Case Law Details
Sh. Chander Mohan Lall Vs ACIT (ITAT Delhi)
A plain reading of section 40A(2) of the Act would make it clear that where the payment made to a related party, in the opinion of the Assessing Officer, is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made, it has to be disallowed. However, the expression “the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities” as used in section 40A(2) of the Act makes it abundantly clear that the opinion of the Assessing Officer cannot be formed in vacuum and without any cogent evidence. It is the Assessing Officer who has to establish on record that the payment made to the related party is unreasonable and excessive having regard to the market value of the goods, services or facilities for which payment is made. In the facts of the present case, admittedly, except stating that the related party is not technically qualified to undertake the work and the payment made is unreasonable and excessive, the Assessing Officer has not brought any material on record to demonstrate that the payment made is excessive and unreasonable having regard to the market value of the services for which such payment was made. Thus, the disallowance made under section 40A(2) without being back by cogent evidence and purely on conjectures and surmises, cannot be sustained. Accordingly, we delete the disallowance made of Rs.9,00,000/-.
FULL TEXT OF THE ORDER OF ITAT DELHI
The captioned appeal by the assessee arises out of order dated 21.12.2018 of the learned Commissioner of Income Tax (Appeals)-20, New Delhi, for the Assessment Year 2015-16.
2. In ground no. 1, the assessee has challenged the disallowance of Rs.9,00,000/- made under section 40A(2) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
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