"One of my client has paid approx 25 lakhs medical expenses on behalf of his employee and booked the same as Medical Expenses. Actually while the employee were on foreign business tour, he got heart-attack and got admit in hospital their. All expenses incurred their has directly paid by Employer." So, please clarify whether the medical expenses of Rs. 25 lakhs is allowable under Income Tax Act.
20 December 2018
A peculiar case but critical details are missing for arriving at any conclusive decision therefore am citing the judgement for both in the favour and against the assessee.
To claim deduction u/s 37(1), the expense should not be of capital nature and should be wholly and exclusively for the purpose of business. It is this second limb which can create some issues.
In case of CIT v Tian House Service Ltd. [2000] 109 Taxman 82/243 ITR 695 (Mad.), the assessee incurred expenditure on by-pass surgery of its part-time advisor. The court held that since it had no link with salary, the deduction should not be allowed.
There was a similar case "Shanti Bhushan vs Commissioner Of Income Tax", wherein the assessee claimed his heart as plant for claiming deduction if the same expenditure on its treatment could not be allowed as deduction u/s 37. He tried to claim deduction by treating the heart as plant to which Norman Vs. Golder (Inspector of Taxes) (1945)13 ITR 21 had already held that a human body was not a plant. Similarly, deduction was not allowed u/s 37(1) either as the expense was not wholly and exclusively for the purpose of business.
[Where do we get to see shayari in court's judgement? Well, in this case there was one " DIL-E-NADAN TUJHE HUA KYA HAI AKHIR ESS DARD KE DAWA KYA HAI." And this was actually the third para of the official judgement.]
But, there still are some chances. If the employee was involved in that accident (cardiac arrest) while he was discharging his official duties, then some relief may be provided.
In Mehboob Productions Private Ltd. vs Commissioner Of Income-Tax,1977 106 ITR 758 Bom, the Tribunal accepted the assessee's contention that Mehboob Khan's visit to the U.S.A. was for the purpose of the assessee's business. According to the Tribunal, Mehboob Khan must be held to have suffered a heart attack while he was in the U.S.A. by reason of the company's work and, therefore, it came to the conclusion that the expenses of medical treatment in the U.S.A. to the extent that it was in excess of the expenses which would normally have been incurred in India should be allowed as a deduction to the assessee. On a rough and ready basis such expenses in India were estimated by the Tribunal at 1/3rd of the expenses incurred in the U.S.A., and, accordingly, the Tribunal upheld the disallowance only of an amount equivalent to 1/3rd of the medical expenses, and the assessee was permitted to claim the balance 2/3rd expenses as a deduction.
Similarly, if you can prove that his survival was vital for the interest of business/profession and the expenditure was incurred on account of commercial expediency, then some amount may be allowed as deduction. The Supreme court in Gordon Woodroffe Leather Mfg. Co. V CIT [1962] 44 ITR 551 had given certain criteria for allowing the deduction of expenditure, one of which included the test of commercial expediency. Further, in 1979, Supreme court in the case of T.Sassoon J. David & Co. (P) Ltd held that each of the tests have to be read disjunctively.
Therefore, if you can prove that the cardiac arrest occured while he was discharging his official duties and can also prove the commercial expediency, then you can claim some % of deduction (not entire), say 33%.
" DIL-E-NADAN TUJHE HUA KYA HAI AKHIR ESS DARD KE DAWA KYA HAI." Seriously, at first I laughed at this case but there is quite a thing which one can learn (in income tax matter)
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