Section 40A(2)(b) of the Income-tax Act, 1961, addresses the disallowance of certain expenditures in computing the income under the head 'Profits and gains of business or profession'. Specifically, it targets payments made to related parties that are deemed excessive or unreasonable. This section applies when an assessee incurs any expenditure in respect of which payment has been or is to be made to certain specified persons, such as relatives or entities in which the assessee has a substantial interest. The significance of this provision lies in its role in preventing tax evasion through inflated expenses. The statutory test involves assessing whether the payment is excessive or unreasonable compared to the fair market value of the goods, services, or facilities provided. The burden of proof lies with the Assessing Officer to demonstrate that the payment is excessive or unreasonable. In practice, this section ensures that transactions with related parties are conducted at arm's length, thereby maintaining the integrity of taxable income.