Law:

Section:

Section 40A(2) of the Income-tax Act, 1961 - Business disallowance - Excessive or unseasonable payments Where Assessing Officer, finding that purchase price of blades and gear boxes from sister concern of assessee was inflated when compared to that quoted by third parties, disallowed an amount on account of such inflation under section 40A(2), it was for assessee to discharge burden and satisfy revenue that expenditure incurred by it in connection with purchase of blades and gear boxes from its sister concern, was not excessive or unreasonable by producing relevant records from sister concern as to sale of similar goods during relevant period to any third party [A.Y. 1993-94] What section 40A(2)(a) contemplates is that there should be some material available before the Assessing Officer for invoking section 40A(2)(a) to initiate action to disallow or refuse to deduct the excessive or unreasonable expenditure mentioned thereunder. But, at the same time, before taking any final decision by invoking the power under section 40A(2)(a), either allowing or disallowing such expenditure incurred as excessive or unreasonable, such decision of the Assessing Officer should be based on reasons well-founded, which is judiciously acceptable and in which event the finding or decision arrived at stating that the expenditure is excessive or unreasonable and the same cannot be allowed or deducted, certainly would become purely a question of fact with which the Court cannot interfere. Where the Assessing Officer, finding that the purchase price of blades and gear boxes from the sister concern of the assessee was inflated when compared to that quoted by the third parties, disallowed an amount on account of such inflation under section 40A(2), it was for the assessee to discharge burden and satisfy the revenue that the expenditure incurred by it in connection with purchase of blades and gear boxes from its sister concern, was not excessive or unreasonable by producing relevant records from the sister concern as to the sale of similar goods during the relevant period to any third party. Mrs. Pushya Sitaraman for the Appellant. R. Sivaraman for the Respondent.. JUDGMENT P.D.…

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