Law:

Section:

Section 40A(2) of the Income-tax Act, 1961 - Business disallowance - Excessive or unreasonable payments - Assessment year 2000-01 - Assessee was a company jointly promoted by Samsung Electronics Company (SEC), Korea and its Indian associates - SEC was registered owner of brand name and logo 'Samsung' and produced consumer durable and other white goods like television, washing machine, refrigerator, etc. - It had 74 per cent of equity in assessee-company and held control and supervision of functioning of company - It had granted a non-exclusive and non-transferable license to assessee to use technical information to produce products at facility of assessee-company in India for sale in India as well as international markets - For manufacturing of various products, assessee-company had been importing raw material from its parent company, i.e., SEC - Keeping in view controlling hand of assessee-company, Assessing Officer was of opinion that SEC was a person specified under section 40A(2)(b) and price on which raw material was imported was an exclusive price paid by assessee to its parent company - He, therefore, disallowed 2 per cent of aforesaid purchase price and made addition to that extent in income of assessee - On appeal, assessee produced orders of Commissioner of Customs wherein categorical finding had been recorded by custom authorities that prices at which goods were imported were reasonable and not excessive and relationship of SEC, Korea with assessee had not influenced said price - Commissioner (Appeals) deleted addition accepting assessee's explanation - Tribunal upheld order of Commissioner (Appeals) - Whether in view of specific finding of fact recorded by Commissioner (Appeals) and Tribunal that raw materials were imported by assessee from SEC, Korea at reasonable/competent rates which were neither excessive nor unreasonable, section 40A(2)(b) would not apply to instant case - Held, yes FACTS The assessee was a company jointly promoted by Samsung Electronics Company (SEC), Korea and its Indian associates. SEC was registered owner of the brand name and logo 'Samsung' and produced consumer durable and other white goods like television, washing…

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