DENTSU AEGIS NETWORK INDIA PRIVATE LIMITED(ERSTWHILE VIZEUM MEDIA SERVICE INDIA MERGED IN DAN INDIA),MUMBAI V. INCOME TAX OFFICER, CIRCLE 8(3)(2), MUMBAI, MUMBAI

ITA 6122/MUM/2025

AI Insights

The case involves Dentsu Aegis Network India Private Limited, which appealed against the disallowance of salary recharge and reimbursement of expenses amounting to Rs. 62,50,720 by the Assessing Officer under section 37(1) read with section 40A(2)(b) of the Income-tax Act, 1961. The disallowance was based on the grounds that the assessee failed to prove that the expenditure was incurred wholly and exclusively for the purposes of its business and that the payments were made to related group concerns. The Commissioner of Income-tax (Appeals) upheld the disallowance, which was contested in the Tribunal. The Tribunal, after examining the agreements and the nature of the transactions, concluded that the disallowance was not justified as there was no evidence of tax evasion or that the payments were excessive or unreasonable.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 837963 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 29-09-2025
• Other Referred Cases: CIT v. Indo Saudi Services (Travel) (P.) Ltd. [2009] 310 ITR 306
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANNAVARAMKOSURI; LD
• Assessee Lawyers: KETAN VED; ABDULKADIR
• Keywords: Additional evidence; Business expenditure; Fair market value; Commercial expediency; TDS
• Section: 143(3); 142(1); 37(1); 40(a)(ia)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH MUMBAI BEFORE SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER & SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER ITA No. 6122/Mum/2025 (Assessment Year: 2014-15) Dentsu Aegis Network India Private Limited (Erstwhile Vizeum Media Service India merged with Dentsu Aegis Network India Private Limited w.e.f. 1st April 2017) 2nd Floor, Devchand House, Dr. A. B. Road, Shiv Sagar Estate Mumbai, Worli SO, Mumbai-400 018 Vs. DCIT Central Circle-1(1), Aayakar Bhavan, Maharashi Karve Marg, Mumbai-400 020 PAN/GIR No. AAHCA3058N (Applicant) (Respondent) Assessee by Shri Ketan Ved and Shri Abdul Kadir Jawadwala, Ld. ARs Revenue by Shri Annavaram Kosuri, Ld. DR Date of Hearing 02.02.2026 Date of Pronouncement 20.02.2026 Printed from counselvise.com 2 ITA No. 6122/Mum/2025 Dentsu Aegis Network India Private Limited आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, AM: This appeal is directed against the order dated 31.07.2025 passed by the Commissioner of Income-tax (Appeals)–47, Mumbai [hereinafter referred to as “CIT(A)”] under section 250 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”]arising out of the assessment order dated 07.12.2016 passed by the Assessing Officer under section 143(3) of the Act for the Assessment Year 2014–15. 2. The brief facts of the case are that the assessee, formerly known as M/s. Vizeum Media Services India Private Limited and now merged with Dentsu Aegis Network India Private Limited, is engaged in the business of media services, including media consultancy and strategy. For the Assessment Year 2014–15, the assessee filed its return of income on 22.12.2014 declaring total income of Rs. 20,76,320/-.The case was selected for scrutiny and the assessment was completed by the Assessing Officer under section 143(3) of the Act determining the total income at Rs. 1,42,70,810/- after making, inter alia, disallowances under section 40(a)(ia) and under section 37(1) read with section 40A(2)(b). The CIT(A) confirmed the additions. 3. The issue involved in the grounds of appeal before us relates to the disallowance of salary recharge and reimbursement of expenses amounting to Rs. 62,50,720/- under section 37(1) read Printed from counselvise.com 3 ITA No. 6122/Mum/2025 Dentsu Aegis Network India Private Limited with section 40A(2)(b) of the Act. The relevant facts, as emerging from the assessment order, are recorded hereunder. 4. The Assessing Officer observed from the details of expenses claimed under the head “salary and wages” that the assessee had debited an amount of Rs. 46,23,220/- paid to M/s. Aegis Media India Pvt. Ltd. and Rs. 16,27,500/- paid to M/s. Carat Media Services Pvt. Ltd., which were described by the assessee as “salary recharge” or reimbursement of salary and bonus expenses (assessment order, page 6). It was further noticed that the assessee had deducted tax at source of Rs. 1,03,889/- and Rs. 36,571/- respectively on these payments (assessment order, page 6). 5. Since the assessee had also claimed substantial salary and bonus expenditure in its own profit and loss account, the Assessing Officer required the assessee to explain the nature of these additional payments and to furnish details of agreements, if any, entered into with the said group concerns. Accordingly, a notice under section 142(1) dated 03.10.2016 was issued calling upon the assessee to furnish the details of salary and bonus payments made to M/s. Aegis Media India Pvt. Ltd. and M/s. Carat Media Services Pvt. Ltd. along with copies of agreements and the basis of such payments. 6. In response thereto, the assessee submitted copies of “cost sharing agreements” executed between the assessee and the said two concerns. On examination of these agreements, the Assessing Printed from counselvise.com 4 ITA No. 6122/Mum/2025 Dentsu Aegis Network India Private Limited Officer recorded that both the agreements were executed on plain paper, were neither stamped nor registered or notarised, and that all the three concerns, including the assessee, were operating from the same office premises and were engaged in the same line of business of media and advertising consultancy services. 7. As the assessee had not furnished any specific details of services rendered, the Assessing Officer again issued a notice under section 142(1) dated 11.11.2016 calling upon the assessee to furnish elaborated details of the services claimed to have been received, along with the list of personnel deputed by M/s. Aegis Media India Pvt. Ltd. and M/s. Carat Media Services Pvt. Ltd. to perform professional duties on behalf of the assessee and the list of customers to whom services of such personnel were provided. 8. The relevant portion of the said notice, as reproduced in the assessment order, records that the assessee had reimbursed expenses of Rs. 46,54,146/- to its group concern M/s. Aegis Media India Pvt. Ltd., which included salary of Rs. 46,23,220/-, and similarly reimbursed an expense of Rs. 16,27,500/- to M/s. Carat Media Services Pvt. Ltd. as salary expense. The Assessing Officer specifically required the assessee to provide the names and addresses of the personnel deputed by M/s. Aegis Media India Pvt. Ltd. and M/s. Carat Media Services Pvt. Ltd. to assist the assessee in achieving its business targets, and also to provide details of services provided by the assessee to its clients through such personnel, in order to examine whether there was any duplication of expenses. Printed from counselvise.com 5 ITA No. 6122/Mum/2025 Dentsu Aegis Network India Private Limited 9. In reply, the assessee submitted that no specific person was deputed by the group concerns exclusively for the assessee company and that the salary recharge related to centralised finance, IT and administration departments. The assessee further stated that it was part of a multinational group having five entities in India, namely M/s. Aegis Media India Pvt. Ltd., M/s. Posterscope Outdoor Advertising Pvt. Ltd., M/s. Carat Media Services India Pvt. Ltd., M/s. Doosra Brand Communications Pvt. Ltd. and M/s. Vizeum Media Services India Pvt. Ltd., and that in order to minimise duplication of expenses, Aegis and Carat recruited common employees on their payroll and such employees provided services to all five entities. It was stated that the cost of such centralised departments was charged to each entity on the basis of revenue of each entity. 10. On examination of the above explanation and the material on record, the Assessing Officer observed that the cost sharing agreements did not contain any specific terms and conditions for charging salary or bonus and did not lay down any mechanism for allocation of such cost based on revenue or otherwise. He further observed that despite being specifically asked, the assessee was not able to furnish any details of services actually rendered by such personnel to the assessee or any evidence to show that any such experts were requested by the assessee and that their services were in fact taken. 11. The Assessing Officer also noted that the assessee had separately claimed salary and bonus expenditure of Rs. Printed from counselvise.com 6 ITA No. 6122/Mum/2025 Dentsu Aegis Network India Private Limited 3,46,15,781/- in its profit and loss account for the year and that the assessee could not reconcile how, in addition to such expenditure, further salary recharge from group concerns was justified without demonstrating actual services rendered. 12. On these facts, the Assessing Officer recorded a finding that the assessee failed to prove that the expenditure claimed towards salary recharge was incurred wholly and exclusively for the purposes of its business. He further observed that while making similar claims of reimbursement in respect of rent and bonus, the assessee had taken the stand that TDS should not be deducted on reimbursements, which itself showed that the assessee’s contention that these were pure reimbursements was not acceptable. He thus concluded that the reimbursement of salary and bonus was not allowable as business expenditure and disallowed the same under section 37(1) of the Act. He further recorded that the payments were made to related group concerns and, therefore, the provisions of section 40A(2)(b) were also attracted (assessment order, page 8). 13. Accordingly, the Assessing Officer disallowed the entire amount of Rs. 62,50,720/- comprising Rs. 46,23,220/- paid to M/s. Aegis Media India Pvt. Ltd. and Rs. 16,27,500/- paid to M/s. Carat Media Services Pvt. Ltd. under section 37(1) read with section 40A(2)(b) of the Act and added the same to the total income of the assessee. Printed from counselvise.com 7 ITA No. 6122/Mum/2025 Dentsu Aegis Network India Private Limited 14. In so far as the other additions are concerned, the Assessing Officer had also made disallowances under section 40(a)(ia) in respect of payments made to TAM Media Research Pvt. Ltd., reimbursements made to Carat Media Services India Pvt. Ltd. towards licence costs and reimbursement of rent paid to Posterscope Outdoor Advertising Pvt. Ltd. Those disallowances were confirmed by the CIT(A). However, the assessee has not challenged those disallowances before the Tribunal and the present appeal is confined only to the disallowance of salary recharge and reimbursement of expenses amounting to Rs. 62,50,720/- under section 37(1) read with section 40A(2)(b). 15. In appeal before the CIT(A), the assessee reiterated that the salary recharge represented common employee cost for centralised services availed by the assessee from group entities. It was contended that both M/s. Aegis Media India Pvt. Ltd. and M/s. Carat Media Services Pvt. Ltd. were domestic companies assessed to tax at the same rate as the assessee and that the salary recharge had been duly offered to tax in their hands. It was further submitted that details of employees in respect of whom salary cost was recharged had been furnished and that the expenditure was incurred wholly and exclusively for the purposes of business. 16. The CIT(A), however, did not accept the said explanation. He noted that during the assessment proceedings the Assessing Officer had specifically called upon the assessee to furnish the names and addresses of the personnel deputed by M/s. Aegis Printed from counselvise.com 8 ITA No. 6122/Mum/2025 Dentsu Aegis Network India Private Limited Media India Pvt. Ltd. and M/s. Carat Media Services Pvt. Ltd. to assist the assessee in its business and also to provide details of services rendered by such personnel and the clients for whom such services were performed. He further noted that in response thereto, the assessee had stated that no specific personnel were deputed to the assessee and that the salary recharge pertained to centralised departments. The CIT(A) observed that the assessee had not brought on record any material to demonstrate the actual nature of services rendered by such employees to the assessee or the basis on which such services were quantified and charged. He also noted that the cost sharing agreements relied upon by the assessee were executed on plain paper and did not specify any clear terms or conditions regarding charging of salary or the mechanism for apportionment of cost among group entities. On these facts, the CIT(A) held that the assessee had failed to substantiate, with cogent and reliable evidence, that the expenditure towards salary recharge was incurred wholly and exclusively for the purposes of its business. He, therefore, upheld the disallowance of Rs. 62,50,720/- made by the Assessing Officer under section 37(1) read with section 40A(2)(b) of the Act. 17. Aggrieved by the order of CIT(A), the assessee is in appeal before us raising following grounds of appeal: 1. Disallowance under section 37(1) read with section 40(A)(2) of the Act – Rs. 62,50,720/-: 1.1 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the disallowance made by the Learned Assessing Officer (“AO”) in relation to reimbursement of salary Printed from counselvise.com 9 ITA No. 6122/Mum/2025 Dentsu Aegis Network India Private Limited cost of Rs. 46,23,220/- paid to M/s. Aegis Media India Pvt. Ltd. and Rs. 16,27,500/- to M/s. Carat Media Services Pvt. Ltd under section 37(1) read with section 40(A)(2) of the Act. 1.2 The Learned CIT(A) erred in not appreciating the fact that recharge of salary was made by the Appellant to M/s. Aegis Media India Pvt. Ltd. and M/s. Carat Media Services Pvt. Ltd which are both domestic companies assessable to tax at the same rate of tax as that of the Appellant. 1.3 The Learned CIT(A) erred in not appreciating the fact that M/s. Aegis Media India Pvt. Ltd. and M/s. Carat Media Services Pvt. Ltd have appropriately included the salary recharge received from the Appellant in its income liable to tax. 1.4 The Learned CIT(A) erred in not appreciating the fact that the Appellant submitted the details of employees employed by M/s. Aegis Media India Pvt. Ltd. and M/s Carat Media Services Pvt. Ltd in respect of whom salary cost was recharged by the Appellant for centralized services availed. 1.5 The Learned CIT(A) grossly erred in not appreciating the fact that these are common employee cost, and the learned AO has not disallowed the said expenditure by stating that the same are not incurred for the purpose of business. The Appellant craves to add, alter, amend, substitute and/or modify in any manner whatsoever modify all or any of the foregoing grounds of appeal at or before the hearing of the appeal. 18. During the course of hearing before us, the learned Authorised Representative (AR) reiterated the factual submissions made before the lower authorities and drew our attention to the documents placed in the paper book. It was submitted that copies of the cost sharing agreements entered into between the assessee and the group entities had been filed, which clearly evidenced that employees were shared for rendering advertising consultancy and allied services and that the consideration was Printed from counselvise.com 10 ITA No. 6122/Mum/2025 Dentsu Aegis Network India Private Limited limited to reimbursement of personnel costs and related expenses actually incurred. Reference was made to the agreements dated 01.04.2013 entered into between M/s. Aegis Media India Pvt. Ltd. and M/s. Vizeum Media Services India Pvt. Ltd., and between M/s. Carat Media Services India Pvt. Ltd. and M/s. Vizeum Media Services India Pvt. Ltd., wherein it was expressly provided that personnel would be made available for rendering services, office facilities would be shared only as a matter of convenience without creating any tenancy or lease rights, and that Vizeum would reimburse only the personnel costs and out-of-pocket expenses incurred on its behalf, as detailed in Annexure to the agreements. It was further pointed out that the agreements also provided for invoicing of the net reimbursable amount and for bearing of withholding taxes by the recipient entity, thereby demonstrating that the payments were structured as cost reimbursement without any profit element. 19. The learned AR further invited our attention to the related party disclosures contained in the notes to accounts of M/s. Aegis Media India Pvt. Ltd. and M/s. Carat Media Services India Pvt. Ltd. for the year ended 31.03.2014, copies of which were placed on record. It was submitted that the names of the group entities, the nature of transactions and the amounts of reimbursements were duly disclosed in the financial statements, and the very same amounts were reflected as reimbursement of expenses received or paid in the respective accounts of the parties. It was contended that this mutual disclosure in the Printed from counselvise.com 11 ITA No. 6122/Mum/2025 Dentsu Aegis Network India Private Limited audited financial statements of both payer and payee demonstrated that the transactions were transparent, accounted for on a gross basis, and did not involve any diversion of profits. 20. Referring to the written submissions made before the CIT(A), the learned AR submitted that the assessee had analysed the applicability of section 40A(2) by demonstrating that all the statutory pre-conditions were not satisfied. It was submitted that while the payment could be regarded as “expenditure”, the second condition under section 40A(2)(b) was not fulfilled in respect of M/s. Carat Media Services India Pvt. Ltd., as the said entity did not fall within the category of “specified persons” contemplated in that provision. It was pointed out that as per clause 23 of the tax audit report and the related party disclosures, M/s. Aegis Media India Pvt. Ltd. held 100 per cent ownership interest in the assessee during the relevant year, whereas no such substantial interest existed in the case of M/s. Carat Media Services India Pvt. Ltd. Consequently, according to the learned Authorised Representative, payments made to Carat Media could not be subjected to disallowance under section 40A(2) at all. 21. It was further submitted that even in respect of payments made to M/s. Aegis Media India Pvt. Ltd., the third and crucial condition prescribed in section 40A(2), namely, that the expenditure should be excessive or unreasonable having regard to the fair market value of the services, the legitimate business needs of the assessee or the benefit derived therefrom, had not Printed from counselvise.com 12 ITA No. 6122/Mum/2025 Dentsu Aegis Network India Private Limited been satisfied. The learned AR pointed out that the Assessing Officer had not recorded any finding that the salary reimbursement was excessive or unreasonable with reference to the fair market value of the services or the benefit derived by the assessee. On the contrary, the Assessing Officer had merely doubted the arrangement on the ground that the agreements were on plain paper and that the assessee could not identify specific personnel deputed exclusively for it. It was contended that, as explained in the submissions before the CIT(A), commercial expediency and business needs had to be judged from the standpoint of a prudent businessman and not from that of the Assessing Officer, and that the reimbursement of salary costs was for genuine services availed from shared personnel forming part of centralised functions such as finance, administration and advertising support. 22. The learned AR also referred to the assessee’s submissions before the CIT(A) to the effect that the cost sharing agreements could not be discarded merely because they were executed on plain paper and not on stamp paper. It was contended that such agreements were duly signed by authorised representatives of both the parties and were acted upon in the books of account of the respective companies, and that there was no allegation by the Assessing Officer that the agreements were fabricated or an afterthought. It was further submitted that the basis of allocation of cost on the parameter of revenue generation was a reasonable Printed from counselvise.com 13 ITA No. 6122/Mum/2025 Dentsu Aegis Network India Private Limited and commercially acceptable method, which had also been accepted by the Department in earlier years. 23. It was also submitted that the Assessing Officer’s objection regarding inability of the assessee to furnish minute details of services rendered by each individual employee was misconceived, since the arrangement was one of sharing of personnel for common functions and not of deputation of specific individuals to specific clients. According to the learned Authorised Representative, once the existence of the agreements, the incurring of expenditure, the routing of payments through banking channels and the disclosure of corresponding receipts in the hands of the recipient entities stood established, the disallowance could not be sustained merely on the basis of conjectures. On these premises, and by placing reliance on the detailed submissions earlier made before the CIT(A), the learned AR contended that the impugned disallowance under section 37(1) read with section 40A(2)(b) was not warranted either on facts or in law. 24. The learned AR also placed reliance on the decision of the Hon’ble Bombay High Court in the case of CIT v. Indo Saudi Services (Travel) (P.) Ltd. [2009] 310 ITR 306 to submit that where both the assessee and the payee concern are assessed to tax at the same rate, and there is no allegation of tax evasion, disallowance under section 40A(2) on the ground of excessive or unreasonable payment is not justified. It was submitted that in the present case also both Aegis and Carat were taxable at the Printed from counselvise.com 14 ITA No. 6122/Mum/2025 Dentsu Aegis Network India Private Limited same rate as the assessee and, therefore, there was no motive or effect of tax evasion in making the impugned payments. 25. The learned Departmental Representative (DR), on the other hand, relied upon the orders of the Assessing Officer and the CIT(A). He submitted that the assessee had sought to place reliance on additional documents in the form of audited annual accounts and income-tax returns of M/s. Aegis Media India Pvt. Ltd. and M/s. Carat Media Services India Pvt. Ltd. for the relevant period, as reflected in the list of documents filed. It was pointed out that these documents, were not produced before the Assessing Officer or before the CIT(A). The learned DR accordingly submitted that, to the extent reliance is placed on these additional documents, the matter may be restored to the file of the Assessing Officer for verification of the same and for examining whether the impugned salary recharge and reimbursement of expenses were duly reflected and offered to tax in the hands of the recipient entities. He thus urged that the findings of the lower authorities be upheld, or alternatively, that the additional evidences be sent back to the Assessing Officer for verification in accordance with law. 26. In rebuttal, the learned AR submitted that the additional documents placed on record by the assessee, namely, the audited annual accounts and the income-tax returns of M/s. Aegis Media India Pvt. Ltd. and M/s. Carat Media Services India Pvt. Ltd., were only intended to demonstrate that there was no tax arbitrage between the assessee and the recipient entities. He Printed from counselvise.com 15 ITA No. 6122/Mum/2025 Dentsu Aegis Network India Private Limited stated that these documents were not relevant for adjudication of the core issue relating to the allowability of the impugned expenditure under section 40A(2) and section 37(1) of the Act and, therefore, did not warrant any separate or further verification. 27. We have carefully considered the rival submissions and perused the material available on record, including the assessment order, the order of the CIT(A), and the documents placed before us. The sole issue arising for adjudication is whether, on the facts and in the circumstances of the case, the disallowance of salary recharge and reimbursement of expenses amounting to Rs. 62,50,720/- made under section 37(1) read with section 40A(2)(b) of the Act is sustainable in law. 28. On perusal of the assessment order, it is evident that the disallowance has been made primarily on the ground that the assessee failed to furnish details of specific services rendered by the personnel of M/s. Aegis Media India Pvt. Ltd. and M/s. Carat Media Services India Pvt. Ltd., and that the cost sharing agreements were executed on plain paper without specifying the mechanism for allocation of salary cost. The Assessing Officer further observed that the assessee had already claimed substantial salary and bonus expenditure in its own books and had not established the necessity of further salary recharge. On these facts, the Assessing Officer held that the expenditure was not proved to have been incurred wholly and exclusively for the Printed from counselvise.com 16 ITA No. 6122/Mum/2025 Dentsu Aegis Network India Private Limited purposes of business and further invoked section 40A(2)(b) on the footing that the payments were made to related concerns. 29. The CIT(A), while confirming the disallowance, recorded that despite specific requisition, the assessee could not bring on record material to demonstrate the actual nature of services rendered by such employees or the basis of quantification and charging of such services. He also noted that the agreements relied upon did not specify clear terms for charging salary or the mechanism of apportionment and, therefore, upheld the action of the Assessing Officer under section 37(1) read with section 40A(2)(b). 30. At this stage, it is necessary to examine the scope of section 40A(2). The provision permits disallowance of expenditure only where the Assessing Officer is of the opinion that such expenditure is excessive 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 the business, or the benefit derived by the assessee therefrom. Thus, the formation of an opinion that the expenditure is excessive or unreasonable is a sine qua non for invoking section 40A(2). On perusal of the assessment order, we find that the Assessing Officer has not recorded any finding that the amount of salary recharge is excessive or unreasonable with reference to the fair market value of services or the benefit derived by the assessee. The disallowance has been made on the basis that the assessee failed Printed from counselvise.com 17 ITA No. 6122/Mum/2025 Dentsu Aegis Network India Private Limited to demonstrate the exact nature of services and the basis of allocation. 31. In so far as section 37(1) is concerned, it is settled law that the onus is on the assessee to establish that the expenditure was incurred wholly and exclusively for the purposes of business. In the present case, the assessee has explained that the arrangement was one of sharing of common personnel for centralised functions and that allocation was made on the basis of revenue. The lower authorities have disbelieved the claim mainly on the ground that the assessee could not identify specific personnel deputed exclusively for it and could not furnish minute details of services rendered by each employee. However, the arrangement pleaded by the assessee is not one of deputation of specific employees but of sharing of common resources for group functions. The absence of exclusive deputation, by itself, does not establish that no services were rendered. 32. We further note that the learned AR has placed reliance on the decision of the Hon’ble Bombay High Court in the case of CIT v. Indo Saudi Services (Travel) (P.) Ltd. (supra). The Hon’ble High Court, while interpreting section 40A(2), held that where the revenue was not in a position to point out how the assessee evaded payment of tax by alleged payment of higher commission to its sister concern since the sister concern was also paying tax at higher rate, disallowance of alleged excess commission paid to the sister concern was not justified. Printed from counselvise.com 18 ITA No. 6122/Mum/2025 Dentsu Aegis Network India Private Limited 33. The ratio decidendi of the above decision is that where both the payer and the payee are assessed to tax at the same rate and there is no allegation or evidence of tax evasion, disallowance under section 40A(2) on the ground of excessive or unreasonable payment is not justified in the absence of a finding that the payment is excessive having regard to fair market value or business needs. 34. In the present case, it is not in dispute that M/s. Aegis Media India Pvt. Ltd. and M/s. Carat Media Services India Pvt. Ltd. are domestic companies assessable to tax at the same rate as the assessee. The Assessing Officer has not recorded any finding that the impugned payments resulted in any tax evasion or that the amounts were excessive or unreasonable with reference to fair market value or benefit derived. The disallowance has been made essentially on the ground of insufficiency of evidence regarding the nature of services and the basis of allocation. 35. In our considered view, such an approach does not satisfy the statutory requirement of section 40A(2), which mandates a finding on excessiveness or unreasonableness. Further, once the existence of an arrangement for sharing of common employees and incurring of expenditure is not disputed, and there is no finding that the payment is excessive, mere inability to furnish minute details of services rendered by each employee cannot, by itself, justify disallowance of the entire expenditure. Printed from counselvise.com 19 ITA No. 6122/Mum/2025 Dentsu Aegis Network India Private Limited 36. As regards the objection of the learned Departmental Representative concerning additional documents, the assessee has stated that such documents were produced only to demonstrate absence of tax arbitrage. Since the core issue turns on the allowability of expenditure under section 37(1) and section 40A(2), and since the lower authorities have not based their disallowance on any finding of tax evasion, we are of the view that the matter does not require restoration merely for verification of such documents. 37. In view of the above discussion, and respectfully following the ratio laid down by the Hon’ble Bombay High Court in CIT v. Indo Saudi Services (Travel) (P.) Ltd. (supra), we hold that the disallowance of Rs. 62,50,720/- made under section 37(1) read with section 40A(2)(b) is not sustainable in law. The Assessing Officer has neither demonstrated that the expenditure was not incurred for business purposes nor recorded any finding that the same was excessive or unreasonable within the meaning of section 40A(2). 38. Accordingly, the disallowance of Rs. 62,50,720/- is directed to be deleted. The ground raised by the assessee is allowed. 39. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 20.02.2026. Sd/- Sd/- (RAHUL CHAUDHARY) (MAKARAND VASANT MAHADEOKAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Printed from counselvise.com 20 ITA No. 6122/Mum/2025 Dentsu Aegis Network India Private Limited Mumbai, Dated 20/02/2026 Dhananjay, Sr.PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. संबंधधत आयकर आयुक्त / The CIT(A) 4. आयकर आयुक्त(अपील) / Concerned CIT 5. धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, मुम्बई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, सत्याधपत प्रधत //True Copy// 1. उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai Printed from counselvise.com "