TMI Blog2016 (9) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... togi, Adv. For The Respondent : None (Adjournment Application rejected). ORDER This is an appeal filed by the Assessee directed against the order of the Ld.CIT(A)-15, New Delhi dated 27.3.2015 pertaining to the Assessment Year (A.Y.) 2011-12 on the following sole ground. That the disallowance of ₹ 15,00,000/- being the 50% of salary paid to Mrs. Kiran Qureshi, Director u/s 40A(2)(b) of the Income Tax Act, 1961 as made by the AO and sustained by CIT(A) is arbitrary, unjust and at any rate very excessive. 2. No person is present in the Court on behalf of the Revenue. The Revenue has filed an application for adjournment of all the cases which are on board today on the ground that Sr.D.R. is not available . I am informed that, for the entire week, the department would be seeking adjournments in all the cases posted before this SMC Bench on the same ground. Under the circumstances, as the Bench cannot be allowed to collapse, I reject some of these applications filed by the Revenue for adjournments and dispose of the case ex parte qua the Revenue on merits. 3. Heard Shri M.P.Rastogi, Ld.Counsel for the assessee. 4. I find that the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the new provision is applicable to all categories of expenditure incurred in businesses and professions, including expenditure on purchase of raw materials, stores or goods, salaries to employees and also other expenditure on professional services, or by way of brokerage, commission, interest, etc. Where payment for any expenditure is found to have been made to a relative or associate concern falling within the specified categories, it will be necessary for the Incometax Officer to scrutinize the reasonableness of the expenditure with reference to the criteria mentioned in the section. The Income-tax Officer is expected to exercise his judgment in a reasonable and fair manner. It should be borne in mind that the provision is 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 bona fide cases. (Emphasis ours). From this Circular of the CBDT, it is clear that the provision was made specifically to check tax avoidance. Thus when there is no tax avoidance, the applicability of this section would not be appropriate. 12.5. The Hon ble Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue in the present appeals. We find that the following facts were established before the Tribunal and the same have been accepted by the Revenue even before us. (i) That the assessee apart from paying handling charges @9 1/2 per cent to its sister concern, have paid handling charges at the same rate to other agents viz., M/s A.K.Travels, M/s Om Travels and M/s Jet Age Travels. (ii) For asst. yrs. 1986-87 and 1987-88 the assessee had paid the handling charges @ 10 per cent to the sister concern of the assessee and such charges paid were considered to be reasonable by the appellant. (iii) For asst.yrs. 1989-90 and 1990-91 the assessee had reduced the payment of handling charges to 9 1/2 per cent to its sister concern. The AO has considered the payment of commission to the sister concern in the asst. yr. 1989-90 and allowed the claim after due scrutiny. For asst. yr. 1990-91 also the claim of the assessee @9 1/2 per cent has been allowed though the same has not been dealt with by the AO specifically in the order. (iv) For asst.yrs. 1993-94 and 1994-95 the assessment has been made by the AO under section 143(3) and handling charges paid to the sister conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the expenditure is excessive or unreasonable excess, excess or unreasonable portion of the expenditure is to be disallowed. We have also kept in mind the provisions of sub Section 2 (b) of Section 40-A of the Act as per which the burden is upon the assessee to establish that the price paid by it is not excessive or unreasonable as in this case Mr.SushilPandit was holding substantial portion of share namely 65 percent in the assessee company . When we apply the aforesaid principle in the facts of this case, we find that the assessee has been able to discharge the burden that the price paid by it to Mr. SushilPandit is not excessive or unreasonable. 12. It will also be useful to refer to the judgment of Allahabad High Court in Abbas Wazir (P.) Ltd. v. CIT [2004] 265 ITR 77/[2003] 133 Taxman 702 wherein the High Court held that even while invoking the provisions of section 40A(2) of the Act, the reasonableness of the expenditure for the purpose of business has to be judged from the point of view of a businessman and not that of the revenue. The approach has to be that of a prudent businessman and the reasonableness must be looked into from businessman point of view. Simil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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