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TMI Blog2018 (4) TMI 1747X X X X Extracts X X X X X X X X Extracts X X X X ..... was not justified in making the addition by invoking the provisions of Section 40A(2)(b) of the Act which are applicable to the expenditure and not to the receipts and the ld. CIT(A) rightly deleted the same. - Decided in favour of assessee - ITA No. 7044/Del/2017, 7045/Del/2017, 7046/Del/2017 : Asstt. Year : 2013-14, 2014-15 - - - Dated:- 13-4-2018 - Sh. N. K. Saini, Accountant Member Assessee by: Sh. Prakash Sinha, CA Sh. Sachin Sinha, CA Revenue by: Smt. Ashima Neb, Sr. DR ORDER These three appeal by the department are directed against the common order dated 18.09.2017 of ld. CIT(A)-I, Gurgaon. 2. Since, the issue involved is common and the appeals were heard together so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .12.2010 between aforesaid parties. The leading partner M/s KEC International Ltd. was having 80% share and the remaining 20% share was with the other party. He further observed that the work contract was awarded to the assessee by the Railway Authority and the assessee further diverted its 99% contract work by simple letter dated 09.09.2010 for Champa-Jharsuguda stating therein back to back agreement to the aforesaid lead partner i.e. M/s KEC International Ltd. The AO was of the view that the assessee had shifted its real profit by making sub-contract and that the assessee was covered within the meaning of Section 40A(2)(b) of the Act. The AO made the addition of ₹ 44,29,401/- by observing as under: 7. Further, the analysi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(c) are to be initiated separately. 5. Being aggrieved the assessee carried the matter to the ld. CIT(A) who deleted the addition by observing in paras 4.5 to 4.7 of the impugned order as under: 4.5 I have carefully considered the appellant's submissions. I have also perused the facts of the case as also the order of the Hon'ble ITAT referred to above. In the order dated 21.11.2016 in the case of ITO Vs KEC ASIA (Supra), the Hon'ble ITAT held as under: On going through the mandate of the above provision, it is clear that the disallowance under this section is made in respect of the expenses incurred or payments made which are not deductible. This section has no application to income aspect of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the issue under consideration is squarely covered by the earlier orders of the ITAT in assessee s own case for the assessment years 2011-12 and 2012-13 in ITA Nos. 2326 5943/Del/2016 respectively vide respective order dated 21.11.2016 and 28.02.2017 (copies are placed at page nos. 37 to 47 of the assessee s paper book). 8. I have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted position that the AO made the addition by invoking the provisions of Section 40A(2)(b) of the Act which are applicable to the expenses considered to be excessive or unreasonable having regard to the fair market value of the goods/services or fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. 6. On going through the mandate of the above provision, it is clear that the disallowance under this section is made in respect of the expenses incurred or payments made which are not deductible. This section has no application to income aspect of the assessee. As the AO has made disallowance u/s 40A(2)(b) in respect of income which the assessee in his opinion ought to have earned rather than certain expenses incurred, I am of the considered opinion that the provisions of this section are not attracted. I, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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. 6. On going through the mandate of the above provision, it is clear that the disallowance under this section is made in respect of the expenses incurred or payments made which are not deductible. This section has no application to income aspect of the assessee. As the AO has m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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