TMI Blog2017 (3) TMI 980X X X X Extracts X X X X X X X X Extracts X X X X ..... orld where consultants perform different tasks, not only for one concern but for several business entities. A common example would be that of an accountant or a legal professional, who necessarily has to multi task and are recipients or retainers of payments from many concerns having regard to their special expertise. Likewise in other fields i.e. journalism, the medical profession etc. more than one entity may engage or retain a single professional on the basis of his experience, learning and expertise, unless there is a deeper scrutiny that involves comparable analysis of like situations (a highly difficult task), additions made under Section 40A(2) would be suspect.- Decided in favour of assessee. - ITA 795/2016 & CM No. 41578/2016 - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 961 (hereinafter to be referred as the Act ) discussed the submissions of the parties and then on the basis of the analysis of previous Tribunals rulings as well as that of the High Courts, concluded that in the circumstances it could not be said that the expenditure was excessive. The CIT (A) s reasoning is as follows:- Ground No.I :- is in respect of disallowance of 50% of remuneration amounting to ₹ 24 lakhs u/s 40A(2)(b). The Payment was made to Sh. Preetpal Singh a related party. Sh Preetpal Singh was a Bachelor of Engineering from USA and MBA in Marketing and Finance. Before discussing the matter further, I shall quote Section 40A(2)(a):- ''Where the assessee incurs any expenditure in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on your qualifications and experience we can get you an yearly package of around ₹ 48 to ₹ 60 lakhs alongwith perks. If you agree on this package please let us know to enable us to discuss your credentials with top management of few companies. Please note though your base office may be NCR, Delhi but your work area may extend to USA. Europe and certain parts of China but not to Russia, Australia and Middle East as agreed earlier. The appellant has also given reason to justify the benefit to the business from employing Sh. Preetpal Singh. The appellant states that Sh Preetpal Singh was a highly qualified person and was engaged to establish the software process infrastructure and boost the market reach of the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1).................... (2) (a) Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of this sub-section, and the Assessing Officer is of opinion that such expenditure is excessive or unreasonable having regard to the 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 or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction. 8. In Hive Communication s case (supra), this Court took note of the CBDT Circular dated 06.07.19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ..........It is not for the Assessing Officer to dictate what the business needs of the company should be and he is only to judge the legitimacy of the business needs of the company from the point of view of a prudent businessman. The benefit derived or accruing to the company must also be considered from the angle of a prudent businessman. The term benefit to a company in relation to its business, it must be remembered, has a very wide connotation and may not necessarily be capable of being accurately measured in terms of pound, shillings and pence in all cases. Both these aspects have to be considered judiciously, dispassionately without any bias of any kind from the view-point of a reasonable and honest person in business. 9. Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the above position, this Court is of the opinion that the ITAT in the present case overlooked the materials that were to be taken into account, i.e. reasonableness of the expenditure having regard to the prudent business practice from a fair and reasonable point of view. The AO s order nowhere seeks to benchmark the expertise of Mr. Preetpal Singh with any other consultant and proceeds on an assumption that he could not have performed multiple tasks for more than one concern. In this Court s opinion, such a stereotyped notion can hardly be justified in today s business world where consultants perform different tasks, not only for one concern but for several business entities. A common example would be that of an accountant or a l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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