TaxTMI 
TaxTMI 
2009 (3) TMI 61
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....ving a finding on the market value of the services received by the assessee? Whether, in the facts and circumstances of the case, the ITAT was right in law in holding that the amount of Rs.67,500/- paid to M/s.P.K. Gujarati & Co., Chartered Accountant could be covered u/s 40A(12) of the Act? The Assessment Year in question is 1988-89. The appellant-assessee, a partnership firm, is engaged in manufacturing of Maida, Suji, Bran, etc. and in the course of its business activities it incurred certain expenses. One of the said expenses was towards payment of Rs.54,000/- to M/s. Corona Machine Works on account of professional services claimed to have been availed by the appellant @ Rs.4,500/- p.m. The second expenditure was in relation to pa....
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....ation to legal and professional charges out of which a sum of Rs.87,679.50 has been disallowed after granting deduction of Rs.10,000/- as provided in the section. In relation to this issue also the assessee did not succeed in appeals filed before Commissioner (Appeals) and the Tribunal. Learned advocate appearing for the appellant-assessee submitted in relation to the first question that provisions of Section 40A(2) of the Act require that the Assessing Officer form an opinion that an expenditure, which is considered as falling within that section, is excessive or unreasonable having regard to the fair market value of the services rendered, but in the present case, no such finding has been recorded by the Assessing Officer. It was submit....
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....referred to in clause (b) of Section 40A(2) of the Act and the Assessing Officer 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 to the assessee on receipt of such goods, services or facilities, then the Assessing Officer shall not allow as a deduction so much of the expenditure as is so considered by the Assessing Officer to be excessive or unreasonable. Therefore, it becomes apparent that the Assessing Officer is required to record a finding as to whether the expenditure is excessive or unreasonable in relation....
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....al. In light of the aforesaid position in law and the findings recorded by Commissioner (Appeals) and the Assessing Officer, it is not possible to hold that there is any legal infirmity in the impugned order of the Tribunal so as to warrant interference. In relation to second ground the Assessing Officer has recorded that no explanation was furnished as regards the nature of services rendered by M/s. P.K. Gujarati & Co. and hence, the entire amount, after granting statutory deduction, was disallowed. Before Commissioner (Appeals) the following break up was submitted by the appellant-assessee: 1) Paid to Vijaybhai L Shah for income tax assessment and stay application Rs. 12,000 2) Paid to Shri K.T. Thakore for consultation in ....