECIFIC DETAIL HAS BEEN SAID TO NOT HAVE BEEN PROVIDED. 3 ITA NO.1558/DEL/2017 11. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD., COMMISSIONER ERRED IN UPHOLDING THE ADDITION OF RS. 16,57,798/- ON ACCOUNT OF MEDICAL EXPENSES INCURRED FOR THE TREATM ENT OF MR. G.L. DIDWANIA BY MERELY STATING THAT THE CASE LAWS QUOTE D WERE NOT APPLICABLE AS EACH CASE TURNS ON ITS OWN FACTS WITH OUT ACTUALLY DISTINGUISHING THE SET PRECEDENTS. 12. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. AO IN MAKING THE IM PUGNED ADDITION AND FRAMING THE IMPUGNED ASSESSMENT ORDER IS CONTRA RY TO LAW AND FACTS, VOID AB INITIO AND WITHOUT PROVIDING ADEQUAT E OPPORTUNITY OF HEARING AND WITHOUT CONSIDERING THE PRINCIPLES OF N ATURAL JUSTICE THE SAME IS NOT SUSTAINABLE ON VARIOUS LEGAL AND FACTUA L GROUNDS. 13. THAT HAVING REGARDS TO THE FACTS AND CIRCUMSTA NCES OF THE CASE, LD. CIT(A) HAS ERRED IN 2\V AND ON FACTS IN NOT REVERSI NG THE ACTION OF THE LD. AO IN CHARGING INTEREST U/S 234 A AND 234B OF T HE INCOME TAX ACT, 1961. 14. THAT THE APPELLANT CRAVES TO LEAVE TO ADD, MODI FY, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING AND ALL THE ABOVE GROUNDS; ARE WITHOUT PREJUDICE THE OTHER. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT ASSESSEE IS A COMPANY ENGAGED IN MANUFACTURING, TRADING, ERECTION , COMMISSIONING, LEASING AND MAINTENANCE OF VARIOUS T YPES OF COMPRESSORS. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED RETURN OF INCOME ON 27/09/2012 DECLARING TOTAL INCO ME OF 1,74,44,220/-. THE CASE OF THE ASSESSEE WAS SELECTE D FOR SCRUTINY AND STATUTORY NOTICES UNDER THE INCOME-TAX ACT, 196 1 (IN SHORT THE ACT) WERE ISSUED AND COMPLIED WITH. IN THE SC RUTINY ASSESSMENT COMPLETED ON 02/03/2015 UNDER SECTION 14 3(3) OF THE ACT, THE ASSESSING OFFICER MADE DISALLOWANCE O F 3,21,065/- ON ACCOUNT OF EXPENSES INCURRED ON FOREIGN TRAVEL A ND DISALLOWANCE OF MEDICAL EXPENSES OF 18,13,574/- ON TREATMENT OF ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY. ON FURTHER APPEAL, THE LD. CIT(A) UPHELD THE DISALLOWANCES. AG GRIEVED, THE 4 ITA NO.1558/DEL/2017 ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAISING T HE GROUNDS AS REPRODUCED ABOVE. 4. IN THE GROUNDS RAISED, MAINLY TWO DISALLOWANCES MA DE BY THE ASSESSING OFFICER, HAVE BEEN CHALLENGED, I.E., FIRSTLY, THE DISALLOWANCE OUT OF FOREIGN TRAVEL EXPENSES AND SEC ONDLY, DISALLOWANCE OUT OF MEDICAL EXPENSES INCURRED ON TR EATMENT OF ONE OF THE DIRECTOR. 4.1 THE FACTS QUA THE FIRST ISSUE OF DISALLOWANCE OF F OREIGN TRAVEL EXPENSES ARE THAT THE ASSESSING OFFICER (AO) OUT OF THE TRAVELLING OF DIRECTORS AMOUNTING TO 37,24,282/-, NOTED EXPENSES OF 3,21,065/- AS INCURRED ON THE FOREIGN TRAVEL TO USA MADE BY MS UNNATI DIDWANIA, DAUGHTER OF MANAGING DIRECTOR OF T HE ASSESSEE COMPANY. ON BEING ASKED TO SUBSTANTIATE THE EXPENSE S AS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS, THE ASSESSEE FAILED TO IDENTIFY THE BUSINESS PURPOS E OF THE FOREIGN VISIT AND ALSO FAILED TO FILE ANY DOCUMENTARY EVIDE NCE TO SUPPORT THAT THE FOREIGN TOUR WAS FOR THE PURPOSE OF THE BU SINESS OF THE ASSESSEE COMPANY. THE ASSESSING OFFICER ASKED TOUR REPORT, DETAILS OF CLIENTS MET OR SEMINAR/CONFERENCE ATTENDED, APPR OVAL OF BOARD OF DIRECTORS, STUDY REPORT BEFORE FINALIZING THE TO UR AND SUCH OTHER RELATED INFORMATION/DETAILS, HOWEVER, THE ASSESSEE FAILED TO PRODUCE ANY SUCH INFORMATION. IN VIEW FAILURE ON TH E PART OF THE ASSESSEE, THE AO OBSERVED THAT PERSONAL AND PLEASUR E TRIP BY THE DAUGHTER OF THE DIRECTORS CANNOT BE DENIED AND HE D ISALLOWED THE RELEVANT EXPENSES ON TRAVEL BY MS UNNNATI DIDWANIA TO THE USA. BEFORE THE LEARNED CIT(A) ALSO THE ASSESSEE FAILED TO PRODUCE DOCUMENTARY EVIDENCE TO SUPPORT THAT EXPENSES WERE INCURRED 5 ITA NO.1558/DEL/2017 WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSIN ESS. THE LEARNED CIT(A) ON THE BASIS OF DOCUMENTS OF PURCHAS E OF FOREIGN CURRENCY FOR THE PURPOSE OF THE TOUR, CONCLUDED THA T TRAVEL WAS PRIVATE IN NATURE AND ACCORDINGLY HE UPHELD THE DIS ALLOWANCE OBSERVING AS UNDER: 4.2.3 IN THIS CONNECTION & DURING THE HEARING, THE APPELLANT WAS SPECIFICALLY REQUESTED TO SUBMIT THE DETAILS OF THE FOREIGN TRAVEL, PURPOSE, BOARD RESOLUTION, IF ANY, AND NORMAL POLIC IES OF THE COMPANY IN RELATION TO SUCH TRAVELS. IN REPLY, THE AR SUBMITTED THE COPIES OF RELATED VOUCHERS AND SUBMITTED THAT H E IS NOT ABLE TO PROVIDE ANY FURTHER DETAIL IN CONNECTION TO THE PURPOSE OF SUCH TRAVEL ETC. AND PLEADED THAT THE ENTIRE AMOUNT SHOULD NOT BE DISALLOWED ON THIS SCORE. 4.2.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. FROM THE DETAILS OF TRAVELLING OF DIRECTORS AMOUNTING TO RS.37,24,28 2/-, IT IS SEEN THAT MS. U. DIDWANIA HAS INCURRED EXPENSES AS A DIR ECTOR FOR TRAVELS TO EUROPE, BANGKOK , DUBAI, SINGAPORE, U.K. THIS APART, IT IS ALSO SEEN THAT IN CONNECTION WITH USA TRIP TH E APPELLANT HAS SUBMITTED LEDGER COPY AND THE VOUCHERS SUCH AS TRAVEL TICKETS BOOKED THROUGH KAPOOR INTERNATIONAL. HOWE VER, THE SALE VOUCHER OF FOREIGN EXCHANGE BY TRANSCORP INTER NATIONAL LTD. AMOUNTING TO RS.113,525/- (FOR $2,500) SHOWS T HAT THE SALE OF FOREIGN CURRENCY HAS BEEN MADE UNDER SCHEME OF PRIWTSIT, WHICH IS INDICATIVE OF THE FACT THAT TH E PURPOSE WAS PRIVATE IN NATURE AND IN ABSENCE OF ANY DETAILS FUR NISHED BY THE APPELLANT, THE REQUIREMENTS OF SECTION 37 (THAT TO BE ALLOWED THE EXPENDITURE HAS TO BE WHOLLY AND EXCLUSIVELY FOR BU SINESS AND NOT BEING OF CAPITAL NATURE AND NOT INVOLVING PERSO NAL ELEMENTS) ARE NOT MET. NO CASE OF BUSINESS EXPEDIENCY HAS ALS O BEEN MADE OUT, EXCEPT A GENERAL STATEMENT MADE IN THIS B EHALF. 4.2 BEFORE US ALSO, THE LD. COUNSEL OF THE ASSESSEE FA ILED TO FURNISH ANY EVIDENCE TO SUBSTANTIATE THAT THE EXPEN SES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. THE ONLY CONTENTION WHICH HAS BEEN MADE BEFORE US I S THAT ENTIRE EXPENDITURE OF RS.3,21,065/- SHOULD NOT HAVE BEEN D ISALLOWED AND A PART OF EXPENSES SHOULD ONLY BE DISALLOWED. 6 ITA NO.1558/DEL/2017 4.3 THE LEARNED DR, ON THE OTHER HAND, RELIED ON THE O RDER OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE ASSESSEE H AS FAILED TO SUBSTANTIATE THE BUSINESS PURPOSE OF TRAVEL AND FOR THE VOUCHERS OF FOREIGN EXCHANGE PURCHASED BY THE ASSESSEE, IT W AS EVIDENT THAT THE FOREIGN TRAVEL IN DISPUTE WAS PRIVATE IN N ATURE AND, THEREFORE, DISALLOWANCE WAS JUSTIFIED. 4.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS INCUR RED EXPENSES OF 37,24,282/- ON TRAVELLING OF THE DIRECTORS, WHICH INCLUDED EXPENSES ON TRAVEL OF MS. UNNNATI DIDWANIA TO VARIO US COUNTRIES OF EUROPE, BANGKOK, DUBAI, SINGAPORE, UK AND USA ETC. THE ASSESSING OFFICER HAS DISALLOWED ONLY THE EXPENSES RELATED TO THE USA TRIP AS ASSESSEE FAILED TO ESTABLISH THAT TRAVE L TO USA BY MS. UNNATI DIDWANIA WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. THE ASSESSEE FAILED TO FILE COPY OF T OUR REPORT, DETAILS OF ANY CLIENTS MET, DETAILS OF ANY SEMINAR/ CONFERENCE OR ANY OTHER DOCUMENTS WHICH COULD ESTABLISH THAT THE PURPOSE OF THE TRAVEL WAS FOR BUSINESS. BEFORE THE LEARNED CI T(A) ALSO THE ASSESSEE FAILED TO ESTABLISH THE BUSINESS PURPOSE O F THE TRAVEL. FURTHER, THE LEARNED CIT(A) FROM THE VOUCHERS OF FO REIGN EXCHANGE PURCHASED BY THE ASSESSEE FOUND THAT PURPOSE OF THE TRAVEL WAS PRIVATE IN NATURE. IN THE CIRCUMSTANCES, THE ONUS W AS ON THE ASSESSEE TO ESTABLISH THAT THE EXPENDITURE INCURRED WAS FOR THE PURPOSE OF THE BUSINESS AND IN VIEW OF THE FAILURE ON THE PART OF THE ASSESSEE IN DISCHARGING ITS ONUS, WE DO NOT FIN D ANY ERROR IN THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND 7 ITA NO.1558/DEL/2017 ACCORDINGLY, WE UPHOLD THE SAME. THE GROUNDS OF THE ASSESSEE IN RELATION TO THIS ISSUE ARE DISMISSED. 5. THE SECOND ISSUE RAISED IN THE GROUNDS RELATES TO DISALLOWANCE OF MEDICAL EXPENSES OF 18,13,574/- ON THE TREATMENT OF SRI G.L. DIDWANIA. 5.1 IN THE PROFIT AND LOSS ACCOUNT, THE ASSESSEE CLAIM ED EXPENSES OF 18,13,574/- UNDER THE HEAD MEDICAL EXPENSES. THE ASSESSEE SUBMITTED THAT SH. G L DIDWANIA, WAS THE S ENIOR-MOST DIRECTOR OF THE COMPANY AND FOUNDER OF THE COMPANY AND THEREFORE, IT WAS THE DUTY OF THE COMPANY TO MAINTA IN HIS HEALTH FOR GETTING HIS USEFUL ADVICE FOR INCREASING PROFIT ABILITY AND EXPANSION OF THE BUSINESS. ACCORDING TO THE ASSESSI NG OFFICER, THE EXPENDITURE WAS COVERED UNDER SECTION 17(2) OF THE ACT, I.E., PERQUISITE TO THE DIRECTORS, AND THEREFORE, HE DISA LLOWED THE EXPENDITURE. BEFORE THE LEARNED CIT(A), THE ASSESSE E FILED A COPY OF THE RESOLUTION IN ITS EXTRAORDINARY GENERAL BODY MEETING DATED 31/07/2012, WHEREIN THE EXPENSES WERE APPROVED IN V IEW OF THE LITTLE AMOUNT OF SALARY OF RS.35,000/- PER MONTH AN D EXPERTISE AND MANAGEMENT SKILL OF SH. G.L. DIDWANIA. THE ASSE SSEE SUBMITTED THAT APPLICATION OF SECTION 17(2) OF THE ACT WAS NOT RELEVANT AND NO TAX WAS REQUIRED TO BE DEDUCTED ON THE SAME UNDER SECTION 17(2) OF THE ACT AS THE EXPENDITURE H AS BEEN INCURRED ON THE GROUND OF COMMERCIAL EXPEDIENCY. TH E COPY OF THE RESOLUTION HAS BEEN PRODUCED BY THE LEARNED CIT(A) IN THE IMPUGNED ORDER. THE LEARNED CIT(A) DISTINGUISHED TH E CASE RELIED UPON BY THE ASSESSEE AND HELD THAT THE CLAIMS FAILE D TO PASS THE MUSTER AND DISMISSED AS NOT A PERMISSIBLE DEDUCTION . THE LD. 8 ITA NO.1558/DEL/2017 CIT(A), HELD THAT MEDICAL REIMBURSEMENT PAID FALLS IN THE NATURE OF THE PERQUISITE IN TERMS OF SECTION 17(2) OF THE ACT AND RELYING OF THE DECISION OF THE GURURAJ MAHULI (SUPRA) SUSTAINE D THE DISALLOWANCE OBSERVING AS UNDER: 4.3.8 AS IT STANDS ON GOING THROUGH THE CBDT CIRCU LARS AND INSTRUCTIONS AND AS HELD IN CIT VS RAGHU SINHA 2003 ] 130 TAXMAN 254 (RAJ.) WHETHER THE MEDICAL REIMBURSEMENT IS PER QUISITE OR NOT WITHIN THE MEANING OF SECTION 17(2) OF THE ACT, 196 1, WE HAVE TO SEE THE PROVISIONS. THE RELEVANT SUB-SECTION (2) OF SECTION 17 OF THE A CT, 1961 READS AS UNDER:- 'FOR THE PURPOSES OF SECTIONS 15 ,16 AND OF THIS SE CTION (1) 'SALARY' INCLUDES (I) TO (III) ** ** ** (IV) ANY FEES, COMMISSIONS, PERQUISITES OR PROFIT S IN LIEU OF OR IN ADDITION TO ANY SALARY OR WAGES; (V) TO (VIII) ** ** ** (2) 'PERQUISITE' INCLUDES (I) TO (III) ** ** ** (IV) ANY SUM PAID BY THE EMPLOYER IN RESPECT OF A NY OBLIGATION WHICH BUT FOR SUCH PAYMENT, WOULD HAVE BEEN PAYABLE BY THE ASSESSEE; AND (V) TO (VIII) ** ** ** PROVIDED THAT NOTHING IN THIS CLAUSE SHALL APPLY TO, (I) TO(/V) ** ** ** (V) ANY SUM PAID BY THE EMPLOYER IN RESPECT OF AN Y EXPENDITURE ACTUALLY INCURRED BY THE EMPLOYEE ON HI S MEDICAL TREATMENT OR TREATMENT OF ANY MEMBER OF HIS FAMILY OTHER THAN THE TREATMENT REFERRED TO IN CLAUSES (I) AND (II); SO, HOWEVER, THAT SUCH SUM DOES NOT EXCEED FIFTEEN THOU SAND RUPEES IN THE PREVIOUS YEAR. (VI) ** ** ** 4.3.9 THEREFORE IT COULD NOT BE DISPUTED THAT THE A MOUNTS PAID AS MEDICAL REIMBURSEMENTS IS IN THE NATURE OF PERQUISI TE FALLING WITH THE DEFINITION OF PERQUISITE FALLING WITH THE DEFINITIO N OF PERQUISITES AS GIVEN IN SEC. 17(2)(IV) PROVISO (V) OF THE ACT.0 SE C. 17(2) (IV) PROVISO (V) OF THE ACT. 4.3.10 IN GURURAJ MAHULI [2010] 187 TAXMAN 34 (BANG .) (MAG.) THE DIFFERENCE BETWEEN EXPENDITURE INCURRED FOR GEN ERAL SICKNESS OR 9 ITA NO.1558/DEL/2017 AILMENTS DURING THE LIFETIME OF THE EMPLOYEES AND T HAT OF AN ACCIDENTAL CAUSE IN THE COURSE OF DUTY WAS EXPLAINE D AS UNDER: WHETHER AN AMOUNT RECEIVED BV AN EMPLOYEE FROM HIS EMPLOYER FOR HIS MEDICAL TREATMENT DUE TO AN ACCIDENT IN PLACE O F WORK DURING COURSE OF EMPLOYMENT WILL NOT AMOUNT TO A PERQUISIT E - HELD, YES. 6. THERE ARE SEVERAL CIRCULARS ISSUED BY THE CENTRA L BOARD OF DIRECT TAXES FROM TIME TO TIME ON REIMBURSEMENT BY EMPLOYER TO EMPLOYEES ON THE EXPENSES INCURRED FOR MEDICAL TREA TMENT FOR THE EMPLOYEES AND THEIR FAMILIES. MANY SUCH CIRCULA RS AND AMENDMENTS, TO THE ACT WERE EVOLVED DUE TO VARIOUS REPRESENTATIONS MADE FROM DIFFERENT FORUM OF PUBLIC . ONE CAN GATHER FROM THAT, THE TERM ' MEDICAL TREATMENT ' WA S MEANT TO MEAN TREATMENT ARISING OUT OF GENERAL SICKNESS OR A ILMENTS DURING THE LIFETIME OF THE EMPLOYEES. A CASE WHERE MEDICAL TREATMENT IS PROVIDED TO ART EMPLOYEE DUE TO HAPPEN ING OF AN EVENT IN THE COURSE OF EMPLOYMENT FALLS IN A DIFFER ENT FOOTING. WHEN A MISHAP HAPPENS IN THE COURSE OF THE, EMPLOYM ENT AND DUE TO THE EMPLOYMENT, IT IS THE PRIMARY DUTY ON EV ERY ACCOUNT FOR THE EMPLOYER TO STRIVE HARD AND RESTORE THE EMP LOYEE OF HIS HEALTH 7. THEREFORE, AMOUNT RECEIVED BY THE EMPLOYEE FOR H IS TREATMENT DUE TO AN ACCIDENT IN THE PLACE OF WORK DURING THE COURSE OF EMPLOYMENT WILL NOT AMOUNT TO PERQUISITES AND HENCE CANNOT BE TAXED. 4.3.11 THUS THE AMOUNT HERE COULD BE TREATED AS A P ERQUISITE. 4.3.12 IN FACT, THE MEDICAL REIMBURSEMENT IS TO BE TREATED TO BE PART OF PERQUISITES, EVEN AS PER THE RESOLUTION. THE RES OLUTION INCREASED THE PERQUISITE UP TO RS.25 LAKH IN ADDITION TO OTHE R BENEFITS ALONG WITH SALARY OF RS.36,000/- PER MONTH. BUT IT WAS NOT SO TREATED BY THE COMPANY IN THE SAL ARY OF THE DIRECTOR. NEITHER THIS WAS INCLUDED IN THE SALARY N OR ANY TDS EFFECTED THEREON. 5.2 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE REITERA TED THE SUBMISSION MADE BEFORE THE LEARNED CIT(A) AND ARGUE D THAT EXPENSES WERE INCURRED AS COMMERCIAL EXPEDIENCY AND , THUS, SHOULD HAVE BEEN ALLOWED UNDER SECTION 37(1) OF THE ACT. 10 ITA NO.1558/DEL/2017 5.3 THE LEARNED DR, ON THE OTHER HAND, RELIED ON THE O RDER OF THE LOWER AUTHORITIES. 5.4 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE FACT THAT MEDICAL EXPENDITURE OF RS.16,57,798/- WAS INCURRED TOWARD TREATMENT OF SH. GL DIDWANIYA, WHO WAS DIRECTOR OF THE COMPANY DURING R ELEVANT TIME IS UNDISPUTED. THE ASSESSEE HAS SUBMITTED COPY OF T HE RESOLUTION PASSED IN EXTRAORDINARY GENERAL MEETING WHEREIN REM UNERATION OF THE WHOLE TIME DIRECTORS WAS CHANGED AND MEDICAL REIMBURSEMENT WAS OFFERED AS PERQUISITE TO THE DIRE CTORS PARTICULARLY SH. G.L. DIDWANIA. THE RELEVANT PART O F THE EXPLANATORY STATEMENT OF THE MINUTES OF THE EXTRAOR DINARY GENERAL MEETING OF THE COMPANY REPRODUCED BY THE LEARNED CI T(A) IN THE IMPUGNED ORDER IS EXTRACTED AS UNDER : SRI G. L. DIDWANIA IS THE FOUNDER OF THIS COMPANY AND SENIOR MOST DIRECTOR. SINCE, HIS HEATH IS NOT WELL IN RECENT TI MES, THE COMPANY URGES TO MAINTAIN HIS HEALTH SO THAT THE COMPANY CA N GET APPROPRIATE ADVICE FROM HIM WHICH WILL BE HELPFUL T O THE COMPANY IN FUTURE TO INCREASE ITS PROFITABILITY. HENCE, THE RE MUNERATION OF MR. GO L. DIDWANIA, THE WHOLE TIME DIRECTOR IS AMENDED SUB JECT TO THE APPROVAL OF THE FOLLOWING TERMS AND CONDITIONS AGRE ED BY AND BETWEEN MR. G. L. DIDWANIA AND THE COMPANY. I. SALARY: : RS. 36,000/-PER MONTH II. PERQUISITES : WILL BE ALLOWED IN ADDITION TO SA LARY UP TO RS. 25,00.000/- PER ANNUM. FOR THIS PURPOSE PERQUISITES ARE CLASSIFIED IN 3 CATEGORIES PART A, PART B AND PART C. PERQUISITES REFERRED TO UNDER PART B AND PART C SHA LL NOT BE CONSIDERED OR INCLUDED FOR COMPUTATION OF CEILING O F PERQUISITES. PART A U) HOUSING: HOUSE RENT ALLOWANCE UP TO 50 % OF SA LARY OR RENT FREE ACCOMMODATION WILL BE PROVIDED BY THE COMPANY. 11 ITA NO.1558/DEL/2017 (II) MEDICOI REIMBURSEMENT: EXPENSES INCURRED FOR T HE WHOLE- TIME DIRECTOR AND THE FAMILY TO THE EXTENT PERMISSI BLE AND ABROAD. (III) LEAVE TRAVEL CONCESSION: FOR THE WHOLE TIME D IRECTOR AND HIS FAMILY, ONCE IN A. YEAR FOR ANY DESTINATION IN INDIA, AND ABROAD. (IV) CLUB FEES: FEES OF CLUBS SUBJECT TO A MAXIMUM OF TWO CLUBS. THIS WILL NOT INCLUDE ADMISSION AND LIFE MEMBERSHIP FEE. (V) PERSONAL ACCIDENT INSURANCE: PREMIUM NOT TO EXC EED RS.1,000/- PER ANNUM. FOR THE PURPOSE OF CATEGORY A, FAMILY MEANS THE SPOUSE, THE DEPENDENT CHILDREN AND THE DEPENDENT PARENTS OF THE WHOLE TIME DIRECTOR PART B (I) CONTRIBUTION TO PROVIDENT FUND, SUPERANNUATION FUND OR ANNUITY FUND WILL NOT BE INCLUDED IN THE COMPUTATIO N OF THE CEILING ON PERQUISITES TO THE EXTENT THESE EITHER S INGLY OR PUT TOGETHER ARE NOT TAXABLE UNDER THE INCOME TAX ACT. (II) GRATUITY NOT EXCEEDING HALF A MONTHS SALARY F OR EACH COMPLETED YEAR OF SERVICE, SUBJECT TO THE PROVISION OF THE GRATUITY ACT. (III) ENCASHMENT OF LEAVE AT THE END OF THE TENURE WILL NOT BE INCLUDED IN THE COMPUTATION OF THE CEILING ON PERQU ISITES. PART C PROVISION FOR CAR FOR USE ON COMPANYS BUSINESS AND TELEPHONE AT RESIDENCE WILL NOT BE CONSIDERED AS PERQUISITE. PER SONAL LONG DISTANCE CALLS ON TELEPHONE AND USE OF CAR FOR PRIV ATE PURPOSE SHALL BE BILLED BY THE COMPANY TO THE WHOLE TIME DIRECTOR . NATURE OF DUTIES: MR. G. L. DIDWANIA IS EMPLOYED ON WHOLE-TIME BASIS AND IS OVERALL IN CHARGE OF ALL OPERATIONAL MATTER LIKE FINANCE, PURC HASE, SALES, PRODUCTION, LIASIONING, MANAGEMENT ETC. HE IS CURRE NTLY REPORTING TO THE BOARD OF DIRECTORS. EXCEPT MR. G. L. DIDWANIA NO OTHER DIRECTOR IS INTE RESTED IN THE AFORESAID RESOLUTION. 5.5 IN VIEW OF THE ABOVE RESOLUTION PASSED IN THE GENE RAL BODY MEETING OF THE COMPANY, THERE IS NO DISPUTE AS THE REIMBURSEMENT OF MEDICAL EXPENSES WAS ALLOWED TO SH . G.L. 12 ITA NO.1558/DEL/2017 DIDWANIYA AS PERQUISITE AND NOT AS COMMERCIAL EXPED IENCY. THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE ON TH E SAID AMOUNT OF PERQUISITE, WHICH WAS PART OF THE SALARY AS DEFI NED UNDER SECTION 17 (2) OF THE ACT. IN THE FACTS AND CIRCUMS TANCES OF THE CASE, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED CIT(A) ON THE ISSUE IN DISPUTE AND ACCORDINGLY, WE UPHOLD THE SAME. THE GROUNDS OF THE APPEAL OF THE ASSESSEE, RELATED TO T HE ISSUE IN DISPUTE ARE ACCORDINGLY DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMI SSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2019. SD/- SD/- (SUDHANSHU SRIVASTAVA) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31 ST OCTOBER, 2019. RK/-(D.T.D.) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI