The Tax Publishers2022 TaxPub(DT) 8022 (Chen-Trib)

INCOME TAX ACT, 1961

Section 40A(2)(a)

Once payment made for purchase of land was found to be reasonable in term of perspective of businessman, unless a contrary finding given by authorities below, addition could not be sustained.

Business disallowance under section 40A(2)(a) - Excessive or unreasonable payment - Land purchased from son of Managing Director of assessee company -

During course of assessment proceedings, AO noted that assessee purchased land from son of Managing Director of assessee company for a sum of Rs. 1.40 crores. He noted that as per sale deed, value of land disclosed was Rs.1.40 crores whereas amount paid by assessee for value of land was in excess to extent of Rs. 21.82 lakhs. Accordingly, he brought excess amount over fair market value of land to tax by invoking provisions of section 40A(2)(a). Aggrieved, assessee preferred appeal before CIT(A), who also confirmed action of AO without considering explanation submitted by assessee properly. Hence, this appeal. Held: Payment made for purchase of land is fair market value of land and none of authorities below had considered this issue whether payment made was excessive or unreasonable in term of section 40A(2)(a). Once payment made was found to be reasonable in term of perspective of businessman, unless a contrary finding given by authorities below, addition could not be sustained. Accordingly, assessee's appeal was allowed.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2014-15 and 2015-16



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