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2010 (1) TMI 812 - AT - Income TaxDisallowances made by the Assessing Officer invoking section 40A(2)(b) of the Income-tax Act, 1961 - commission and incentive and consultancy charges. According to the Revenue, the assessee had not produced any evidence for services rendered by the recipients of the above amounts who fell within the purview of section 40A(2)(b) of the Act, nor could it substantiate the business expediency for such payments - Held that:- For invoking clause (b) of sub-section (2) of section 40A of the Act, the first requirement is that the Assessing Officer has to have an opinion that the expenditure incurred in relation to the related parties was excessive or unreasonable having regard to the fair market value of the services, or the payments made were not for the legitimate needs of the business of the assessee. Here, the Assessing Officer has not at any point of time considered the fair market value of the services rendered by the above three persons. There is no comparative study of similar payments made by the assessee to other persons, before coming to a conclusion that such payments were excessive or unreasonable. The learned Commissioner of Income-tax (Appeals) after noting that the assessee was paying higher or comparable amounts to persons who were having less experience was of the opinion that section 40A(2)(b) of the Act is not applicable. Assessing Officer being unable to establish the excessiveness or unreasonableness of the payments made by the assessee, when compared with the fair market value of the services rendered by them, the disallowances made were not warranted. appeal filed by the Revenue dismissed.
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