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Sec 40(a)(2)

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This query is : Resolved

Ritesh Maheshwari (Querist)

20 October 2012 In my case wife of A is legal adviser in which he is director, co is paying Rs. 100000 towards fees but in market that fees is Rs. 25000 so Rs. 75000 is disallowed U/s sec 40(A)(2) i.e. it is treated as business income, so what will be treatment in hand of wife ie this will also be treated as income of wife??
If this is so then it will be double taxation under I Tax??

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

20 October 2012 The wife is liable to tax on Rs 100000/.
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The expenditure of Company will be disallowed to the extent of Rs. 75000/.
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Technically, we can not say it, double taxation on income, as in this case income is taxed in the hands of the recipient only.
In case of the company, due to unreasonable claim to the extent of Rs. 75000/-, the expenditure is being disallowed.

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In common parlance, you can say that on Rs. 75000/-, government gets tax from two persons.
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