MEDICAL EXPENSES OUTSIDE INDIA

1. According to sec 17(2)(vi), perquisite does not include if the medical expenses incurred abroad for family members if the same was reimbursed by the employee.  
2. However, the above provision is subject to two conditions,
i)  Expenditure on Medical treatment and stay abroad to the extent allowed by RBI and 
ii) Expenditure on travel shall be excluded if the employee's Gross total Income without including the above perquisite does not exceed Rs. 2,00,000.  
3. From the above provision we can easily conclude that his Gross Total Income (Rs. 1,40,000 +  40,000= 1,80,000) does not exceed Rs. 2,00,000, so his travel expenses should not form part of perquisite. 
4. With respect to Medical Expenditure to the extent allowed by RBI will not form part of Perquisite. So, out of Rs. 7,00,000, Rs. 6,50,000 will not form part of perquisite and the balance Rs. 50,000 will be taxable as perquisites.
5. Solution for the above question would be Rs. 50,000. 
Please correct me if the above solution has an alternative view. 

I don’t see any other interpretation for the above question. But they could have included Travel expenditure of Rs. 150,000 as not allowed by RBI. Possible for this view also. Even though clearly travel expenditure should not form part of perquisite, but if they have added that to Rs. 7,00,000+1,50,000 = 8,50,000 less RBI allowed amount of Rs. 6,50,000 which gives us Rs. 2,00,000. This could be one view. But this makes the second condition irrelevant.