9911796707
TMI Blog2019 (5) TMI 1920X X X X Extracts X X X X X X X X Extracts X X X X ..... Director of a company, partner of a firm or member of the association or any family or any relative of such Director, partner or member is a related person under sub- clause (ii) of clause (b) of sub-section (2) of section 40. A subsidiary company of the assessee is not a related person within the meaning of section 40A (2), the provisions of section 40A(2) do not attract in the present case. Since, the issue involved in the present case are similar to the issue involved in the aforesaid case, it can safety be concluded that the provisions of section 40A(2) do not apply in the present case. Hence we are of the considered view that the Ld. CIT (A) has wrongly confirmed the ad-hoc disallowance made by the AO with regard to payment of research fees made by the assessee to its sister concern. Since, the authorities below have not denied the expenditure in question and allowed the expenses @ 5,00,000/- per month, the only issue remains as to whether how much of the expenses is allowable. Since, the AO has not justified its action by pointing out any cogent and convincing reason for disallowance of the remaining amount, the Ld. CIT(A) ought to have set aside the findings of the AO. Henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case and in law, the Ld. CIT (A) was justified in allowing the marketing and distribution fees of ₹ 1,04,88,902/- paid to QIEF management LLC (QIEF) as business expenditure?" 3. At the outset, the Ld. counsel for the assessee submitted that the ITAT, Mumbai has decided the identical issue in favour of the assessee in assessee's own case ITA No. 3418/Mum/2015 for the AY 2011-12. Since, the Ld. CIT (A) has decided the identical issue in favour of the assessee by following the decision of the Tribunal in the assessee's own case for the AY 2011-12 aforesaid, there is no merit in the appeal of the revenue. 4. On the other hand, the Ld. Departmental Representative (DR) fairly admitted that the Tribunal has decided the identical issue in favour of the assessee in assessee's own case for the AY 2011-12, however, the Ld. CIT (A) supported the assessment order passed by the AO. 5. We have perused the material on record in the light of the submissions of the Ld. counsel for the assessee. The only grievance of the revenue is that the Ld. CIT(A) has wrongly held the fees paid by the assessee to its group company QIEF Management LLC as business expenditure. As pointed out by the Ld. co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration. 1:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, the research fees paid to QAMC were reasonable having regard to the fair market value of the services and the stand taken by the Assessing Officer in this regard is misconceived, erroneous and not in accordance with law and the Commissioner of Income-tax (Appeals) ought to have held as such. 1:3 The Appellant submits that the Assessing Officer be directed to delete the disallowance made by him and re-compute its total income accordingly." 2. Before us, the Ld. counsel for the assessee submitted that the Ld.CIT (A) has confirmed the disallowance of ₹ 2,39,18,400/- made out of the total amount of ₹ 2,99,18,400/- paid by the assessee to its group company Quantum Asset Management Company Pvt. Ltd. (QAMC) during the previous year ignoring the fact that the research fees paid to QAMC are reasonable having regard to the fair market value of the services. The Ld. counsel submitted that for the purpose of providing investment management services and managing portfolio of its clients, the assessee avails research services from QAMC for identifying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee within the meaning of, sub-clause (iv) of clause (b) of section 40A(2), the provisions of section 40A(2) of the Act are not attracted in the present case, therefore the Ld CIT(A) has wrongly confirmed the disallowance made u/s 40A of the Act. 4. We have heard the rival submissions of the parties and carefully gone through the material on record in the light of the rival submissions of the parties. The grievance of the assessee is that the Ld. CIT(A) has wrongly confirmed the disallowance of ₹ 2,39,18,400/- made out of the total amount of ₹ 2,99,18,400/- paid towards research fees by the assessee to its group company Quantum Asset Management Company Pvt. Ltd. (QAMC) during the previous year. We notice that the AO has made the said disallowance u/s 40A of the Act merely on the ground that the payment made to the group company for research work is excessive and does not commensurate with the cost of services rendered and further the payment has been made by the assessee only with an intention to enrich the other group company. It is not the case of the revenue that the fees were not at all paid by the assessee. However, in the opinion of the authorities below, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance is to be made under section 40A(2) in respect of the payments made to the relatives and sister concerns where there is no attempt to evade tax. 5. In view of the aforesaid submitted facts we are of the view that the Tribunal was correct incoming to the conclusion that the CIT (A) was wrong in disallowing half per cent commission paid to the sister concern of the assessee during the asst. yr. 1991-92 and 1992-93. The learned advocate appearing for the appellant was also not in a position to point out how the assessee evaded payment of tax by alleged payment of higher commission to is sister concern since the sister concern was also paying tax at higher rate and copies of the assessment orders of the sister concern were taken on record by the Tribunal. 6. We, therefore, answer the above question of law raised in these appeals in affirmative and dismiss the above appeals filed by the appellant. There will, however, be no order as to costs." 5. In the present case, the assessee has brought on record the facts that the subsidiary company QAMC generated an aggregate income of ₹ 13,13,72,237/- by way of research fees during the previous year, which includes the fe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
