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Section 40A(2) of the Income-tax Act, 1961 - Business disallowance - Excessive or unreasonable payments - Assessment year 1975-76 - Assessing Officer made addition as excessive price paid by assessee to another company in purchase of certain items - Commissioner (Appeals) and Tribunal as a matter of fact found that expenditure incurred on purchase was neither excessive nor unreasonable, having regard to fair market value of item concerned - Whether since both formed their opinion after thorough examination of all factors, and facts as found by them did warrant conclusion they reached, it had to be held that Tribunal had valid materials to hold that provisions of section 40A(2)(a) could not apply in regard to purchase made by assessee - Held, yes T. Ravikumar for the Applicant. P.P.S. Janarthana Raja for the Respondent. JUDGMENT R. Jayasimha Babu, J. - Section 40A(2)(a) of the Income-tax Act, 1961 ('the Act') reads thus : "(2)(a) Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of this sub-section, and the Assessing Officer is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction;" The completed assessment of the assessee, a partnership firm carrying on manufacturing and marketing of goods wholesale, was reopened by the ITO for the assessment year 1975-76 to consider the applicability of section 40A(2)(a) in respect of purchase of gripe-water made by it from Tamil Nadu Printers (P.) Ltd., which company is owned by…

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