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2018 (2) TMI 1592 - AT - Income TaxDisallowance on marketing and distribution expenses - Held that:- It is evident from quantum assessment order that Ld. AO has not doubted the genuineness or bonafides of the expenses but made adhoc disallowance of 5% only on the premise that the assessee failed to justify the apportionment of the expenses, which was nothing but a business decision for the assessee. No material has been brought on record by AO to support the contention that the impugned expenses were excessive or unreasonable in any manner. Secondly, we find that the assessee and payee are subsidiary of a third entity namely HDFC Ltd. and during impugned AY, the transactions between two such subsidiary entities were not covered by clause 40A(2)(b)(iv). The said relation has subsequently been covered by Finance Act, 2012 w.e.f. 01/04/2013. Disallowance of certain legal & professional fees being reimbursed by the Assessee to HDFC AMC to carry out investigations pursuant to certain SEBI directions - Held that:- A perusal of the above give strength to our findings that complete responsibility to conduct the affairs of the mutual fund rested with the Trustee Assessee. As per the terms of the directions, the Trustees of the mutual fund were required to set up an investigation committee to examine all the transactions / dealings by Mr. Nilesh Kapadia. The Trustees were required to submit a plan to overhaul the internal control systems and the internal preventive measures of HDFC AMC to avoid recurrence of such instances in future. Hence, upon conjoint reading of Trust Deed and SEBI directions as above, we conclude that the said expenditure was incurred by the assessee to safeguard / protect its business interest and therefore, allowable to the assessee in terms of Section 37. CIT(A) clinched the issue in the right perspective but had no justification to restrict the impugned expenditure to 50%. We find that genuineness of the expenditure was not in dispute. If the expenditure was restricted to 50% then as a logical consequence, the remaining expenditure was to be allowed to HDFC AMC since as per the logic of Ld. first appellate authority, the said expenditure was to be shared equally between the two entities. Even in that eventuality, the whole exercise would remain revenue neutral as both entities fall in the same tax bracket and we see no fruitful reason to disturb the already concluded assessments. We uphold that the impugned disallowance was not justified - Decided in favour of assessee.
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