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TMI Blog2015 (1) TMI 524X X X X Extracts X X X X X X X X Extracts X X X X ..... paid were in excess of the fair market charges and that the authorities below disallowed the labour charges without ascertaining the fair market value of the same. As the Tribunal did not appreciate corresponding receipts were already shown, and therefore, same is also answered in favour of the assessee - Decided in favour of assessee. - TAX APPEAL NO. 156 of 2003 - - - Dated:- 15-12-2014 - MR. KS JHAVERI AND MR. K.J.THAKER, JJ. FOR THE APPELLANT : MR SN SOPARKAR, SR. ADVOCATE, with MRS SWATI SOPARKAR, ADVOCATE FOR THE RESPONDENT : MR SUDHIR M MEHTA, ADVOCATE JUDGEMENT Per: K S Jhaveri: 1. This is an appeal by the appellant-assessee, seeking to assail the order of the learned ITAT, Ahmedabad (for short, ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the appellant assessee could not have been disallowed as the appellant had already shown corresponding receipts as and by way of job charges for polishing the same diamonds and therefore it cannot be presumed that those diamonds got polished without incurring any labour charges at all? 4. At the outset, Mr. Soparkar, learned Advocate for the appellant, invited our attention to a recent decision of this Court in Tax Appeal No. 1058 of 2006, Dated: 26.11.2014, in the case of TAKTAWALA GLASS IND. PVT. LTD. VS. ACIT , wherein, this Court, under similar circumstances, answered the question of law raised, therein, in favour of the assessee and against the Revenue. While disposing of the Tax Appeal No. 1058 of 2006, this Court placed re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned CIT(A) also observed that no comparative prices for similar transport services was cited by the AO and therefore, was not justified in making ad hoc disallowance of 5% under section 40A(2)(b) of the Act and therefore, the CIT(A) as such rightly deleted the disallowances made under section 40A(2)(b) of the Act. Considering the provisions of Section 40A(2)(b) of the Act and the Evidence Act, if the AO was of the opinion that the payment for which disallowance is claimed, is excessive or unreasonable. In that case, it was for the AO to assess fair market price and give comparative instances for payment for similar transport service. In absence of such comparative cases brought on record, as rightly observed by the ITAT it was not open for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deletion of disallowance must stand confirmed. There is, however, one more reason for doing so. As evident from a plain reading of the assessment order, the Assessing Officer, had called upon the assessee to demonstrate that the payment made by the assessee to the specified persons is not unreasonable or excessive, and it is thus failure of the assessee which has resulted in disallowance under section 40A(2). However, proving a negative, as the assessee has been called upon to do in this case, is an impossible onus to perform. In any event, this onus is on the Assessing Officer and the AO has failed to discharge the said onus. For this reason also, the disallowance is unsustainable in law. As regards the discrepancy in the figures of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was rightly disallowed under Section 40A(2) (b) of the Act. However, it is required to be noted that except aforesaid there was no basis for the AO to come to the conclusion that amount of interest paid at the rate of 12% would relate to the concerned parties was otherwise excessive and/or unreasonable. It is not the case on behalf of the revenue that considering the market rate the aforesaid interest charged at the rate of 12% can be said to be excessive and / or unreasonable. Under the circumstances, solely because the assessee for whatever reasons/consideration charged the interest at different rates by that itself cannot be a ground to come to the conclusion that charging of interest at higher rate than charged from other party was exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly confirmed by the CIT(A) and the Tribunal. 7. Mr. Mehta, learned Advocate for the Respondent-Revenue, does not dispute the aforesaid position of law. 8. So far as firs question is concerned, the factual scenario also permits us to held that provisions of Section 40A(2)(b) will permit the assessee allowance of labour charges paid to the female relatives of the Director of the assessee- Company and that on facts and seeing that the law declared is in favour of the assessee, the disallowance could not have been made in the facts of the case. We held that the interpretation of Section 40A(2)(b) would not permit disallowance when there was no finding the effect that the labour charges paid were in excess of the fair market charges and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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