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TMI Blog2021 (12) TMI 445X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 (10) TMI 1 - ITAT MUMBAI ] invoking of section 40A(2)(b) of the Act to disallow a portion of the expenditure is an altogether different dimension than invoking section 37(1) of the Act to say that the expenditure is not laid out wholly and exclusively for the purposes of business. In fact, under such a situation, it was all the more onerous on the part of the CIT(A) to demonstrate as to why the entire expenditure was disallowable under section 37(1) of the Act, having regard to the stand of the Assessing Officer in the remand report as well as in the assessment for assessment year 2012-13. The said burden, in our view, has not been discharged by the CIT(A) in the present case and, therefore, we are unable to acquiesce to the same. As a consequence, we hereby set-aside the order of the CIT(A) on this aspect and direct the Assessing Officer to delete the addition representing payment made to QIEF for marketing support services. Thus, on this aspect assessee succeeds. Additional claim of expenditure on account of education cess payable on the income tax which was not claimed in the return of income and was being claimed for the 1st time before the Tribunal by way of this addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 A.Y. 2012-13. The Ld. A.R. therefore prayed that the issue may kindly be decided following the said decision of the co-ordinate Benches of the Tribunal in assessee s own case. 4. The Ld. D.R., on the other hand, fairly conceded that the issue has been decided as stated by the Ld. A.R., however, relied heavily on the orders of authorities below. 5. After hearing both the parties and perusing the material on record including the decisions of the co-ordinate Benches of the Tribunal in assessee s own case in ITA No.3418/M/2015 A.Y. 2011-12 ITA No.3989/M/2017 A.Y. 2012-13, we find that the issue is squarely covered in favour of the assessee. The operative part of the decision in ITA No.3989/M/2017 A.Y. 2012-13 is reproduced as under: 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) dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment has been made by the AO under section 143 (3) and handling charges paid to the sister concern @ 9.5 per cent have been considered to be reasonable and allowed. (v) The sister concern of the assessee M/s Middle East International is also assessed to tax and income assessed for the asst. yr. 19914-92 is ₹ 9,38,510 and for asst. yr. 1992-93 is ₹ 14,65,880 and the said assessment orders have been placed on record. (vi) Under the CBDT Circular No. 6-P, dated 6th July, 1968 it is stated that no 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. A.R. therefore prayed that the issue may kindly be decided following the said decision of the co-ordinate Bench of the Tribunal. 9. The Ld. D.R., on the other hand, relied on the order of authorities below. 10. We have heard the rival submissions and perused the material on record including the decision of the co-ordinate Bench of the Tribunal in ITA No.3418/M/2015 A.Y. 2011-12 (supra) and observed that similar issue has been decided by the co-ordinate Bench of the Tribunal in ITA No.3418/M/2015 A.Y. 2011-12 in favour of the assessee. The operative part is reproduced is as under: 7. We have carefully considered the rival submissions. Pertinently, the dispute before us pertains to the allowability of expenditure incurred by the assessee on fee paid to QIEF for marketing support services. The Assessing Officer as well as the CIT(A) have found it expedient to disallow the expenditure, albeit on different grounds. The Assessing Officer disallowed it on the ground that the requisite tax was not deducted at source and hence such expenditure was to be disallowed under section 40(a)(i) of the Act. This position did not find favour with the CIT(A) as according to him tax was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment options. In fact, at Page-339 of the Paper Book, a list of clients have been placed, who were referred to the assessee by QIEF and at the time of hearing it was explained that more than 90% of assessee's revenues have been earned from the clients referred by QIEF. From the submissions of the asessee made to the lower authorities, it is seen that assessee has consistently explained that QIEF was marketing assessee's services to prospective institutional investors such as sovereign funds, pension funds, etc. in Europe, Middle East and Asia and also to private sector institutional clients in USA. In our considered opinion, the assertions which have been made by the assessee before the lower authorities as well as before us are borne out of record inasmuch as assessee has earned income through clients referred by QIEF, which is not disputed. Much has been made out by the CIT(A) that mere existence of an agreement between asessee and QIEP would not ipso-facto lead to the allowability of the impugned expenditure. In absolute terms, we have no quarrel with the said proposition advanced by the CIT(A) but the onus in the present case was on him to establish on the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact, the invoking of section 40A(2)(b) of the Act to disallow a portion of the expenditure in assessment year 2012-13 does not lend any support to the inference of the CIT(A) that the expenditure has not been made wholly and exclusively for the purpose of assessee's business because what is envisaged by section 40A(2)(b) is to disallow an expenditure which is found to be unreasonable or excessive in relation to it's market value. Invoking of section 40A(2)(b) of the Act to disallow a portion of the expenditure is an altogether different dimension than invoking section 37(1) of the Act to say that the expenditure is not laid out wholly and exclusively for the purposes of business. In fact, under such a situation, it was all the more onerous on the part of the CIT(A) to demonstrate as to why the entire expenditure was disallowable under section 37(1) of the Act, having regard to the stand of the Assessing Officer in the remand report as well as in the assessment for assessment year 2012-13. The said burden, in our view, has not been discharged by the CIT(A) in the present case and, therefore, we are unable to acquiesce to the same. As a consequence, we hereby set-aside the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me may kindly be dismissed. The ld DR alternative prayed that without prejudice to the first contention, the issue may be restored to the file of the AO to take a decision after verification of facts. 15. We have heard the ld. authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, and have also considered the judicial pronouncements that have been relied upon by them in context of the issue in hand. Undisputedly the issue of claim of education cess was claimed for the first time before us. The issue being purely legal and also covered by the jurisdictional high court in favour of the assesse. In our opinion all the facts qua this issue are available on records and no new facts or independent verification of facts are required. Moreover the assessee can raise the legal issue at any appellate stage even if not raised before the authorities below. Besides the issue is squarely covered by the decisions of the Apex Court as well as Jurisdictional High Courts relied by the Ld. A.R. as stated above. Therefore we are inclined to admit the same for adjudication. 16. We find that the issue raised in the additio ..... 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