Perquisite u/s 17(2) of IT Act,1961

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Bhaskaran Chackrapani Warrier (Querist)
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23 March 2011 A member of the legislative assembly under went an open heart surgery abroad for which an amount of10 lacs/- has been paid to him by the state government towards reimbursement of medical / treatment expenses. The ITO says, that amount is to be assessed as a perquisite u/s 17(2) of the Income tax Act,1961. Whether the view of the ITO is correct according to law.

CA Namrata Dedhia

CA Namrata Dedhia (Expert)
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23 March 2011 Any remuneration, allowance, etc. received by any MPs/MLAs is not to be taxed as salary but as Other Source Income since there is no employer-employee relationship. If the income is not salary income, the reimbursement cannot be taxed as perquisite u/s. 17(2).

But the ITO may still try to tax this as other source income. Only argument possible in that case is that this receipt is not in the nature of income at all. But this is also a weak argument.

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