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2014 (1) TMI 912 - AT - Income TaxDisallowance u/s 40A(2)(b) of the Act – Excess payment of job charges – Held that:- The AO has not done any exercise to determine as to whether the amount paid by the Assessee to its sister concern were excessive or unreasonable by comparing the prevalent market rates - He has not arrived at an exact figure of excessive payment by comparing the amount paid by the assessee with the market rates for similar goods and services but he has rather considered the disallowance by comparing the cost of production to the Assessee with that the job work charges paid by assessee. This fact has not been controverted by Revenue by brining any material on record - The decision in Mahavir Dyeing & Print Mills Pvt. Ltd. Versus Income Tax Officer [2010 (4) TMI 968 - ITAT AHMEDABAD] followed – Where an assessee incur any expenditure in respect of which payment has been made to any of a person referred then in the opinion of the Assessing Officer such expenditure is excessive or unreasonable, having regard to the fair market value of the goods or services or facilities for which the payment is made, then so much of the expenditure as is so considered by the Assessing Officer to be excessive or unreasonable shall not be allowed as a deduction. On careful readings of this Section 40, it is worth to mention that before applying the provision it is required that the Assessing Officer should form an opinion having regard to fair market value of the service rendered. In the present case this exercise is lacking and the Assessing Officer need not make any attempt to find out the prevailing market rate - no case has been made out for disallowance u/s 40A(2)(b) and therefore no disallowance can be made - the disallowance made by the AO deleted – Decided in favour of Assessee
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