India - Income Tax Act 2010 - Saarc

S. 40A I.T. ACT, 1961 1.25811[Expenses or payments not deductible in certain circumstances.1240A. (1) The provisions of this section shall have effect notwithstandinganything to the contrary contained in any other provision of this Actrelating to the computation of income under the head “Profits and gains ofbusiness or profession”.13(2)(a) Where the assessee incurs any expenditure in respect of which paymenthas been or is to be made to any person 14 referred to in clause (b) of this subsection,and the 15 [Assessing] Officer is of opinion that such expenditure isexcessive or unreasonable having regard to the fair market value of the goods,services or facilities for which the payment is made or the legitimate needs of thebusiness or profession of the assessee or the benefit derived by or accruing to himtherefrom, so much of the expenditure as is so considered by him to be excessiveor unreasonable shall not be allowed as a deduction.16[* * *](b) The persons referred to in clause (a) are the following, namely :—(i) where the assessee is anindividualany director of the company, partnerof the firm, or member of the asso-ciation or family, or any relative ofsuch director, partner or member;(ii) where the assessee is acompany, firm, associationof persons or Hindu undividedfamilyany relative of the assessee;(iii) any individual who has a substantial interest in the business orprofession of the assessee, or any relative of such individual;(iv) a company, firm, association of persons or Hindu undivided familyhaving a substantial interest in the business or profession of theassessee or any director, partner or member of such company, firm,association or family, or any relative of such director, partner ormember;(v) a company, firm, association of persons or Hindu undivided familyof which a director, partner or member, as the case may be, hasa substantial interest in the business or profession of the assessee; or11. Inserted by the Finance Act, 1968, w.e.f. 1-4-1968.12. See also Press Note, dated 2-5-1969, issued by Ministry of Finance, Letter [F.No. 1(22)/69-TPL (Pt.)], dated 18-4-1969, Circular No. 34, dated 5-3-1970, Circular No. 33, dated 29-12-1969, Circular No. 250, dated 11-1-1979, Circular No. 522, dated 18-8-1988, Letter [F. No.142(14)/70-TPL], dated 28-9-1970, Circular No. 10/2008, dated 5-12-2008, Letter [F. No.1(22)/69-TPL(Pt.)], dated 18-4-1969, Circular No. 220, dated 31-5-1977, Circular No. 169(para 27), dated 23-6-1975, Letter [F. No. 204/10/71-IT(A-II)], dated 17-4-1971 and LetterBC No. T-II/256-Misc. 75-76, dated 15-11-1975, from the Commissioner of Income-tax,Bombay. For details, see Taxmann’s Master Guide to Income-tax Act.13. For relevant case laws, see Taxmann’s Master Guide to Income-tax Act.14. For the meaning of the expression “any person”, see Taxmann’s Direct Taxes Manual,Vol. 3.15. Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f.1-4-1988.16. Omitted, ibid., w.e.f. 1-4-1989. Prior to its omission, proviso was amended by the Finance(No. 2) Act, 1971, w.e.f. 1-4-1972.