DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1(2)(1), MUMBAI, MUMBAI vs. BLEND FINANCIAL SERVICES LIMITED, MUMBAI

PER OM PRAKASH KANT, AM

This appeal by the Revenue is directed against order dated
3rd September, 2025 passed by the Ld. Commissioner of Income
Tax (Appeals) – National Faceless Appeal Centre, Delhi [in short,
“the Ld. CIT(A)] for assessment year 2018-19 raising following grounds:
“1. Whether on the facts and circumstances of the case and in law the Ld.
CIT(A) erred in deleting disallowance u/s. 40A(2)(b) on account of excess and unreasonable remuneration paid to directors and their relatives amounting to Rs. 1,62,10,571/-?

, Ld. CIT(A) account of additional portunity of d 46A (3) of the assessee agement and l institutions, trade finance,
The assessee owledge-based namely Blend
Emirates, on a ee filed return
- after setting e filed by the notices under re issued and 143(3) of the essing Officer
,571/- under ments made to unreasonable; ion 37 of the Act on account of wholly and exclusivel
3
Aggrieved by th an appeal before th considering the sub deleted both the add in appeal before the hereinabove.
4. Before us, the record a paper book relevant documents dispute.
5. Ground No. 3
nature does not call f
6. Ground No.1 re the Assessing Officer of payments made t treated by the Assess
6.1 Facts in brief
Assessing Officer com year under considera year and observed th particularly focused o payments made to Blend Finan
ITA foreign travelling expenses tr ly incurred for business purpose he assessment order, the asses he learned CIT(A). The learned bmissions and material placed ditions. The Revenue, being aggr e Tribunal raising the ground learned counsel for the assess k comprising pages 1 to 371 co and evidences relating to the of the Revenue’s appeal bein for any specific adjudication.
lates to the deletion of disallowa r under section 40A(2)(b) of the A to directors and their relatives sing Officer as excessive and unr qua the issue in dispute a mpared the revenue and expen ation with those of the immediat hat the overall expenses had i on employee benefit expenses an directors and their relatives ncial Services Limited
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No. 8088/MUM/2025

eated as not es.
ssee preferred
CIT(A), after d on record, rieved, is now s reproduced see placed on ontaining the e expenses in ng general in ance made by Act in respect s, which were reasonable.
are that the nditure of the tely preceding increased. He nd noted that s constituted approximately 19.26
The Assessing Office expenditure of ₹3,82
expenses, professiona and their relatives.
increase in expend business receipts, th remuneration to ce excessive.
6.2 In particular, th paid to Ms. Vaibhav that she had also b salary. He further
Commerce degree a paid to her to be ex respect of the remun other related persons
6.3 On this basis
40A(2)(b) of the Act.
of the services ren expenses of financi assumed a permissi methodology, he com consideration at Rs.1
Blend Finan
ITA

6% of the total employee bene er observed that the assessee
,17,740/- towards salary/remu al fees and guest house rent pai
Though the assessee explain diture corresponded with an he Assessing Officer held tha ertain directors and related he Assessing Officer noted that vi Thakkar had increased subs been paid professional fees in observed that she held a and therefore considered the xcessive. Similar observations w neration paid to Shri Ravi Gupt s.
s, the Assessing Officer invo
Instead of determining the fair ndered, the Assessing Officer ial year 2016–17 as the ba ible annual increase of 10%. A mputed such expenses for the 1,91,49,169/- and thus the bala ncial Services Limited
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No. 8088/MUM/2025

fit expenses..
had incurred uneration, car id to directors ned that the increase in at the rise in persons was remuneration stantially and n addition to Bachelor of remuneration were made in a and certain oked section market value adopted the ase year and Applying this e year under ance expenses of Rs.1,62,10,571/- ( excessive expenditure
6.4 The assessee c learned CIT(A) and documentary evidenc by the directors, the paid, and the agreem and professional ser are reproduced as un
“7. The AO stated appellant company) remuneration (& not s submits that she is knowledgeable in f hundreds of clients t work worth crores f examined on oath by knowledgeable enou requested for that. B end luxury car Rang time vide Agreement treated presumably
Vaibhavi Thakkar a Appellant had pass prejudice to the abov
30% on her income. A Both persons are pay either side. As per company) being just was not acceptable.
appreciate that educ majority of the busin experience and skill s

Hence considering th fully justified and di rental of a high end p.m and the house
Thakkar was a 179
Mumbai at Rs.2 Ica
Clarification on Ravi

Blend Finan
ITA

(3,53,59,740 – 1,91,49,169/-) w e, which was disallowed.
challenged the said disallowanc filed detailed submissions s ce explaining the nature of serv e commercial rationale for the ments relating to car rent, gues rvices. For ready reference said nder :
in the Asst order that Vaibhavi Thakkar (C being just a B.com graduate her Profess salary) of Rs. 78 lacs was not acceptable. The s the CEO since 2007 and is well read, finance and international financial produ he world over, well-travelled person and has for Blend. Ideally, she ought to have been y the AO, if the AO was so doubtful that sh ugh to earn this kind of salary/fees and Besides Vaibhavi Thakkar gave residence and ge Rover) on rent to the appellant company f ts which are self-explanatory. Here again th the rental amounts paid by the Appellan as excessive and unreasonable, with no sed appropriate resolutions for the same ve Vaibhavi Thakkar is also paying highest
And so is the appellant.
ying taxes at highest rates. So there is no tax r the AO, Vaibhavi Thakkar (CEO of the a B.com graduate her fees remuneration of R
The AO puts more emphasis on education a cation is different from experience and sk ness, the person is paid higher salary by vi set in that industry.
he above facts the payment made to Vaibhavi isallowance made by the AO is incorrect. Th luxuary new rover range car is about Rs. 2
(used as Guest house by Blend) given by 94 sq ft Apartment at a prime location of as p.m. These are the normal rentals in th
Gupta ncial Services Limited
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No. 8088/MUM/2025

was treated as ce before the supported by vices rendered remuneration st house rent d submission
CEO of the sional fees e Appellant extremely ucts, meets s completed personally he was not d we had d car (High for the first he AO has nt Blend to basis. The e. Without slab taxes evasion on e appellant
Rs. 78 lacs and fails to kill sets. In irtue of his
Thakkar is he average to 2.5 lacs y Vaibhavi f Goregaon, he market.

He is the Managing D and founder directo passed. Without preju
Hence logic of AO in 30% tax. Hence con
Gupta is fully justifie
This is especially ke
Ravi Gupta vis-à-vis A 9. Jigar Thakkar wa
There was no compa states that as per the some extent. The App unjustified and witho

mpany got a ame Rs. 84
AY 16-17 of Salary with eck that Mr.
well read, al products, n and has e examined nt-company utions were taxes 30%.
are paying ade to Ravi s incorrect.
n Salary of 8,09,440/-.
e Appellant sallowed to d incorrect, d parties of income and es. So there uals. There ing profit of / salary /
es are also are neither
62,10,571/- and other rect and not orted with d for. The along with ts made to assessment designation, parties j) Assessment order f expenses were accep

ein all such ced by the allowed Rs n record to cessive and arties in the statement.
ary for Asst t was not a ary of Asst for AY: 18- ogical and lary on the tors salary
O has thus u/s 143(3) salary from ry could go es not even
AO fails to 16-17 and lowed and /s 40A(2)(b) a 5.7 of the t order u/s oint of view cy, and the oint of view court in the We further
Consulting it is for the uneration or ses is to be e AO.
nses which to form the able having he AO must e based on mises and market price where no was made sional fees paid by the assessee discharge of burden hence, no disallowan

ere was no the Act and Circle 4(1),
(1)(1), ACIT no ITA No.
mum/2011, t vs. J.B &
IT, Circle-5,
Teravel) Pvt ramal fund
5
(P) Ltd vs.
g salary to material on d parties is and same ssment order, g documents, ny material on cessive having rendered. The g Officer had onal ceiling of sturbing the . Accordingly, the disallowance of ₹
of ld CIT(A) is reprodu
“5.4 From the proper reply/submission of proceedings in suppo
40A(2)(b) provides th which are excessive o provided shall not repeatedly emphasiz establish excessiven
Management Servic
Brothers Pvt Ltd v that the AO must p manifestly unreasona
ITR 105 (Guj) and Taxman 440 (Rajas judged from the per industry norms, busi of Balani Infotech held that merely mak without examining t returns, is unsustain the light of above jud has made detailed relevant qualification remuneration paid is services offered in agreements for rent prudence. The AO's m ceiling and reworking comparable market d earlier assessments offer additional sup disallowance of Rs.
and is hereby deleted
6.6 We have heard the material availabl note that the disallo
40A(2)(b) of the Act
Officer is required incurred by the ass persons is excessive
Blend Finan
ITA

₹1,62,10,571/- was deleted. Rel uced as under :
r appreciation and evaluation of the findings of the appellant furnished during the ort of its contention. It is relevant to note th at expenses in respect of payments to specifi or unreasonable having regard to the service be allowed. The juri ictional hon'ble co zed that the initial onus to bring forth m ness and unreasonableness lies on the AO ces (P) Ltd vs DCIT [Delhi ITAT 2019] an vs ACIT, Surat ITA No. 552/SRT/2023), it prove the payments are above fair market, able. In Voltamp Transformers Pvt Ltd v d CIT vs Consulting Engineering Group sthan HC), it was held that reasonableness rspective of a prudent businessman having iness exigencies, and service rendered. Furth king additions based on arbitrary percentage the rationale and facts or considering prio nable. While applying the facts of the present dicial decisions/guidelines, it is seen that the submissions establishing prevailing salary ns, experience, and business roles of the dir s within a realistic band considering the com nternationally. The appellant has produ payments and professional fees bearing methodology of adhering to an arbitrary 10%
g prior years' assessments is not legally susta data or expert evidence was presented by th for AY 2016-17 and AY 2017-18 stand acc pport for the appellant's position. Accord
1,62,10,571/- under section 40A(2)(b) is n d. Therefore, these grounds of appeal are allo the rival submissions and care le on record. At the outset, it is owance has been made by inv t. Under the said provision, t to form an opinion that the sessee in respect of payments or unreasonable having regar ncial Services Limited
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No. 8088/MUM/2025

levant finding of AO and appellate hat section ied persons or facilities ourts have material to O. In Astra nd J.B. &
% increment ainable. No he AO. The cepted and dingly, the not justified owed.”
efully perused s pertinent to oking section the Assessing e expenditure s to specified rd to the fair market value of the payment is made.
6.7 In the presen undertaken any exerc services rendered by he has merely com consideration with arbitrary benchmark approach, in our c statutory requiremen
6.8 Further, the com suffers from inheren house rent, car rent the year under consid in the earlier year. C the preceding year excessiveness.
6.9 It is also a m directors and relate assessments for the the absence of any m principle of consisten
6.10 Another relevan recipients of the rem
Blend Finan
ITA e services, facilities or goods f nt case, the Assessing Offic cise to determine the fair marke y the directors and related pers mpared the expenditure of the that of the earlier year and k of a 10% annual increme considered opinion, does not nt under section 40A(2)(b).
mparison made by the Assessing nt defects. Certain payments su and professional fees were inc deration but were not part of th
Consequently, a mechanical com cannot form a valid basis for matter of record that similar ed parties had been accepted immediately preceding assessm material change in facts or circum ncy also supports the claim of th nt aspect noted by the assesse muneration were subject to tax ncial Services Limited
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No. 8088/MUM/2025

for which the cer has not et value of the sons. Instead, e year under adopted an nt. Such an t satisfy the g Officer itself uch as guest curred during e expenditure mparison with r determining payments to d in scrutiny ment years. In mstances, the he assessee.
ee is that the xation at the maximum marginal any tax avoidance o may not be determin of any tax avoidance
6.11 Significantly, th genuineness of the p
Assessing Officer h genuineness but the assumption that the any comparable ma substantiate such co
6.12 In these circum the reasoning and c
We, therefore, see n learned CIT(A) deleti appeal of Revenue is 7. The next groun foreign travelling exp
7.1 The learned De the learned CIT(A) ad the Assessing Office violating Rule 46A o the learned counsel f evidence was filed
Blend Finan
ITA rate. Thus, the payments did or loss of revenue. Though this native, it nevertheless reinforces motive.
he Assessing Officer has not payments or the rendering of has not disallowed the expen e disallowance has been made expenditure was excessive, with arket data or other material nclusion.
mstances, we find ourselves in ag conclusion arrived at by the le no reason to interfere with the ing the disallowance. The grou accordingly dismissed.
d of the Revenue is in relation enses amounting to Rs.1,11,69, epartmental Representative su dmitted additional evidence with er an opportunity of being he f the Income-tax Rules. On the for the assessee submitted that before the learned CIT(A) a ncial Services Limited
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No. 8088/MUM/2025

not result in s factor alone s the absence disputed the services. The nses on the solely on the hout bringing on record to greement with arned CIT(A).
order of the und no. 1 of to deleting of ,620/-.
ubmitted that hout affording eard, thereby e other hand, no additional and that the documents relied up records.
7.2 Facts in brief a foreign travelling exp to the preceding year employees of the a several countries ap expenditure of ₹1,25
₹39,45,489/- related while ₹72,24,132/- p
The Assessing Office had been undertake directly earned by the disallowed foreign tra the Assessing Officer
7.3 The learned CIT held that the asses including travel bills reimbursement by learned CIT(A) obser earned from a particu justify disallowance undertaken for busin was deleted observing
“5.6 I have duly cons issue and reply of the Blend Finan
ITA pon were already part of the are that the Assessing Officer o penses had increased substantia r. On verification, he noted that assessee had undertaken fore part from Dubai. Out of the 5,01,268/-, the Assessing Office d to travel of directors and th pertained to travel undertaken b er further observed that subs en to countries from which no e assessee during the year. On t avel expenses of ₹1,11,69,620/- disallowed the said sum.
T(A), after examining the mater ssee had furnished document s, correspondence with clients the associated enterprise in rved that the mere fact that no ular country during the year ca of travel expenses where th ness purposes. Accordingly, the g as under :
sidered the facts of the case, findings of the e appellant filed during the appellate proceed ncial Services Limited
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No. 8088/MUM/2025

e assessment observed that ally compared directors and ign travel to e total travel er noted that heir relatives, by employees.
stantial travel o income was that basis, he
. Accordingly, ial on record, tary evidence and proof of Dubai. The o income was annot by itself he travel was disallowance
AO on this dings. From the perusal of asses the appellant filed d spent on foreign trav business purpose at 5.7 The appellant h foreign travel expen appellate proceedings of foreign travel expe fulfilling client requi
Company Blend Man the same was sub necessitated by its was on client instru detailed country-wis the AO.

nd reply of 1.69,620/- vidence for s earned.
lowance of during the sallowance
-related for ated Dubai evidence for travel was bai), travel client, and ubmitted to of AO and appellate el expenses tions. Mere sole reason directives, t Ltd ITA e appellant mbursement y identified travel on a the global summarily
Accordingly, expenses to s business find that the tive regarding e record. The ional evidence
In fact, the rly submitted were already

Blend Finan
ITA learned counsel for the assess undertaken in connection with essee and largely on the instru e, Blend Management Services F mitted that a substantial por eimbursed by the said associate rtions have not been controve e nature of the assessee’s bus consultancy and advisory
, foreign travel by directors an d as unusual. The Assessing nditure on a blanket basis merel generated from certain countrie g, in our considered view, is no gitimate business expenditure.
of any specific finding that the e usiness purposes or that th nreliable, the disallowance m nnot be sustained.
e find no infirmity in the order o ddition. Ground No.2 raised by d.
ncial Services Limited
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No. 8088/MUM/2025

see reiterated the business uctions of its FZCO, Dubai.
rtion of such ed enterprise.
erted by the siness, which services to nd employees g Officer has ly because no es during the t sufficient to expenses were e supporting made by the of the learned y the Revenue

Copy of the Order forward
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.

////

Blend Finan
ITA ppeal of the Revenue is dismisse ced in the open Court on13/0 GOPAL)
(OM PRAKA
MBER
ACCOUNTAN ded to :

BY ORDE

(Assistant Re

ITAT, Mu ncial Services Limited
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No. 8088/MUM/2025

ed
03/2026. d/-
ASH KANT)
NT MEMBER
R, gistrar) umbai