An order issued by the Central Board of Direct Taxes, dated 19 April 2016. Issued under section 17(2), proviso, clause (ii), sub-clause (b).
An order of approval passed by the Principal Chief Commissioner of Income-tax, Bihar and Jharkhand, at Patna, under sub-clause (b) of clause (ii) of the proviso to sub-clause (viii) of clause (2) of section 17 of the Income-tax Act, 1961. That provision keeps out of the definition of perquisite any sum paid by an employer for an employee's medical treatment at a hospital approved for the purpose. The order approves one named hospital, Shri Sai Hospital at Kankarbagh, Patna, having regard to the guidelines in rules 3A(1) and 3A(2) of the Income-tax Rules, 1962.
This is an order of the Board. An order is issued under a power the Act itself gives the Board — most often section 119, which lets it direct its own officers and, in the cases the section names, relax a requirement. Read the enabling words before deciding how far it reaches: the power is administrative, and it cannot rewrite the charge.
The order accords approval to the named hospital for the purposes of sub-clause (b) of clause (ii) of the proviso to section 17(2). Its effect is stated in terms: any sum paid by an employer in respect of expenditure actually incurred by an employee on his or her medical treatment, or that of any member of the family, at that hospital, for the diseases or ailments prescribed under rule 3A(2), shall not be treated as a perquisite for the purposes of sections 15, 16 and 17. Thirteen qualifying ailments are listed. The order then confines itself expressly, stating that the approval is only for that sub-clause and is not to be construed as an approval of the Central Government, of the Principal Chief Commissioner or of any other statutory authority for any other purpose. Six conditions follow, covering non-transferability, the exclusion of Indian systems of medicine, a right of inspection, statutory compliance, withdrawal, and a duty to report changes.
Employer-borne medical expenditure is ordinarily a perquisite in the employee's hands. The Act relieves it where the treatment is at a hospital approved by the prescribed authority for prescribed ailments, and rule 3A sets out the standards of equipment, staffing and facilities such a hospital must meet. The approval is therefore granted case by case on application, after the hospital has been examined against those standards. This order is the outcome of one such application.
The order binds the income-tax authorities in the charge: no assessing officer may treat payments answering its terms as a perquisite while it stands. It confers nothing beyond that, and it does not bind the employee, the employer or the hospital to any position. Nor is it authority before a Tribunal or a court, which will look to section 17 and rule 3A rather than to the approval order. Its benefit runs to employees treated at that one hospital.
Takes effect from 1 April 2016 and remains in force for three years, that is, until 31 March 2019, unless withdrawn earlier under the conditions attached.
The approval is narrow on three axes and each is a trap. It covers only the ailments prescribed under rule 3A(2), so ordinary treatment at the same hospital remains a perquisite. It excludes treatment under the Indian systems of medicine. And it is not transferable, so a change in the hospital's ownership or constitution can take it outside the approval, which is why the order requires changes to be reported. Check that the approval was current on the date of treatment.
The approval accorded as above, is only for the purpose of sub clause(b) of clause (ii) of the proviso to [sub-clause(viii) of] clause (2) of Section 17 of the Income Tax Act, 1961
— the Central Board of Direct Taxes, order, 19 April 2016. Read it in the department’s own PDF.
| Under the Income-tax Act, 1961 | Now, in the Income-tax Act, 2025 |
|---|---|
| section 17 | section 16, section 17, section 18 |
| section 15 | section 15 |
| section 16 | section 19 |
My employer gave me a concessional staff loan. Is the interest I saved taxable as a perquisite?
My employer gave me a company flat at a low licence fee and now adds a perquisite value to my salary under Rule 3. Can I say there was no concession at all?
My employees exercised stock options but the shares are locked in and non-transferable. Was I supposed to deduct tax on the market value less what they paid?
My employer pays part of the premium on a superannuation policy, but I get nothing unless I stay until retirement. Is that contribution taxable as a perquisite in my hands now?
My Indian contract says my pay is free of Indian tax and the Indian company pays the tax for me. Is that tax itself taxable in my hands?
We pay our salesmen a turnover commission on top of salary and contribute to the provident fund on both. Is the contribution on the commission deductible?
What here is the Board’s and what is ours. The document is the Central Board of Direct Taxes’ own. Its date and the words quoted above are reproduced from the Board’s own PDF, which is here. Everything else on this page is ours: the plain-English account of what the document is and what it does, the reading of which provision it turns on, the note on what to watch, and the choice of cases. Where our account and the document part, the document governs.
An order of the Board binds the department, not you and not a court. The Board writes to its own officers. An assessee may hold the department to an order or an instruction 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. This is the most common mistake made with this material, and it is worth making twice: a direction of the Board is not a section of the Act.
We did not read all of it. The department’s file returned only part of this document to us, so what is written above is written from the part we could read. Open the PDF before you rely on it.
What we could not settle. The date printed on the order is 19 April 2016, whereas the department lists the document under 19 May 2016; the printed date has been used. The F. No. did not come through legibly and has been left blank rather than guessed. The thirteen listed ailments and the six conditions were returned in summary and not read individually.