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2021 (8) TMI 765 - AT - Income TaxDisallowance of expenditure u/s 40A(2) - Payment to sister concern towards consultancy and technical services - HELD THAT:- We come to the conclusion that this essential aspect has been missed by both the Authorities. CIT Appeal had wrongly and in a pro rata manner, had sustained the 20% of the expenditure claimed by the Assessee. There was no reason for coming to the conclusion for sustaining 20% of the disallowance. No fair market value of the services or goods has been brought on record by the Lower Authorities. It is undisputed that the Assessing Officer had allowed the similar expenditure for the assessment yea₹ 2015-16, 2017-18 and 2018-19. Further, we are of the opinion that in the absence of any comparable instance of rendering the similar services/supply of goods, it would not be permissible to disallow the expenditure u/s 40A(2). As the needful was not done by the Lower Authorities and on adhoc/estimate basis, the CIT Appeal has restricted the disallowance upto 20%. When the comparable fair market value have not been brought on record by the Lower Authorities, we further grant the benefit of another 10% to the Assessee. Thus, we restrict the disallowance upto 10% of the expenditure claimed by the Assessee by making the payment of M/s Oxbridge International Private Limited for both the assessment years. In the result, both the Appeals are partly allowed.
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