More than Rs.15000 annual medical reimbursement taxable: Bombay HC
14 November 2006
The Bombay High Court has upheld the provisions of the legislature that expenditure incurred on medical treatment undergone in a hospital other than run by the employer or state, when reimbursed by the employer and more than Rs 15000 in a year, is taxable.
A division bench comprising Justices H L Gokhale and D R Kingaonkar rejected the appeal of the petitioners to allow all the medical reimbursements to not be treated as perquisite (perks) and therefore waive the tax applicable on such income.
The judges stated that if we are to accept the petitioners submissions, then all the provisions of the legislature would become otiose, meaning that the legislature has made superflous provisions.
The order further stated that the legislature, on the contrary, is very clear that the amount paid by the employer in respect to an obligation, will be held as perquisite.
The judges also held that it was the prerogative of the legislature to decide which categories are to be taxed and which excluded. The legislature has excluded only hospitalisation in the employer's or state run hospitals.
The judges added,"An employer who incurs expenditure on medical treatment of an employee or his family member in a government hospital will not be treated as a perquisite."Also, the employee has to attach the receipts of the amount paid to the hospital, they said.
The court was hearing a petition filed by S Bankatti, working with State Bank of India, P D More and Sunil Bendre, working with the Reserve Bank of India. While Mr Bankatti had met with an accident in 2001 and incurred medical expenses of Rs 3.4 lakhs, Mr More spent Rs 1.5 lakhs for the treatment of his child suffering from Hmophelia.
Mr Bendre was suffering with kidney failure and spent about Rs 1.5 lakhs on the treatment.
However, they will now have to pay taxes on the amount reimbursed (more than Rs 15000 annually) as the stay which was granted in 2001 was also vacated today.