the provisions of Sec.2(22)(e) were not applicable since the payment was mere reimbursement of expenditure by M/s PHL – ITAT Mumbai

Section 2(22)(e) of the Income Tax Act, 1961

Taxcharcha March 16, 2020

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Late Shri D.K. Jain vs ACIT — Where the assesse has made the FDR out of borrowed funds, the interest on such FDRs cannot be added back by invoking the provisions of section 57(iii) of the Income Tax Act, 1961

The provisions of Sec.2(22)(e) were not applicable since the payment was mere reimbursement of expenditure by M/s PHL. However, Ld. CIT(A) proceeded on wrong footing that the same would be personal expenditure and hence, disallowable completely overlooking the fact that the said expenditure has never been claimed by the assessee anywhere while computing his income.

The said expenditure was booked as business expenditure by M/s PHL. Therefore, the impugned additions could not be sustained. By deleting the same, ITAT allow the appeal.