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2019 (5) TMI 1920 - AT - Income TaxAllowable business expenditure - fees paid by the assessee to its group company - HELD THAT:- As pointed out by the Ld. counsel, the Ld. CIT (A) has decided the identical issue in favour of the assessee by following the order of the coordinate Bench rendered in the assessee’s own case [2016 (10) TMI 1 - ITAT MUMBAI] - As revenue has not pointed out any material change in the facts of the present case. Hence, respectfully following the decision of the coordinate Bench passed in assessee’s own case referred above, we uphold the decision of the Ld. CIT(A) and dismiss the sole ground of appeal of the revenue. Addition u/s 40A(2) - Payment made to subsidiary company - HELD THAT:- As has been held by the Hon’ble Bombay High Court in the case of CIT vs. Vs. Dempo & Company Pvt. Ltd. [2010 (10) TMI 711 - BOMBAY HIGH COURT], 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 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. Hence, following the principles of law laid down by the Hon’ble jurisdictional High Court discussed above, we allow this ground of appeal of the assessee and set aside the findings of the Ld. CIT (A). Revenue’s appeal is dismissed and the assessee’s appeal is allowed.
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