RAJESH SENJI SRINIVASAN,CHENNAI vs. ACIT NON CORPORATE CIRCLE 18, CHENNAI

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ITA 1205/CHNY/2019Status: DisposedITAT Chennai09 June 2022AY 2014-153 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal found that the payments were made under agreements, TDS provisions were complied with, and the payees declared the income. There was no evidence that the payments were excessive or unreasonable.

What were the facts?

The assessee made payments of Rs. 6.93 Lacs to his father and father-in-law for consultancy services. The Assessing Officer disallowed these payments under Section 40A(2)(b) as payments to related persons.

What were the issues?

Whether payments made to relatives for consultancy services are disallowable under Section 40A(2)(b) if they are not excessive or unreasonable.

Which sections of the Income-tax Act were involved?

Section 40A(2)(b)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI

Before: HON’BLE SHRI MAHAVIR SINGH & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2014-15 arises out of the order of learned Commissioner of Income Tax (Appeals)-15, Chennai [CIT(A)] dated 27-02-2019 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 29-12-2016. The sole grievance of the assessee is disallowance u/s 40A(2)(b) which is adjudicated as under.

1.

2 - 2. The Ld. AO made disallowance of Rs.6.93 Lacs being payments made to related persons u/s 40A(2)(b). The said amount includes payment of Rs.2.13 Lacs to assessee’s father and another payment of Rs.4.80 Lacs to assessee’s father-in-law. The assessee is stated to be engaged in rendering consultancy services. The services of these persons are stated to have been hired for documentation, preparing reports and maintaining the office. For the same, the assessee has entered into separate agreements which specify the nature of work being handled by them. The assessee also filed confirmation letters as well as Income Tax returns of the payee depicting the aforesaid payment. The copies of Form 16A were also furnished. During appellate proceedings, the assessee filed qualifications and detailed note on service offered by the relatives and assailed the disallowance. The Ld. CIT(A) noted that the payments was made to assessee’s father in Bangalore and father-in-law located at Chennai. There was no description of the nature of services being rendered by them. The confirmation letters were held to be general and vague, No such professional fees was paid by the assessee to the other. The payees fall under tax slab of 20% as against the fact that the assessee fall in 30% slab. Therefore, the disallowance was confirmed. Aggrieved, the assessee is in further appeal before us.

3.

Upon due consideration, we find that the services have been availed by the assessee under agreements. Due compliance of TDS provisions has been made by the assessee. Undisputedly, both the payees have depicted this income in their Income tax Returns. If the services were hired from outside, the assessee would be obligated to make the payments to outsiders also. There is no evidence that the 3 - payments are excessive or unreasonable giving regards to the market value of the services. All these facts favor the case of the assessee. Therefore, by deleting the disallowance of Rs.6.93 Lacs, we allow the appeal.

4.

The appeal stand allowed. Order pronounced on 09th June, 2022.

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