JUDGMENT

A.K. Sikri, J.

1. There is one question which is common in all these appeals. However, in ITR 458/1984 there are some additional questions which are referred for opinion. We would like to deal with these questions first and then approach the common question of law centre to all these cases. This ITR pertains to assessment year 1978-79 wherein the assessee had claimed certain medical expenses which were reimbursed to its employees. The Tribunal accepted the claim of the assessee that such reimbursement could not be regarded as perks. Following question has been referred by the Tribunal for our opinion in this behalf:

"Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that reimbursement of medical expenses by the assessee company to its employees could not be treated as perquisites within the meaning of Section 40C/40A (5) of the Income-Tax Act, 1961?"

2. This question stands answered in favour of the assessee and against the Revenue in the case of Commissioner of Income Tax Vs. Mafatlal Gangabhai and Co. (P) Ltd., 219 ITR 644.

3. Another question which is referred by the Tribunal on the application of the assessee relates to assessee's claim that its sur-tax liability of Rs. 42,850/- for this year should be deducted in the computation of its total income. The Tribunal did not accept the contention of the assessee in the impugned order but on the application of the assessee, has referred the following question for opinion:

"Whether, on the facts and in the circumstances of the case, the sur-tax liability claim of Rs. 42,850/- was allowable as deduction in computing the total income of the assessee company for the assttt. Year 1978-79?"

4. It is also decided in favour of the assessee in 219 ITR 589. We thus answer the question in the affirmative i.e. in favour of the assessee and against the Revenue.

5. Coming to the pivotal issue which is common in all these years, which has arisen for the first time in the assessment year 1997-98 and concerns the treatment which is to be given to the surplus amount at the hands of the assessee which the assessee collected from its customers on account of insurance premium and remained unclaimed because the persons who had paid the excess amount did not come forward to receive the same.

6. We may record that the assessee is a Limited Company carrying on business of financing for the purpose of purchase of commercial vehicles. There is a prescribed agreement under which finances are provided by the assessee to the purchaser of a vehicle. There are various terms and conditions mentioned in the agreement. According to clause (ix) the purchaser who is described as hirer has to get the vehicle insured for a comprehensive policy with an insurance company approved by the assessee with an endorsement assigning the policy in favour of the assessee. There is also transaction sheet in the name of the hirer indicating description of the vehicle purchased, cost of the same, initial payment to be made, hire purchase charges etc. etc. The initial insurance amount is also paid by the hirer. Insurance of the second year, third year and fourth year are also mentioned in the transaction sheets. Though the primary responsibility to insure the vehicle lies with the hirer, frequently the assessee collects the insurance amount in round figures and this is also added to the total amount financed by the assessee for the purchase of the vehicle and the installments are also determined accordingly. However, the amounts collected by way of insurance are kept in separate account as deposits. Out of these deposits, the insurance premium is paid by the assessee on behalf of the hirer. Since the amount is collected in round sum which may be a little more than what is required to be paid towards insurance premium, there is small balance left in the account of each of the hirers. The amount so remaining in each of the hirers towards the excess insurance premium is r