TaxTMI 
TaxTMI 
2019 (4) TMI 290
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....pressed, in view of the fact that the appeal is taken-up for hearing. ITA No.120/2018 Present appeal under Section 260A of the Income Tax Act, 1961 ('Act', for short) by Sigma Research & Consultancy Pvt. Ltd. (appellant-assessee, for short) relates to assessment year 2011-2012 and arises from the order dated 29.08.2017 passed by the Income Tax Appellate Tribunal ('Tribunal', for short). 2. The appeal was admitted for hearing vide order dated 02.02.2018 on the following substantial question of law:- "Whether the ITAT fell into error in upholding the disallowance under Section 40A (2) in the facts and circumstances of the present case." 3. Disallowance referred to the above question relates to payments made by the appella....
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....y to Shri Tilak Mukherji and Dr. U.V. Somayajulu to the tune of Rs. 14,32,391/-, Rs. 27,81,720/- & Rs. 73,57,484 in FY 2008-09, 2009-10 & 2010-11 respectively and fees paid to Shri Arindam Ganguly to the tune of Rs.l,82,500/-, Rs. 4,05,000/- & Rs. 13,76,000/- in FY 2008-09, 2009-10 & 2010-11 respectively which is an increase in the range of 250% to 300% without explaining that if there was a change in the nature of their work or they have put more time while rendering services to the assessee company or they have improved their qualification or expertise in one year. Because when Shri Tilak Mukherji and Dr. U.V. Somayajulu were getting salary of Rs. 27,81,720/- in FY 2009-10 suddenly their salary enhanced to Rs. 73,57,484 in FY 2010-11. 9....
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....ies." Section 40A(2)(a) applies to transactions between related persons specified in clause (b) to Section 40A(2) of the Act. Assessing Officer in exercise of power vested vide Section 40A(2)(a) can examine such transactions having regard to the fair market value of the goods, services or facilities for which payment is made; or legitimate needs of the business or profession of the assessee; or benefit derived by or accruing to the assessee to disallow excessive or unreasonable expenditure. This power to disallow under Section 40A(2)(a) can be exercised by the Assessing Officer notwithstanding anything contained in any other provision including Section 37 of the Act. As the facts relating to reasonableness and fair market value of the expe....
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.... be considered judiciously, dispassionately and without any bias from the view-point of a reasonable and honest person in business. Aforesaid ratio elucidated relies and refers to several earlier judgments including CIT v. Edward Keventer (P.) Ltd. [1972] 86 ITR 370 (Cal) which was affirmed by the Supreme Court in CIT v. Edward Keventer (P.) Ltd. [1978] 115 ITR 149 (SC) and CIT v. Shatrunjay Diamonds [2003] 261 ITR 258 (Bom). Similar view has been expressed by the Delhi High Court in Sigma Corpn. India Ltd. v. Dy. CIT [IT Appeal No. 795 of 2016, dated 15-2-2017]. 6. In the present case, the Tribunal has failed to apply test of prudent and reasonable business person. The disallowance was solely predicated on percentage of increase in the pa....
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....ogy & Science, Pilani. Tilak Mukherji had twenty years experience in handling various social/developmental marketing and communication research, public opinion polling and retail audits in India, Bangladesh and Sri Lanka. He was a member of the Consultative Committee, Department of Adult Education, Indian Association for Study of Population, etc. He was co-author of many publications with Dr. U.V. Somayajulu and had personally conducted and supervised studies for UNICEF, World Bank, Future Group, the Urban Institute (USA) and some universities. Tilak Mukherji was also earlier working with M/s. TNS India Pvt. Ltd. and had drawn salary of Rs. 42,99,530/- per annum as per the TDS certificate. (v) Arindam Ganguly, an alumnus of St. Xavier'....
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.... working with a third party. These were arms-length payments market driven and for market value. This was the best evidence. Educational qualifications and work experience of the directors were ignored as irrelevant because of the low salary/remuneration benevolently and magnanimously accepted by them in the earlier years. Professional and fair conduct in earlier years should have been appreciated and not frowned to be treated as a ground to disallow fair and genuine payment under Section 40A(2)(a) read with Clause (b) of the Act. A provision which requires a just and fair approach by the assessee must be interpreted and applied in a just and fair manner by the authorities. 8. The Commissioner of Income Tax (Appeals) had also pointed out t....