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CHAPTER IV COMPUTATION OF TOTAL INCOME Profits and Gains of Business or Profession Expenses or payments not deductible in certain circumstances. 36. (1) The provisions of this section shall have effect irrespective of anything to the contrary contained in any other provision of this Act relating to computation of income under the head “Profits and gains of business or profession”. (2) If the assessee incurs any expenditure for which payment has been or is to be made to any “specified person”, which in the opinion of the Assessing Officer is excessive or unreasonable having regard to the–– (a) fair market value of the goods, services or facilities; or (b) legitimate needs of the business or profession of the assessee; or (c) benefit derived by or accruing to the assessee therefrom, so much of the expenditure as considered excessive or unreasonable by him shall not be allowed as a deduction (3) For the purposes of sub-section (2) and this sub-section,–– (a) “specified person” shall mean the following,–– (i) in relation to an assessee mentioned in column B of the Table below, the person referred to in column C thereof: Table
Sl. No. | Assessee | Specified person |
A | B | C |
1 | Individual. | Any relative of the assessee. |
2 | Company. | Any director of the company or his relative. |
3 | Firm. | Partner of the firm or his relative. |
4 | Association of persons. | Member of the association or his relative. |
5 | Hindu undivided family. | Member of the family or his relative; |
ii. any person being an individual or company or firm or association of persons or Hindu undivided family having substantial interest in the business or profession of the assessee, or any director, partner, member thereof or any relatives of such individual, director, partner, member or any other company in which the first mentioned company has substantial interest; iii. a company, firm, association of persons, or Hindu undivided family whose director, partner or member has substantial interest in the business or profession of the assessee, or any director, partner or member thereof and their relatives, as the case may be; iv. any person carrying on a business or profession, where assessee, being–– A. an individual or his relative; or B. a company, its directors or their relatives; or C. a firm, its partners or their relatives; or D. an association of persons, its members or their relatives; or E. a Hindu undivided family, its members or their relatives, has substantial interest in the business or profession of such person; b) a person is deemed to have “substantial interest in the business or profession” if— (i) in a |