YETURU BIO TECH LIMITED, HYDERABAD,HYDERABAD vs. DCIT, CRICLE-3(3), HYDERABAD, HYDERABAD

We notice at the outset that the assessee’s identical sole substantive ground raised in all these appeals challenges correctness of both the lower authorities’ action invoking sec.40A(2) disallowance(s) of Rs.64,99,316/-, 98,94,950/-, 1,77,94,075/- and 71,05,647/- and 53,23,184/-; Assessment year wise respectively pertaining to its purchase price(s) paid to the related parties/directors involving “aloe vera leaves” for the purpose of manufacturing aloe vera products in various segments.

We have given our thoughtful consideration to rival contentions against and in support of the impugned disallowance. A perusal of these case file suggests that the assessee had claimed the corresponding purchase price(s) @ Rs.10/- per kg whereas the learned lower authorities; and more particularly the CIT(A), has taken it @ Rs.5/- per kg in the former common order and @ Rs.6/- in the latter ones (supra); respectively.

Ld.DR invited our attention to CIT(A)’s order in para 6.7 page 10 that the Assessing Officer had duly found a comparable case i.e. M/s Biomax Life Sciences Ltd. having purchased aloe vera leaves at an average price of Rs. 3.50 paise per kg in Ongole, Ananthapur, Chowtuppal and Vinukonda of Guntur district ( in the undivided state of Andhra Pradesh). His case therefore is that the assessee has already been granted sufficient relief in estimating aloe vera rates (supra) respectively. to 1504/H/16 & group Yeturu Bio Tech Ltd., Hyd.

We have given our thoughtful consideration to rival contentions and find no reason to express our concurrence with either parties stand in entirety. There is hardly any dispute that sec. 40A(2) is applicable in case of a revenue expenditure claim involving payments made to related parties; if it is found that the same is either excessive as compared to market rate or is unreasonable; as the case may be. The CBDT’s Circular issued way back on 6.7.1968 issued directions to the field authorities long back that the impugned statutory provision does not come into play if both the payer as well as the payee are assessed at the same rate. This is followed by various judicial precedents Pr.CIT vs Gujarat Gas Finance Services Ltd. (2015) 233 taxmann.com 532 (Guj.) and also CIT vs Sarjan Realities Ltd. (2014) 50 taxmann.com 52 (Guj) holding that just because the assessee has paid a particular price to a third party does not itself form the market rate of the corresponding goods or services; as the case may be.