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TMI Blog2013 (12) TMI 1480X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the AO to make disallowance under section 40A(2)(b) of the Act. We are in complete agreement with the view taken by the ITAT and the observations made by the learned ITAT while deleting disallowances made by the AO under section 40A(2) (b) of the Act on motor bus rent. No error has been committed by the learned ITAT which calls for interference of this Court. - Decided in favour of assessee. Disallowance made under section 40(a)(ia) i.e. with respect to retrospective operation of the amendment in Section 40(a)(ia) by Finance Act, 2010 - Held that:- The said question is squarely covered against the revenue by decision of the Division Bench of this Court in Commissioner of Income Tax -Ahmedabad IV Versus Omprakash R. Chaudhary [2015 (2) TMI 150 - GUJARAT HIGH COURT] wherein held that the amendment in section 40(a)(ia) of the Act by Finance Act, 2010 would apply retro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o produce any comparative prices to justify payments made to the related concerns? (ii) Whether ITAT has erred in law by not appreciating the fact that the assessee failed to reconcile the different in payments as per tax audit report to that, submitted during the assessment proceedings and also ignoring the fact that assessee failed to produce any comparative prices to justify payments made to the related concerns? 4. For the sake of convenience facts of Tax Appeal No.1065 of 2013 are narrated as under :- 4.1 The assessee, who is doing business in the name and style of M/s. Ashok Travels and is dealing in travels business on contract basis, filed return of income for A.Y. declaring total income at ₹ 9,73,150/- along with the tax audit report. Thereafter the case was selected for scrutiny and statutory notices under section 143(2) and under section 143(1) of the I.T. Act along with detailed questionnaire were issued. The assessee claimed disallowance of payments made under section 40A(2)(b) towards higher charges during the year under consideration : Sr. No. Name of Persons Amount (Rs.) 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made by cheques and TDS is also deducted at source. It was submitted that payments are reasonable and based on commercial consideration. The assessee also submitted that rates are normal rate of transportation prevailing at that time and such payments were made solely on business consideration. 4.3 The AO was not satisfied with the reply given by the assessee and made addition of ₹ 15,49,163/- to the total income of the assessee by disallowing 5% of the total payment made by observing that the assessee has not produced any comparative market prices and no documents have been produced before him to prove reasonableness of the payment. The AO also observed that the assessee has not submitted any details to substantiate the payment made to persons specified under section 40A(2)(b) of the I.T. Act. The AO also disallowed total higher charges amounting to ₹ 68,83,091/- under section 40(a)(ia) of the I.T Act by observing that payments of the said TDS though deducted by the assessee, the same was not deposited with the department within a specified time. However, deposited before the due date of filing of the return and therefore, directed to make addition of the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned counsel appearing on behalf of the revenue and perused the impugned common judgement and order passed by the learned tribunal. 7. Mr. K.M. Parikh, learned counsel appearing on behalf of the revenue has vehemently submitted that the learned tribunal has materially erred in deleting disallowance of ₹ 15,49,160/- made under section 40A(2)(b) of the Act out of total payment of the bus rent (for A.Y. 2005-06 and deleting disallowance of ₹ 14,97,668 under section 40A(2)(b) of the Act out of total payment of bus rent (A.Y. 2006-07). It is submitted by Mr. Parikh, learned counsel appearing on behalf of the revenue that the learned tribunal has materially erred in shifting the onus upon the department / Assessing Officer to prove that the expenditure in respect of his payment made and of which disallowance is claimed, is excessive or unreasonable having regard to the fair market value. It is submitted that the impugned judgement and order passed by the learned ITAT is just contrary to the provisions of section 40A(2)(b) of the I.T. Act. 7.1. Mr. K.M. Parikh, learned counsel appearing on behalf of the revenue has vehemently submitted that the learned tribunal has mis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 the AO to make disallowance under section 40A(2)(b) of the Act. While deleting disallowance made by the AO under section 40A(2)(b) of the Act, the learned ITAT has observed and held in para 7 as under :- 7. It is plain on principle that, so far as disallowance under Section 40A(2) for payment being excessive or unreasonable can only be made when the payment is made to the specified persons under clause 40A(2)(b) and the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market price of the goods, services or facilities for which the payment is made . The opinion of the Assessing Officer for the expenditure being excessive or unreasonable is to be formed vis-a-vis fair market price of such goods services or facilities. It is thus sine qua non for making a disallowance under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 40(a)(ia) of the Act i.e. with respect to retrospective operation of the amendment in Section 40(a)(ia) by Finance Act, 2010 is concerned, the said question is squarely covered against the revenue by decision of the Division Bench of this Court in Tax Appeal No.412 of 2013 and allied matters. The Division Bench of this Court in Tax Appeal No.412 of 2013 and allied matters, has held that the amendment in section 40(a)(ia) of the Act by Finance Act, 2010 would apply retrospectively. 8.2 Mr. Parikh, learned counsel appearing on behalf of the revenue has fairly conceded that the aforesaid issue is squarely covered against the revenue by the Division Bench of this Court in Tax Appeal No.412 of 2013 and allied matters. 8.3 Now, so far as disallowance made under section 40(a)(ia) with respect to AY 2005-06 is concerned, it appears that as such the assessee preferred appeal and claimed that the said expenditure be allowed in the next assessment year which has been accepted by the learned ITAT. Therefore, as such the question with respect to disallowance under section 40(a)(ia) would not arise in Tax Appeal No.1065 of 2013 for AY 2005-06. 9. In view of the above and for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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