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2017 (2) TMI 988 - HC - Income TaxAddition u/s 40A(2) - Held that:- Section 40A(2) empowers the assessing officer to effect a disallowance of payments that are, in his opinion excessive or unreasonable giving regard to fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by him or accruing to him. Such opinion has to be based on tangible material and not assumptions and suspicions. The provisions of section 40A(2) are not automatic and can be called into play only if the assessing officer establishes that the expenditure incurred is, in fact, in excess of fair market value. This had not been done in the present case. The quantum of commission paid is thus at arms length. The decision to streamline business activities and establish a division of labour or hierarchy of operations is within the domain of the entities and cannot be trespassed upon by the assessing officer except where the officer establishes that such design or method is a ruse to circumvent legitimate payment of tax. The Supreme Court in the case of Vodafone International Vodafone International Holdings BV. Vs. Union of India and another (2012 (1) TMI 52 - SUPREME COURT OF INDIA) points out the difference between looking through a transaction and looking at a transaction settling the position that a conclusion of colourable /sham can be arrived at by viewing the transaction in a commercially realistic and wholistic perspective, not adopting a truncated and dissecting approach. In the present case, there is a consistent finding of fact that the transaction was bonafide and acceptable. Nothing is placed before us to indicate that the findings are perverse. We are thus not inclined to interfere with the concurrent findings of the authorities. - Decided in favour of the assessee.
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