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TMI Blog2020 (3) TMI 467X X X X Extracts X X X X X X X X Extracts X X X X ..... tor / masonary work paid - HELD THAT:- In the present case, it is seen that AO has not done any exercise to determine as to whether the amount paid by the Assessee to the aforesaid two ladies were excessive or unreasonable by comparing the prevalent market rates. He has not arrived at an exact figure of excessive payment by comparing the amount paid by the assessee with the market rates for similar services but he has rather proceeded to disallow the expenses @ 5% on adhoc basis. We are of the view that in the present case, no case has been made out for disallowance u/s 40A(2)(b) of the Act and therefore no disallowance can be made u/s 40A(2)(b) of the Act. We therefore delete the disallowance made by the AO . Thus the ground of the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2013-14. The learned CIT(A)-4, Pune erred in not appreciating that investment in partnership firm was as a strategic investment not for earning any exempt income. 2. Alternatively and without prejudice to Ground No.1, the learned CIT(A)- 4, Pune erred in law and on facts in affirming the disallowance u/s 14A of the ITA, 1961 r.w.r. 8D of the ITR, 1962; amounting to ₹ 14,41,438/- without appreciating that, appellant had sufficient own funds of about ₹ 12.87 Crs. at the yearend as against investment of ₹ 5.33 Crs. during the year. 3. The learned CIT(A)-4, Pune erred in law and on facts in affirming the ad-hoc disallowance u/s 40A(2)(b) of the ITA, 1961 amounting to ₹ 6,66,708/- (being 5% of ₹ 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O, assessee carried the matter before Ld.CIT(A), who upheld the order of AO. Aggrieved by the order of Ld.CIT(A), assessee is now before us. 5. Before us, Ld.A.R. reiterated the submissions made before AO and Ld.CIT(A) and further submitted that no exempt income has been earned by the assessee and in such a situation, no disallowance u/s 14A of the Act is called for and for the aforesaid proposition, he relied on the decision of Hon ble Apex Court in the case of CIT Vs. Chettinad Logistics (P) Ltd., reported in (2018) 95 taxmann.com 250 SC. In support of his contention of having not earned any exempt income, he pointed to the assessee s submissions in the order of lower authorities. Ld. D.R. on the other hand, supported the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. 9.1. During the course of assessment proceedings, AO noticed that assessee had claimed expenses towards RCC Labour contractor / masonary work paid to Mrs. Shubangi Asabe amounting to ₹ 68,34,450/- and ₹ 64,49,726/- to Mrs. Jyothi Asabe. AO noted that the payments fall under the category of Sec.40A(2)(b) of the Act. The assessee was asked to explain as to why the payments not be considered to be colourable device and added to the income, to which assessee inter-alia submitted that the payments have been made to the aforesaid ladies are not at a higher rate than what is paid to the other outside parties and the payments are made for the purpose of business. The submission of the assessee was found not acceptable to the AO. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and AO has disallowed 5% of the expenses. We find that before lower authorities, it was assesses s contention that the payments that have been made are as per the comparable rate paid to outside parties and are not excessive. 12. Perusal of provisions of s.40A(2)(b) of the Act shows 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 cl. (b) of section 40A(2) and the AO 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 by or accruing t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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