Assessee, engaged in land development, paid consultancy charges of 1,57,00,000 to Mangala Properties Pvt. Ltd. (MPPL), a related party, for services related to land sale. AO disallowed
50,75,784, holding the payment excessive without providing comparable instances or fair market value. AO failed to discharge the initial onus under section 40A(2)(b) by not demonstrating excessiveness through comparable cases or fair market value analysis. AO must first establish unreasonableness, which was not done. Therefore, disallowance was deleted. (AY. 2009 10 ) (ITA No. 1213/Ahd/2024, dt. 23/06/2025)
Virbala Kiritkumar Patel v. Dy. CIT (Ahd.)(Trib.)(UR)
S. 40A(2) : Expenses or payments not deductible-Excessive or unreasonable-Consultancy charges paid to related party-No comparable instances cited by AO-Disallowance is deleted. [S. 40A(2)(b)]
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