Medical Insurance Premium paid for Family Members of Employees is Business Expenditure: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the medical insurance premium paid for the family members of the employees is allowable as business expenditure under section 37 of the Income Tax Act.

The sole grievance of the assessee was that the Assessing Officer has disallowed the amount paid in relation to medical insurance premium paid for the family members of the employees of the company. The AO was of the view that such expenditure, though incurred in terms of contractual obligations entered into with the employees, cannot be stated to have been incurred wholly and exclusively for the purposes of business of the assessee.

Both the first appellate authority dismissed the appeal of the assessee.

The Tribunal overruled the findings of the lower authorities and noted that the authorities could not bring any evidence on record to substantiate that the payments so made by the assessee-company had no nexus with the business of the assessee.

“Even otherwise, it is not necessary that all the payments/expenditure incurred by the assessee should have direct bearing on earning of income, but some payments are also made under certain business expediency. In the instant case, the payments claimed to have been made by the assessee for the insurance premium of such members who have attained the age of 21 years or more or who are the remote relations of assessee have already been offered by the assessee to tax before the ld. CIT(A), as also noted in the written submissions above. The ld. Authorities below appear to have rejected the claim of the assessee that these payments were in the nature of perquisites to the employees as contemplated under sub-clause (iv) of section 17(2) of the IT Act, according to which any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee, shall be included in perquisites. However, in view of proviso (iii) & (iv) appended to this section clearly prohibit the application of section 17(2) in certain eventualities as contained in these provisos,” the bench said.