Section 40A(2)(b) cannot be invoked merely for Unregistered agreement

DE Diamond Electric India Pvt Limited Vs ACIT (ITAT Delhi) One of the ground taken by the AO for invoking section 40A(2)(b) is the agreement between the parties has not been registered. In our opinion, an unregistered agreement cannot be a ground for invoking provisions of section 40A(2)(b) of the Act in absence of requirement of law. If the expenses are not incurred wholly and exclusively for the purpose of the business, then disallowance could be made under section 37(1) of the Act. For invoking the provision of section 40A(2)(b) of the Act, the Assessing Officer has to form an opinion of ex...