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2022 (11) TMI 1204 - AT - Income TaxAddition u/s 40A - addition on account of payment of management fee paid to M/s ATS Infrastructure Ltd - HELD THAT:- CBDT in its Circular No.6P dated 06.07.1968 clarified on the issue stating that the provisions of Section 40A(2) are meant to check evasion of tax through excessive or unreasonable payments to relatives and associate concerns and should not be applied in a manner which will cause hardship in bonafide cases. The assessee company had filed all the requisite documents before A.O. as called for, but, however, the A.O. without considering the fact that there is no loss to the revenue since assessee company as well as ATS are not claiming any exemption, disallowed the impugned expenditure and added back the same to the returned loss of assessee company in an arbitrary manner without considering the judicial precedence on this issue as well as the Circular of CBDT No.6P Dated 06.07.1968. A.O. flouted the CBDT Circular as well as judicial precedence on the matter in issue. We may note that in the instant case the A.O. judged the merits or otherwise of a commercial transaction by sitting in the chair of assessee which is not sustainable under law as per Judgment of Hon’ble Delhi High Court in the case of Pr. CIT vs., M/s. Second Leasing Pvt. Ltd. [2017 (11) TMI 269 - DELHI HIGH COURT] We find that the A.O. failed to bring any cogent material on record to suggest that the entire expense is excessive without bringing any comparable that the expenditure claimed by the assessee company is much higher than that of prevailing market rate. We, therefore, find no force in the arguments of Ld. D.R. on this issue. D.R. also did not brought anything on record to sustain the addition made by the A.O. In this view of the matter and the settled position of law on this issue by the Hon’ble Supreme Court in the case of S.A. Builders Limited [2006 (12) TMI 82 - SUPREME COURT] and the Judgment of Hon’ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. [1954 (10) TMI 12 - SUPREME COURT] relied upon by the CIT(A), we find no reason to interfere with the order of the Ld. CIT(A) in deleting the disallowance made by the A.O.- Thus, we dismiss the ground of Revenue.
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