TMI Blog2010 (1) TMI 812X X X X Extracts X X X X X X X X Extracts X X X X ..... cessive or unreasonable having regard to the fair market value of the services, or the payments made were not for the legitimate needs of the business of the assessee. Here, the Assessing Officer has not at any point of time considered the fair market value of the services rendered by the above three persons. There is no comparative study of similar payments made by the assessee to other persons, before coming to a conclusion that such payments were excessive or unreasonable. The learned Commissioner of Income-tax (Appeals) after noting that the assessee was paying higher or comparable amounts to persons who were having less experience was of the opinion that section 40A(2)(b) of the Act is not applicable. Assessing Officer being unable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Manohar Lulla, brother of Shri Ramesh Lulla Rs. 2,75,000 iii. Smt. Padmini Lulla, w/o Shri Manohar Lulla Rs. 5,25,660 4. The assessee was called upon to explain the commercial necessity of the payments of the above persons whereupon his reply was as under: "(i) Shri Sidharth Lulla, director. (a) He is eligible for a commission calculated at 0.25 per cent, of the turnover achieved net out outside supplier payment. (b) He is also eligible for a commission calculated at 5.50 per cent, on the commission earned from TRIAX for the order procured on all India basis. Commission paid during the year Rs.40,840. (ii) Shri Manohar Lulla, brother of Shri Ramesh Lulla managing director of the company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce again invoked section 40A(2)(b) of the Act and made disallowance of Rs.2,29,000. 7. In its appeal before the learned Commissioner of Income-tax (Appeals), the assessee gave details of the service profile and services rendered by all three persons. According to him, Shri Sidharth Lulla was a graduate with vast experience, working as a whole-time director of the assessee-company. Shri Manohar Lulla was explained to be involved in this industry since 1994 and doing execution of contract work, negotiations and operations. Vis-a-vis Smt. Padmini Lulla, explanation was that she was attending clients meetings, contract negotiation, etc. The assessee also furnished details of commission and incentives paid to various persons who were not falli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... study of similar payments made by the assessee to other persons, before coming to a conclusion that such payments were excessive or unreasonable. The learned Commissioner of Income-tax (Appeals) after noting that the assessee was paying higher or comparable amounts to persons who were having less experience was of the opinion that section 40A(2)(b) of the Act is not applicable. Thus there was sufficient reason for the learned Commissioner of Income-tax (Appeals) to have deleted the disallowances. The Assessing Officer being unable to establish the excessiveness or unreasonableness of the payments made by the assessee to the above persons, when compared with the fair market value of the services rendered by them, the disallowances made were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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