TMI Blog2009 (3) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Respondent. JUDGMENT JUSTICE D. A. MEHTA - On 18.10.2000, while admitting the appeal, following two questions have been formulated by this Court: Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that the amount of Rs.25,880 paid to M/s. Corona Machine Works could be disallowed under sec. 40A(2) of the Income Tax Act without giving a finding on the market value of the services received by the assessee? Whether, in the facts and circumstances of the case, the ITAT was right in law in holding that the amount of Rs.67,500/- paid to M/s.P.K. Gujarati Co., Chartered Accountant could be covered u/s 40A(12) of the Act? The Assessment Year in question is 1988 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epairs. Therefore, the payment made for repairs and maintenance was excessive considering the legitimate needs of the business. The assessee carried the matter in appeal before Commissioner (Appeals), but failed. In the second appeal before the Tribunal also the assessee did not succeed on this count. The second disallowance has been made by the Assessing Officer under Section 40A(12) of the Act in relation to legal and professional charges out of which a sum of Rs.87,679.50 has been disallowed after granting deduction of Rs.10,000/- as provided in the section. In relation to this issue also the assessee did not succeed in appeals filed before Commissioner (Appeals) and the Tribunal. Learned advocate appearing for the appellant-assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied on the findings recorded concurrently by Commissioner (Appeals) and the Tribunal and submitted that the disallowance had been correctly made. In relation to the disallowance under the provisions of Section 40A(2) of the Act, a plain reading of the provision reveals that where an assessee incurs any expenditure in respect of which payment is required to be made or has been made to any person referred to in clause (b) of Section 40A(2) of the Act and the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable having regard to-(a) fair market value of the goods, services or facilities for which the payment is made; OR (b) the legitimate needs of the business of the assessee; OR (c) the benefits derived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he services rendered in connection with maintenance of machinery. Commissioner (Appeals), therefore, held that in absence of any such evidence it was difficult to believe that the connected concern was rendering sufficient services commensurate with the lump-sup payment of Rs.54,000/- in addition to the regular repairing charges paid on job work basis. These findings have been confirmed by the Tribunal. In light of the aforesaid position in law and the findings recorded by Commissioner (Appeals) and the Assessing Officer, it is not possible to hold that there is any legal infirmity in the impugned order of the Tribunal so as to warrant interference. In relation to second ground the Assessing Officer has recorded that no explanation was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials from the seized papers was primarily for income tax proceedings and, therefore, the entire fee is covered under Section 40A(12) of the Act. This finding has been confirmed by the Tribunal. Provisions of Section 40A(12) of the Act specifically, in the opening portion, provide that no deduction shall be allowed in excess of Rs.10,000/- for any assessment year in respect of any expenditure incurred by an assessee by way of fees or other remuneration paid to any person for services in connection with any proceedings under the Act before any income-tax authority. It is not necessary to refer to the other part of the provisions. The use of the phrase "any proceedings under the Act" indicate that the applicability of the section is v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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