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2016 (7) TMI 7 - AT - Income TaxAddition u/s 40A(2)(a) in respect of sub-contract payments - unreasonable and excessive expenditure - Held that:- The market value of services rendered by M/s. Shri Bharat Cemco Pvt. Ltd. is to be seen from the angle of contract received by the assessee. The total work contract has been sub-contracted and even if we consider the direct expenses which have been debited by the assessee as part of cost of contract, the assessee for the year under consideration has declared profit of ₹ 1.34 crores in the Hospet division. The perusal of assessment order itself reflects that the assessee to have declared income at ₹ 80,47,920/- i.e. after claiming deduction on account of salary payable to partners. Further, the concern M/s. Shri Bharat Cemco Pvt. Ltd., in turn, had filed the return of income declaring total income of ₹ 1.75 crores. In case, the profits declared by the assessee and M/s. Shri Bharat Cemco Pvt. Ltd., are considered, first of all, there is no loss of revenue. Even otherwise, we hold that where the market value of services provided by the assessee is available on record i.e. the receipts received by the assessee against the contract between the assessee and NMDC, which in turn, is sub-contracted to M/s. Bharat Cemco Pvt. Ltd., we find no merit in the order of authorities below in holding that the provisions of section 40A(2)(a) of the Act are attracted in the case. In the absence of any finding by the Assessing Officer that the payments made to M/s. Bharat Cemco Pvt. Ltd., were unreasonable and excessive, we find no merit in the disallowance of any part of sub-contract charges paid by the assessee to the said concern. Accordingly, we direct the Assessing Officer to delete the addition - Decided in favour of assessee.
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