9911796707
TMI Blog2024 (8) TMI 342X X X X Extracts X X X X X X X X Extracts X X X X ..... market price of the goods or services so procured by the assessee. The Hon ble High Court of Madras in the case of Computer Graphics Pvt. Ltd [ 2006 (2) TMI 117 - MADRAS HIGH COURT] held that the reasonableness of the expenditure for the purpose of business had to be adjudged from the view point of a businessman and not that of the Revenue while invoking Section 40A (2). Unless there is proof of excessive / unreasonable payment, no disallowance could be made u/s 40A (2) of the Act. During this year, the project of the assessee has started generating revenues and the payee director has been involved in day to day affairs of the assessee-company which quite justify the increased payment in this year. The payment so made is stated to be in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance of salary to directors u/s 40A (2)(b). Having heard rival submissions and upon perusal of case records, the same is adjudicated as under. Proceedings before lower authorities 2.1 The Ld. AO proposed disallowance of Rs.73.78 Lacs out of consultancy charges paid to one of the directors. The assessee submitted that it paid consultancy charges of Rs. 93.78 Lacs to one of the directors, Shri. S. Sridharan who acted as resident director. The other two directors were non-residents. Shri S. Sridharan had several years of experience in related business and engaged in day-to-day business and management and development of the assessee company. The said payment was justified considering the expertise and experience of the said director and it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee for its business purposes unless it is shown that the said expenditure was excessive having regard to the market price of the goods or services so procured by the assessee. The Hon ble High Court of Madras in the case of Computer Graphics Pvt. Ltd. (155 Taxman 612) held that the reasonableness of the expenditure for the purpose of business had to be adjudged from the view point of a businessman and not that of the Revenue while invoking Section 40A (2). Unless there is proof of excessive / unreasonable payment, no disallowance could be made u/s 40A (2) of the Act. 4. From the financial statements as placed on record, it could very well be seen that the assessee has generated revenue from operations for Rs. 629.29 Lacs in this year wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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