Sabyasachi Mukharji, J. - (1.) In this reference under Section 256(1) of the I.T. Act, 1961, the following two questions have been referred to this court : " 1. Whether, on the facts and in the circumstances of the case, the premium paid by the assessee to Nursing Home Benefit Association in respect of the medical insurance policy taken on the individual life of each employee resulted directly or indirectly in the provision of any benefit or amenity or perquisite within the meaning of Section 40(c)(iii) of the Income-tax Act, 1961, and should be taken into account in computing the amount disallowable under the said section ?
(2.) "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that for the purpose of computing the amounts disallowable under Section 40(c)(iii) of the Income-tax Act, 1961, the amount of salary payable to the employees should be reduced by the recoveries made from the managed companies on account of the services rendered to such companies by the said employees ? " 2. This reference arises out of the assessments for the assessment years 1966-67 and 1967-68, for which the relevant previous years were calendar years 1965 and 1966. As per the terms of the contract the assessee-company was required to reimburse the entire nursing expenses of its employees and officers. To avoid any heavy expenditure in any particular year the company took medical insurance policy from a Nursing Home Benefit Association on the individual life of each employee for which it was required to pay premia of Rs. 150 to Rs. 510 per year in the cases of different employees. The ITO treated the amount of premia as the expenditure which resulted directly or indirectly in the provision of a benefit or amenity or perquisite to the employees for working out the disallowable item Under Section 40(c)(iii) of the Act. The claim of the assessee, on the other hand, was that the premia as such did not result in any such benefit or amenity or perquisite. The ITO, however, rejected the assessee's contention.
(3.) On appeal, the AAC, however, accepted such view.;