Exemption u/s 17(2)

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

07 September 2010 An Assessee has claimed exemption u/s 17(2)
towards reimbursements of medical expenses to the tune of Rs.13500/- from his salary
income u/s 17(2) proviso V.and offered the balance medical allowance for tax.
He has got medical allowance from the company of Rs.84000/- in addition to his salary income & other allowances u/s 17(1).

During the Scrutiny assessment in Income tax department, The ass officer has added back 13500/- as income & not allowed exemption and stated the reason for his disallowance as follows.,
An assessee cannot claim the exemption u/s 17(2) for the receipts of Medical allowance u/s 17(1)
& further states that receipts should also
be u/s 17(2) and should reflect as perquisite in form no. 12BA & hence not allowable as valid dedn.
Is he right in disallowing
the dedn claimed u/s 17(2)proviso V.
Any case law available in support of dedn claimed to submit for the Asst.

SANJAY TALATI

SANJAY TALATI (Expert)
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08 September 2010 There is a difference between the Medical Allowance and Medical Reimbursement. Medical Allowance is fixed and part of salary and there is no deduction under the IT act , it is taxable. As a tax planning device, the Employer should not club the Medical Amt. in the pay slip. Instead, it should take the Medical Bills from the employees and make the reimbursement against the bills.

From your querry it appears that , the employee was getting the Medical Allowance and was forming part of salary, then the action of the AO is correct

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