Payment not made to related party cannot be disallowed U/s. 40A(2)

Kay Dee Industries Vs JCIT (ITAT Delhi)

Since it was not the first year of the payment of commission to the party and the recipient of the commission income was also not related party in terms of section 40A(2), therefore, revenue was only authorized to see whether the expenditure was laid out or by the assessee for the purposes of the business or not. Power to examine the reasonableness and adequacy of expenses in terms of section 40A(2) are only available when the payment is made to a related party, which was not the case

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