DCIT-1(3)(1) , MUMBAI V. M/S QUANTUM ADVISORS PVT LTD , MUMBAI

ITA 3170/MUM/2022

AI Insights

The case involves the Revenue's appeal against the order of the CIT(A) which deleted a penalty imposed on M/s. Quantum Advisors Pvt. Ltd. for the Assessment Year 2012-13. The penalty was originally levied on the disallowance of research fees amounting to Rs.2,39,18,400 paid by the assessee to its group companies, which the Assessing Officer deemed excessive. However, the Tribunal had previously deleted the addition in the quantum proceedings, leading to the CIT(A)'s decision to delete the penalty. The Revenue's appeal was based on the challenge to this deletion, but the Tribunal upheld the CIT(A)'s decision, referencing a similar case and the fact that the subsidiary company involved had taxed the received fees appropriately.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302320 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 26-04-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 13-12-2022
• Other Referred Cases: CIT vs. Dempo & Company Pvt. Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘D‘ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & MS PADMAVATHY S, ACCOUNTANT MEMBER ITA No.3170/Mum/2022 (Assessment Year :2012-13) DCIT-1(3)(1), Mumbai Room No.535, 5 th Floor, Aayakar Bhavan M.K.Road, Mumbai-400020 Vs. M/s.Quantum Advisors Pvt.Ltd. 503, Regent Chambers Nariman Point Mumbai – 400 021 PAN/GIR No.AAACQ0281C (Appellant) .. (Respondent) Assessee by Shri Niraj Sheth Revenue by Ms. Mahita Nair Date of Hearing 27/04/2023 Date of Pronouncement 27/04/2023 आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the Revenue against the order dated 12/10/2022 for the A.Y.2012-13. 2. In the grounds, Revenue has challenged deletion of penalty of Rs.77,60,325/- u/s. 271(1)(c) of the Act on the disallowance of research fees paid by the assessee to its group companies amounting to Rs.2,39,18,400/-. ITA No.3170/Mum/2022 M/s. Quantum Advisors Pvt. Ltd. 2 3. At the outset ld. Counsel submitted that in the quantum proceedings, the Tribunal has deleted the addition and therefore, penalty levied by the ld. AO cannot be sustained and ld. CIT (A) has rightly deleted the penalty. In this case addition/ disallowance was made on account of research marketing services fee amounting to Rs.2,39,18,400/- by the ld. AO on the ground that it is excessive and accordingly, addition was made. We find that Tribunal in ITA No.3989/Mum/2017 in assessee’s own case has deleted the addition after observing as under:- “5. In the present case, the assessee has brought on record the facts that the subsidiary company QAMC generated an aggregate income of Rs. 13,13,72,237/- by way of research fees during the previous year, which includes the fees of Rs. 2,99,18,400/- paid by the assessee. QAMC has offered the entire amount of research fees, to tax and paid the same rate of tax as was applicable to the assessee. On the other hand, the revenue has failed to point out as to how the assessee evaded payment of tax by making unreasonable payment to its subsidiary for research services. Further, as has been held by the Hon’ble Bombay High Court in the case of CIT vs. Vs. Dempo & Company Pvt. Ltd. (supra), only a 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 ITA Nos. 3989 & 4259/MUM/2017 Assessment Year: 2012-13 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. ITA No.3170/Mum/2022 M/s. Quantum Advisors Pvt. Ltd. 3 4. It has been further informed by the ld. Counsel that in A.Y.2013-14 and 2014-15, the ld. AO himself has dropped the penalty. In view of the aforesaid fact, that once quantum has been deleted, penalty levied u/s. 271(1)(c) has no legs to stand and accordingly, the order of the ld. CIT(A) is upheld. 5. In the result, appeal of the Revenue is dismissed. Order pronounced on 27 th April, 2023 in the open Court. Sd/- (PADMAVATHY S) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 27/04/2023 KARUNA, sr.ps Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy//