D. P. WADHWA,j. ( 1 ) THE Income-tax Appellate Tribunal, Delhi Bench b has referred to this Court under Section 256 (1) of the Income-tax Act, 1961 (hereinafter referred to as the Act) the following question of law in respect of assessment years 1969-70 and 1970-71. "whether on the facts and in the circumstances and on true interpretation of Section 40 (a) (v) of the Income-tax Act, 1961 reimbursement of the medical expenses to the managing director has been correctly restricted by the Tribunal to Rs. 12,0001- for each of the assessment years 1969-70 and 1970-71 ?" ( 2 ) THE facts of the case may be stated briefly. Shri Raj Bans Bahadur, Managing Director of the assessee company was taken ill in July 1967. He suffered partial paralysis and was admitted to a nursing home. He remained in the nursing home for sometime, but even after his discharge be required medical treatment which included the services of a qualified nurse who was attending on him day and night. In August 1967, the Board of Directors of the assessee company decided to reimburs e such medical expenses of the Managing Director as may be incurred by him. For the assessment year 1967-69 (year ending on 31st March, 1968) the assessee company reimbursed medical expenses of Rs. 339411- which comprised payments to the nursing home, doctors, nurses and purchase of medicines. The Income-tax Officer had rejected the claim of the assessee company as he was of the view that such payment was hit by the provisions of Section 40 (c) (iii) of the Act, but on appeal, the Appellate Assistant Commissioner restricted the allowance to Rs. 9408. 00. On further appeal, the Tribunal allowed the claim Of the assessee company in its entirety holding that the payments were made to fulfill the legitimate need of the business of the company and they were neither excessive nor unreasonable. ( 3 ) FOR the assessment years 1969-70 and 1970-71, the asses- see company had claimed deductions of Rs. 40319. 00 and Rs. 41197. 00 about the medical expenses reimbursed to its Managing Director. ( 3 ) FOR the assessment years 1969-70 and 1970-71, the asses- see company had claimed deductions of Rs. 40319. 00 and Rs. 41197. 00 about the medical expenses reimbursed to its Managing Director. It may be noted that S. 40 (c) (iii) was omitted by Finance Act of 1965 with effect from 1-4-1969 but its provisions were re-enacted with certain modifications under clause 40 (a) (v) which were inserted with effect from 1-4-1969 and this clause 40 (a) (v) was omitted by the Finance (No. 2) Act, 1971 with effect from 1-4-1972 and its provisions were re-inacted with modifications in S. 40a (v) which Section was inserted by the same Act with effect from the same date. The relevant provisions of these clauses which place limit on allowance in respect of prequisites, etc. may be reproduced here at this stage : 40. Notwithstanding anything to the contrary in sections 30 to 39 the following amounts shall not be deducted in computing the income chargeable under the head "profits and gains of. business or profession, (e) In the case of any company (III) Any expenditure incurred after the 29th day of February, 1964 which results directly or indirectly assessment in the provision of any benefit or amenity or perquisite, whether convertible into money or not, to an employee (incloding any sum paid by the company in respect of any obligation which but for such payment would have been payable by such employee) to the extent such expenditure exceeds one-fifth of the amount of salary payable to the employee for any period of his employment after the aforesaid date. (a) In the case of any assessee (V) any expenditure which results directly or indirectly in the provision of any benefit or amenity or perquisite, whether convertible into money or not, to an employee (including any sum paid by the assessee in respect of any obligatiota which but for such pay- assessment year ment would have been payable by such employee) 1969-70 / 1970-71 and any expenditure Or allowance in respect of any w. e. f. 1-4-1969) assets of the assessee used by such employee either wholly or partly for his own purposes or benefit, to the extent such expenditure or allowance exceeds one -fifth of the amount of salary payable to the employee or an amount calculated at the rate of one thousand rupees for each month or part thereof comprised in the period of his employment during the previous year, whichever is less: Provided that in computing the aforesaid expenditure or. allbwance, the following shall not be taken into account, namely : (a) any payment by way of gratuity; (b) the value of any travel concession or assistance re- ferred to in clause (5) of S^ 10; (e) passage moneys or the value of any free or conces- sional passage referred to in sub-clause (i) of. clause (6) of S. 10; (d) any payment of tax referred to in sub-clause (vii) of clause (6) of S. 10; (e) any sum referred to in sub clause (vii) of clause (1 ). of Section 17;. (f) any sum referred to in sub-clause (v) of clause (2) of Section 17; (g) the. amount of any compensation referred to in sub- section (i) or any payment referred ^o in sub-clause (ii) of clause (3> of Section 17; (H) any payment referred to in clause (iv) or clause (v) of sub-section (1) of 36 and (I) any expenditure referred to in clause (ix) ,of subsection (1) of Section 36:provided further that nothing in this sub-clause shall apply to any expenditure which results directly or indirectly in the provision of any benefit or amenity or perquisite to an employee whose income. chargeable under the head salaries is seven thousand five hundred rupees or less. Explanation I The provisions of this sub-clause shall apply notwithstanding that any amount not to be allowed under this sub-clause is included in the total income of the employee. chargeable under the head salaries is seven thousand five hundred rupees or less. Explanation I The provisions of this sub-clause shall apply notwithstanding that any amount not to be allowed under this sub-clause is included in the total income of the employee. Explanation II -In this sub-clause word salary shall have the meaning assigned to it in clause (h) of rule 2 of Part of the Fourth Schedule. " (5) (a) Where the assee (I) incurs any expenditure which results directly or indirectly in the payment of any salary to an employee or a former employee, or (ii) incurs any expenditure which results directly or indirectly in the provisios of any perquisite (whether CONVERTIBLE. into money or not) to an employee or incurs directly or indirectly any expenditure or is entitled to any allowance in respect of any assets of the assessee used by an employes either wholly or partly for his own purposes or benefit. then, subject to the provisions of clause (b) so much of such expenditure or allowance as is in excess of the limit specified in respect thereof in clause (c) shall _not be allowed as a deduction Provided that where the assessee is a company, so much or the aggregate of (A)THE expenditure and allowance referred to in subclauses (i) and (ii) of this clause; and (B) the expenditure and allowance referred to in subclauses (i) and (ii) of clause (c) of section 40, in respect of an employee or a former employee, being a director or a person who has a substantial interest in the company or a relative of the director or of such person as is in excess of the sum of a seventy two thousand rupees, shall in no case Be allowed as adeduction: ( 4 ) AS stated above, the assessee company again claimed deduction of these amounts of Rs. 403191- and 41971- on account of medical expenses reimbursed to the Managing Director, but the Income-tax Officer disallowed the? entire claim as not relevant to the Company s business need. On appeal the Appellate Assistant Commissioner treated the medical expenditure as perquisite of the Managing Director and restricted the allowance to 115th of the salary and commission paid to him. . The revenue went in appeal before the Tribunal and the assessee company also filed cross objections. entire claim as not relevant to the Company s business need. On appeal the Appellate Assistant Commissioner treated the medical expenditure as perquisite of the Managing Director and restricted the allowance to 115th of the salary and commission paid to him. . The revenue went in appeal before the Tribunal and the assessee company also filed cross objections. The Tribunal held, relying on its earlier decision for the assessment year 1968-69, that the assessee company was justified in reimbursing the medical expenses to the Managing Director. This position is not in dispute in the reference before us After making a comparative study of both Sections 40 (a) (v) and 40 (c) (iii), the Tribunal was of the view that S. 40 (c) (iii) did not lay any limit beyond which expenditure was to be allowed. The Tribunal held that S. 40 (a) (v) which,. came into effect from 1-4-1969 prescribe a limit over and above which any expenditure en providing. amenities, benefits or perquisites to an employee had to be disallowed. The Tribunal was of the view that what was to be allowed was1|5th of salary or Rs. 1,000|- per month whichever was less. Accordingly, the Tribunal accepted the submission of the Department that the allow ance of reimbursement of medical expenses had to be restricted to Rs. 12,0001- for each of the assessment years in question and not l|5th of the salary and commission paid to the Managing Director as was held by the. Appellate Assistant Commissioner. The Tribunal thus partially accepted the appeal of the revenue and dismissed the cross objections of the assessee company. At the instance of the assessee company this reference was made. ( 5 ) THE learned counsel for the revenae raised a preliminary objection that the present reference was not maintainable, as it did not arise out of the cross-objections filed by the assessee company and was only against the appeal filed by the revenue before the Tribunal. We think this objection is merely stated to be rejected. Under section 256 (1) of the Act, reference has to be made to the High Court on any question of law arising out of the order of the Tribunal. Cross-objections are filed in appeal under Section 253 (4) of the Act, though memorandum of cross-bjections is to be disposed of by the Tribunal as if it were an appeal. The appeal of. Cross-objections are filed in appeal under Section 253 (4) of the Act, though memorandum of cross-bjections is to be disposed of by the Tribunal as if it were an appeal. The appeal of. the revenue as well as cross-objections of the assessee company have been disposed of by one order and we fail to appreciate the argument of the counsel for the revenue as to how the present reference is incompetent. ( 6 ) IT is not disputed thatthe expenses in question were incurred by the assessee company for commercial expediency. As already noticed, the Tribunal in its decision for earlier year did hold that the medical expenses in the present case were incurred on the principle of commercial expediency and, in fact, therevenue does not contain before us. ( 7 ) IT was contended by Mr. Ved Vyas, learned counsel for the assessee company, that the provisions of Section 40 (a) (v) are inapplicable when the payment is made by the company to its employee in cash and any cash payment cannot be equated to "any benefit or amenity or perquisite". According to him, any cash payment made by the company to its employee would be part of the salary and be referred to the provision of Section 17 of the Act in this regard. It was further contended that the words any benefits, or amenity or perquisite" if equated with cash payment would make the words whether convertible into money or not redundant and that would be against all principles of interpretation of statute. All the words in the enactment have to be given full effect. When the legislature uses some words, the interpretation should not be to make these words either redundant or a mere surplusage. ( 8 ) THE counsel also drew our attention to the relevant provision as contained in Section 40 (A) (5) which limit the allowance and is in two parts, where expenditure incurred, by the company results directly or indirectly in the payment of any salary to its employee and where company incurs any expnditure which results directly or indirectly, in the provision, of any perquisite, "whether comtextible tato money or not" to aa employee. This according to. This according to. the counsel, is a clear pointer to the fact that the earlier provisions, as contained in clause (c) (iii), and clause (a) (v) of S. 40 of the Act did not include any cash payment made by the company to its employee within the meaning of the words any benefit, amenity or perquisite. ( 9 ) IN support of his contentions, Mr: Ved Vyas referred to various decisions which may be noticed : ( 10 ) IN Commissioner of Income Tax. vs. Kanan Devan Hills Produce Co. (1979) 119 ITR 431 (1 ). the Calcutta High Court held that any cash payment directly made to the employee cannot be considered to be a perquisite within the meaning of Section 40 (c) (iii) of the Act, which provision corresponds to Section 40a (5) The question before the Court was whether the overseas allowance, managing allowance devaluation allowance and transport allowance did not fall within the expression benefit, amenity or perquisite within the meaning of Section. 40 (c) (iii)of the Act. The Court observed as follows : In our view, in their ordinary meaning, the words which results directly or indirectly in the provision of any benefit or amenity perquisite whether convertible into money or not in cl. (c) (iii) of S. 40 excludes cash paid directly to an employee as there is no question of convertibility to money where cash would be paid. This interpretation is reinforced by the fact that originally the said sub-section contained the expression "remuneration" which was specifically ex cluded by the amendment in troduced in 1964 which also introduced the clause whether convertible into money or not ln sub-clause (i) of the said cl. (c) the expression "retmmeratioo. " was retained along with the other expressions benefit and amenity even after the amendment. This would show that the Legislative had in view the distinefion between the said expressions and yet chose to delete the expression remuneratiofl from the said cl. (iii) The phrase. whether convertible into money or not in our opinion does not govern only. the expression perquisite. The words in the section are any benefit or amenity or perquisite. This would show that the Legislative had in view the distinefion between the said expressions and yet chose to delete the expression remuneratiofl from the said cl. (iii) The phrase. whether convertible into money or not in our opinion does not govern only. the expression perquisite. The words in the section are any benefit or amenity or perquisite. If the phrase whether convertible into money or not was intended to govern only the word perquisite then the correct grammatical form would have been any benefit or amenity or any perquisite whether convertible into money or not ( 11 ) IN Indian Leaf Tobacco Co. Ltd. vs. Commissioner of Income Tax. (Cal) (1982) 137 ITR 827 (2), the Court was concerned with the question as to whether monetary payment made by the Company to its emp loyee for reimbursement of medical expenses. incurred by the employee represented expenditure- resulting directly or indirectly in the provision for any benefit or amenity or perquisite to the said employee wthin the meaning of Section 40a of the Act. . The Court following its earlier decision in Commissioner of Income Tax vs. Kanan Devan Hills (1979) 119 ITR 43. 1 (1) held that the direct payment to the employee did not come. within the scope of expenditure resulting directly or indirectly in the provision for any perquisite to an employee whether convertible into money or not for the purpose of working out disallowance under S-40a (5 ). ( 12 ) THE Court therefore held that the expenditure incurred by the company for reimbursement of medical expenses incurred by the employee could not be treated as perquisite of the employee for the purpose of making disallowance under Section 40a ( 13 ) IN another case of Calcutta High Court reported in (1984) 145 I. T. R. 457 (3), Commissioner of Income Tax. vs. National and. Grindlays Bank Ltd. the question was whether the cash payments on account of reimbursement of medical expenses of the employees of the company could not be included the value of benefits amenities or perquisites for the purpose of disallowance in excess of the limits laid down under Section 40 (c) (iii) or Section 40 of the Act. The Court answered the question in favour of the assessee following its decision in Indian Leaf Tobacco Co. (supra ). ( 14 ) IN Commissioner of Income Tax. The Court answered the question in favour of the assessee following its decision in Indian Leaf Tobacco Co. (supra ). ( 14 ) IN Commissioner of Income Tax. vs. Venkataraman (1978) 111 ITR 444 (4) the Madras High Court had occasion to consider a similar provition as contained in S. 2 (6c) (iii) of the Indian lncometax Act 1922, which defined income as including the value of any benefit or perquisite whether convertible into money or not obtained from a company. It was held that from this language it is clear that the benefit or perquisite contemplated cannot be money itself. If it is money the question of its value being taken into account or the benefit or perquisite being converted into money will not arise. ( 15 ) IT was also observed that the same section made a distinction between benefit or perquisite on the one hand any sum paid on the other indicating that the benefit or perquisite contemplated by the Section. was other than money. . ( 16 ) IN Commissioner of Income Tax. vs. Manjushree Plantations Ltd. (1980) 125 ITR 150 (Madras) the question was whether the leave allowance was not perquisite and therefore the allowance of the same would not fall to be restricted in terms of Section 40 (a) (v) of the Act. The Court referred to the decision of Calcutta High Court in Kanan Devan case and also an earlier decision of the Madras High Court in Commissioner of Income Tax vs. Venkta Raman (1978) 111 ITR 444 (4), and held that in order to term apayment as perquisite, it had to be a payment other than a cash payment in pursuance of a contract of service. ( 17 ) IN Commissioner of Income Tax. vs. Warner Hindustan Ltd. (1984) 145 ITR 24 (AP) (6) the question was as to whether the club fees and medical bills should be taken into account as perquisite for the purpose of disallowance under Section 40a (5)of the. Act. Relying on the decision of the Calcutta and Madras High Courts, it was held that payments made directly to an employee do not fall within he meaning of the expression perquisite. Act. Relying on the decision of the Calcutta and Madras High Courts, it was held that payments made directly to an employee do not fall within he meaning of the expression perquisite. ( 18 ) IN Commissioner of Income Tax vs. Mysore Commercial Union Ltd. (1980) 126 ITR 340 (7), the Karnataka High Court was of the view that the expression whether convertible into money or not occuring in Section 40 (a) (v) is something apart from money such as something in kind, which may be convertible into money or not and that this expression would not be appropriate. when one considers a payment in cash. . It therefore held that payment of bonus to its employee incash was not a perquisite and could not be disallowed under Section 40 (a) (v ). ( 19 ) MR. Wazir Singh, appearing for the revenue however referred to a Full Bench decision of Keraia High Court in Commissioner of Income Tax vs. Commonwealth Trustl Ltd. (1982 ). 135 ITR 19 (8 ). This decision took a contrary view. In. this case the house rent allowance paid by the assessee company to its employes was treated as perquisite by the Income-tax Officer. On appeal, the Tribunal held that the house rent allowance should not be treated as part of the perquisite The question turned on what exactly the term benefit or amenity or perquisite meant. The Court was concerned with S. 40 (a) (v) of the Act as it stood during assessment year 1971-72. The Court referred to the definition of salary as given in cl. (4) of Rule 2 of Part A of the IV Schedule to the Act which was referred to in Explanation 2 to Section 40 (a) (v ). Under this the salary includes the dearness allowance, if the term of employment so provides but excludes all other allowances and perquisites. The Court was therefore of the view that when sub-clause uses the term salary has-to be understood as excluding all allowances and perquisites other than dearness allowance. That the term benefit amenity or perquisite is opposed to salary evidently indicated that these together would exhaust what anemployee would obtain in terms, of the return for his services. The Court thus differed with the view of other High Courts and observed: It is immaterial whether the benefit, perquisite or amenity may or may not be convertible into money. That the term benefit amenity or perquisite is opposed to salary evidently indicated that these together would exhaust what anemployee would obtain in terms, of the return for his services. The Court thus differed with the view of other High Courts and observed: It is immaterial whether the benefit, perquisite or amenity may or may not be convertible into money. ( 20 ) WITH respect we are unable to agree with the line of reasoning adopted by Kerala High Court. The term benefit or amenity or perquisite cannot mean to include cash payment otherwise the words immediately following this term become redundant. Such type of construction has to be avoided. As a matter of fact, the use of words whether convertible into money or not goes to show that the term benefit or amenity or perquisite cannot relate to cash payments. Any cash payment could well be part of the salary as given in Section 17 of the Act. It cannot certainly be a benefit or amenity or perquisite whether convertible into money or not Definition of salary given in Section 40 (a) (v) is restricted in its applicability to only this clausefor the purpose of calculation of he value of the benefit amenity or perquisite when it is to be restricted to l|5th of the amount of salary payable to. an employee. Thus, reimbursement of medical expenditure to Managing Director by the assessee company is not an expenditure by the assessee company which results directly or indirectly in the provision of any benefit, amenity or perquisite whether convertible into money or not to the Managing Director of the assessee company. We are in agreement with the view expressed by the Calcutta High Court in Kanan Devan Hill Produce Co. s case (supra) and followed in other cases mentioned above. ( 21 ) WE are therefore of the opinion that Section 4 (a) (v) is in. applicable where the employee is given cash payments by the company as cash payments would not come within the scope of term benefit amenity or perquisite as used in the Section. In that view of the matter there could not be any limit on the allowance given by the assessee company to its Managing Director to meet his medical expenses and the tribunal was not correct in restricting the reimbursement of the medical expenses to Rs. In that view of the matter there could not be any limit on the allowance given by the assessee company to its Managing Director to meet his medical expenses and the tribunal was not correct in restricting the reimbursement of the medical expenses to Rs. 12,000 for each of the assessment years 1969-70 and 1970-71. Accordingly, we answer the question referred to us in the negative i. e. in tavour of the assessee and against the revenue. The Commissioner of Income-tax will pay costs of this reference to the assessee company.