Assessee paid research and advisory fees to its sister concern being a partnership firm. AO observed that a director of the assessee had substantial interest and hence payment was made to a person as specified under section 40A(2)(b)(v) and such payments were unreasonable. CIT(A) allowed the deduction relying on agreement between the parties which showed there was no intention to avoid tax. Tribunal reversed the order of the CIT(A) and held that assessee did not produce documentary evidence to prove genuineness of the transaction. HC upheld the order of the tribunal and held that no substantial question of law arose in the present case and no merit was found in the assessee’s case. (TC A No. 1389 of 2009 dt. 08-03-2019) (AY. 2003-04)
Patterson & Co. (P.) Ltd. v. Dy. CIT (2019) 179 DTR 193 / 105 taxmann.com 150 (Mad.)(HC)
S. 40A(2) : Expenses or payments not deductible–Excessive or unreasonable–Agreement between assessee and related partnership firm in which one director had substantial interest –Expenditure disallowed in absence of genuineness of the transaction. [S.40A(2)(b)]