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TMI Blog2019 (3) TMI 1166X X X X Extracts X X X X X X X X Extracts X X X X ..... est business interest of Assessee Company even pro bono in which he himself was the Director. Therefore, naturally a doubt could arise in the minds of the Assessing Authority about the genuineness of the payment made to the partnership firm, a related party in which the same person had substantial interest. Tribunal on the basis of materials available before it, cannot be said to have committed any perversity in making such disallowance even though resulting in the reversal of the order passed by the First Appellate Authority viz., CIT (Appeals). The Tribunal being the second and higher tier of the Appellate Forums viz., higher than the CIT (Appeal), naturally has the same and wider powers of the lower Appellate Authority and therefore reversal by the final fact find body ie., the Tribunal in all such cases need not be and cannot be declared to be perverse. The scope of Section 260-A of the Act is limited and only the substantial questions of law can be entertained and answered by the High Court u/s 260-A of the Act - DECIDED against the Assessee and in favour of the Revenue. - Tax Case Appeal No. 1389 of 2009 - - - Dated:- 8-3-2019 - Dr. Justice Vineet Kothari And Mr. Justi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. In this regard, a copy of the Agreement was also filed. The Assessing Officer found that the assessee company has paid this amount to a firm in which Mr.Amarnath, Director of assessee company has substantial interest. The Assessing Officer was of the opinion that payment has been made to a person as specified in Section 40A(2)(b)(v). The assessee was not in a position to produce any documentary evidence regarding the services rendered by M/s. Patterson Co. Pvt. Limited. Under such circumstances, the Assessing Officer disallowed the amount involved under Section 37 holding that it was not made for the purpose of business. The Assessing Officer also held that the payment has been made to a person covered under Section 40A(2)(b)(v) which was clearly unreasonable. 3.2 Upon assessee's appeal, the learned Commissioner of Income Tax (Appeals) held that M/s. Patterson Co. Limited., had a long standing and rich experience with clients in share trading business. Hence, it has the competence to offer advice. The payment was under an agreement. There was also not any intention to avoid tax. Hence, he deleted the addition made by the Assessing Officer. 3.3 Against this orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallow an expenditure, if the same is incurred by way of payment to a relative of the Assessee or in case of Company to any Director or partnership Firm or member of Association of the family. 5. The purpose of disallowance under the said provision is to avoid diversion of income from the hands of the Assessee to its related persons. 6. The findings of the learned CIT (Appeal) in favour of the Assessee are quoted below for ready reference:- 6. The next issue relates to research and advisory fee paid by the assessee company to a sister concern, Patterson and Company towards business procurement and research and advisory services rendered by them. The relevant facts are that after April, 2001 the capital market was in doldrums and the assessee company, in order to survive in its business of stock broking, opted to avail the expertise of its sister concern, Patterson Company, which had been in the market much longer. Through an agreement entered into with Patterson Company, the assessee company agreed to pay 50% of brokerage earnings of the assessee company subject to a maximum limit of ₹ 9 lakhs towards services of procurement of business and market advise t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s required to advise the clients of the assessee company would be provided by the firm Patterson Company through telephone on a continuous basis and the assessee cannot be blamed for not maintaining records of such telephonic advice received from the firm Patterson Company. 7. Per contra, the learned counsel for the Revenue supported the impugned order. 8 . We are of the considered opinion that as a matter of fact, no substantial questions of law arise in the present Appeal filed by the Assessee. The findings of the learned Tribunal even though upon reversal of the order passed by learned CIT (Appeals) in the present case cannot be said to be perverse in any manner and they remain findings on facts. Therefore, it cannot be contended that merely because there was an Agreement between the Assessee Company and the related party or the partnership firm, the Research and Advisory fees made by the Company to the partnership firm, in which one of the Directors Mr.Amarnath had a substantial interest, ought to be allowed wholly or partly as a business expenditure. The mere fact that the same person, Mr.M.Amarnath who had substantial interest in the partnership firm, was the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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