Vivek Jalan
Quick Summary
Excessive payment u/s 40A(3) are not disallowed in case it can be established as follows- Payments have to be made for the assessee's business to not suffer or be hampered. Expenses that are sometimes not predictable or planned Expenses are extremely essential The nature of the assessee's
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FAQ :
Excessive payments are not disallowed under Section 40A(3) if it can be established that the payments were made out of business expediency and the genuineness of the parties involved is proven.
Business expediency means that payments had to be made for the assessee's business to avoid suffering or being hampered, especially for expenses that were unpredictable or extremely essential.
Genuineness is established by proving the identity of the payee as an income tax assessee and ensuring the transaction is not doubted or disputed, considering surrounding circumstances and practical aspects.
The Assessing Officer must take a pragmatic and practical view, balancing the law's direction with potential hardship to the assessee, and should allow deductions if a transaction is found to be genuine.
No, the Board's circulars are considered illustrative, not exhaustive. The Assessing Officer must consider the specific facts, surrounding circumstances, and business expediency of each case.
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