Deductions Disallowed if Expenditure to Associated Person Exceeds Fair Market Value Under Direct Taxes Code

A deduction under the Direct Taxes Code will be disallowed if the Assessing Officer deems certain expenditures, whether capital or revenue, to be excessive or unreasonable. This applies when payments are made to an associated person and the expenditure surpasses fair market value, exceeds the legitimate needs of the business, or does not correspond with the benefits derived by the business.

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