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2017 (8) TMI 1252 - AT - Income TaxDisallowance u/s 40A(2) - payment to specified persons / wives of the directors - Ground Handling Charges is doubtful and unjustified - Held that:- Disallowances was made on surmises and conjectures and without considering the relevant information / evidences. The said evidences and letters were not considered by the CIT(A) as well. Therefore, the case laws referred by the Ld. AR are applicable in the present case and the contentions of the assessee are accepted. Though the AO has not referred to section 40A(2) yet it seems that the disallowance was made under this section because his emphasis for disallowance is only on the fact that the recipients are wives of the directors. Section 40A(2) can be invoked only if the amount paid is excessive or unreasonable w.r.t. the fair market value of the services rendered. Since the AO has not given any such finding, he could not make any disallowance u/s 40A(2). Reimbursement of conveyance expenses to its directors as per the Board Resolution - reason-ability of expenses - 3.36 times increase in expense - Held that:- The explanation given by the Ld. AR that the assessee company does not own vehicles despite huge turnover, only to avoid various overhead expenses was thereon record before the Assessing Officer. The AO has made the disallowance on the ground that the amounts are not shown as perquisites. The Ld. AR’s contention that payments of Conveyance expenses by way of fixed reimbursement cannot be treated as perquisites is just and proper and whether the same is exempt or taxable has to be examined in the case of directors and not the company. Moreover, there is no dispute about the genuineness of payment or its verifiability. Thus, the appeal of the assessee on both the issues is allowed.
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