Circular No. 481, dated 20-2-1987 — [Omitted by Circular No. 603, Dated 6-6-1991]

What this is

Circular No. 481, dated 20-2-1987 was issued by the Central Board of Direct Taxes on 20 February 1987. Its subject is [Omitted by Circular No. 603, Dated 6-6-1991].

This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.

What it does

Defines recognised public hospital for the purpose of Circular No. 445 dated 31st December 1985, which had said that an employer's reimbursement of medical expenses actually incurred in India by an employee on treatment in a recognised public hospital, such as operation fees, hospitalisation charges and the cost of medicines and tests, is not to be treated as a perquisite for income-tax. In consultation with the Ministry of Health and Family Welfare, the Board decides that recognised public hospital means a hospital recognised under the Central Government Health Scheme and the Central Services (Medical Attendance) Rules for treatment or reimbursement under those rules.

Why it was issued

Representations sought clarification of what the words recognised public hospital in the earlier circular meant.

Who it reaches

Employees reimbursed for hospital treatment in India
Employers valuing medical perquisites for salary deduction
Hospitals seeking recognition under the Central Government Health Scheme
Assessing Officers examining medical reimbursement

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

[OMITTED BY CIRCULAR NO. 603, DATED 6-6-1991]

Reimbursement of medical expenses on treatment in recognised public hospital in India-Clarification regarding.

Circular Number: 481, dated 20-2-1987 [F. No. 200/14/86-IT(AI)]

Text:

Subject: Reimbursement of medical expenses on treatment in recognised public hospital in India-Clarification regarding.

Attention is invited to the Board's Circular No. 445 (F. No. 200/177/84-IT(AI)) dated 31-12-1985,* wherein it was laid down that the reimbursement by the employer of medical expenses, such as, operation fee, hopitalisation charges and cost of medicines, tests, etc., actually incurred in India by the employee on medical treatment in a recognised public hospital will not be treated as perquisite for the purpose of charging income-tax. Representations have been received by the Board seeking clarification as to the import of the term "recognised public hospital" as used in the said circular.

2. It has been decided in consultation with the Ministry of Health and Family Welfare that the "recognised public hospital" would mean those hospitals which are recognised under CGHS and CS(MA) Rules for the purpose of medical treatment/reimbursement under these rules.

Hindi version will follow shortly.

(Sd.) K.K. Tripathi,

Secretary, Central Board of Direct Taxes.

What to watch

The heading on the text records that this circular was omitted by Circular No. 603 dated 6th June 1991.
The test is recognition under the Central Government Health Scheme and the Central Services (Medical Attendance) Rules; a well-known private hospital outside those lists does not qualify.
It defines one term in Circular No. 445 and does not otherwise change that circular's conditions, including that the expenses be actually incurred in India.
Medical reimbursement was later governed by a proviso to section 17(2) with its own list of approved hospitals and its own monetary limit.

Where you meet it

In an old salary assessment or employer's section 201 proceeding where hospital reimbursement was left out of the perquisite value.

← Circular No. 482 · Circular No. 480 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.