The assessee filed return of income declaring total income of Rs.77,78,190/-. The return was duly processed under Section 143(1) of the Income Tax Act, 1961 and statutory notices were issued to the assessee and served. 

The assessee’s AR filed response alongwith the details during the course of assessment proceedings. The Assessing Officer observed that the assessee has credited an amount of Rs.58,63,992/- being salary income, however, in the statement of income the assessee has shown salary income of Rs.52,52,592/- only. 

The Assessing Officer added Rs.6,11,400/- as a short declaration of salary income. The Assessing Officer also disallowed interest under Section 57 amounting to Rs.31,99,303/- which was utilised for the purpose of immovable property. The Assessing Officer also made addition of Rs.44,573/- in respect of interest on LIC loans.


AR submitted that as regards ground no.1 related to addition of Rs.6,11,400/- the assessee received gross salary of Rs.58,63,992/- which included car reimbursement, children education, driver salary reimbursement, helper, telephone reimbursement and uniform Attire reimbursement.

AR submitted that the Assessing Officer has not considered tax free allowance and included the said allowance in taxable salary.

DR submitted that the CIT(A) as well as the Assessing Officer has given all the detailed finding in respect of gross salary and the reimbursement is taxable income and the same was rightly disallowed by the CIT(A). 


The division bench of Annapurna Gupta, Accountant Member and Suchitra Kamble, Judicial Member noted that the incentive such as car reimbursement, driver salary reimbursement and telephone reimbursement comes under the purview of taxable income and thus the Assessing Officer has rightly disallowed the same as they are perquisites.  

The bench said that the certificate issued by the employer cannot override the applicability of the Income Tax Statute wherein such kind of reimbursements are taxable. Thus, partly allowed the ground no.1.

The Tribunal observed that the contention of the assessee that the funds were utilised and the loans were taken in earlier year and, therefore, the interest portion should have been allowed appears to be correct. 

It was further observed that the assessee has established that the borrowed funds were utilised for such interest bearing advance and hence claim of the assessee for deduction of interest expenditure under Section 57 of the Act was proper. The Assessing Officer as well as the CIT(A) was not right in making the addition.

Case title: Amit Dhirajlal Doshi v/s DCIT

Citation: ITA No.1760/Ahd/2018

Amit Sharma

Author of Tax Concept

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