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Quantum Advisors Pvt. Ltd. 503, Regent Chamber, Nariman Point Mumbai 400 021. Vs. The Deputy Comm. of Income Tax, Circle-1(3)- Mumbai,
July, 06th 2015
                               " " Bench, Mumbai

                   Before Shri. A.D. JAIN, Judicial Member and
                        Shri G.S. Pannu, Accountant Member

                               SA No. 189/Mum/2015
                          Arising out of ITA 3418/Mum/2015
                               Assessment year 2011-12

            Quantum Advisors Pvt.              Vs.   The Deputy Comm. of
            Ltd.                                     Income Tax, Circle-1(3)-
            503, Regent Chamber,                     Mumbai,
            Nariman Point                            Aaykar Bhavan, Maharishi
            Mumbai ­ 400 021.                        Karve Marg,
            PAN:- AAACQ0281C                         Mumbai ­ 400 020.

            Appellant                                Respondent

                          Date of Hearing:             03.07.2015
                          Date of Pronouncement:       03.07.2015

             Assessee by:                       Shri J.D Mistry
             Department By.                     Shri Love Kumar


Per G.S. Pannu, AM

     By way of the captioned application, assessee has sought stay on
the recovery of outstanding demand of Rs. 3,17,67,608/-, which has
arisen as a consequence of an assessment order passed by the Assessing
Officer u/s 143(3) of the Act, dated 20.03.2014 for assessment year 2011-
12. At the time of hearing, the Ld. Representative for the assessee
submitted   that    the    disputed   demand         has arisen on account      of
disallowances made by the Assessing Officer in relation to Marketing and

                                 Page 1 of 5
                                                              SA No. 189/Mum/2015
                                                       Arising out of ITA 3418/Mum/2015
                                                             Assessment year 2011-12

Distribution fee ­ Rs. 3,26,05,689/- and Advertisement expenses - Rs.
3,77,14,278/. The said additions have also been sustained by the CIT(A).
According to the Ld. Representative, assessee is engaged in providing
Money       Management         Services     to       its   clients.   In    the    year    under
consideration, assessee made a payment of Rs. 3,26,05,689/- to an
associate concern based in Mauritius for Marketing and Distribution
services. The Ld. Representative explained that a pre-dominant income is
earned by the assessee on account of clients referred by its Mauritius
based associate concern and for the services rendered assessee made a
payment of Rs. 3,26,05,689/-. The aforesaid amount was disallowed by
the Assessing Officer by invoking section 40(a)(ia) of the Act on the ground
that the requisite tax was not deducted at source. The assessee satisfied
the CIT(A) that the invoking of section 40(a)(ia) of the Act was not justified
and in the remand report called for by the CIT(A), the Assessing Officer
observed that otherwise the said expenditure was allowable in terms of
section 37(1) of the Act. However, the CIT(A) disregarded the stand of the
Assessing Officer and instead proceeded to hold that the said amount was
not allowable in terms of section 37(1) of the Act. On this basis, it was
pointed out that assessee had a good prima-facie case to show that the
addition was unsustainable.

2.       Insofar   as    the   other     limb     of       the   disallowance      i.e.   out   of
Advertisement expense is concerned, the Ld. Representative pointed out
that the disallowance has been sustained by the CIT(A) on an untenable
logic.    The      Ld.   Representative          explained       that      the    expenses      on
advertisement were incurred which related to launching and promoting
various scheme of the `Quantum Mutual Fund', which was managed by
its own subsidiary `Quantum Asset Management Pvt Ltd'. The Assessing
Officer disallowed the expenditure on various grounds inter-alia pointing

                                       Page 2 of 5
                                                     SA No. 189/Mum/2015
                                              Arising out of ITA 3418/Mum/2015
                                                    Assessment year 2011-12

out that the same was not supported by any documentary evidence; that
it was for brand building and was capital in nature; that the expenses
were incurred by the assessee for its Group company; and, therefore, not
allowable   in   the   hands   of   the      assessee.   According    to   the   Ld.
Representative, the CIT(A) noticed that the income of assessee by way of
dividends from Quantum Asset Management Pvt. Ltd. would be exempt
and, therefore, the impugned advertisement expense can be construed to
have been incurred for earning such exempt income, which was
disallowable u/s 14A of the Act. The Ld. Representative vehemently
pointed out that the aforesaid approach of the CIT(A) was clearly
unsustainable and was based on arbitrary assumptions.

3.   On the other hand, the Ld. DR appearing for the Revenue has
opposed the plea of assessee for stay on recovery of the outstanding

4.   We have carefully considered the rival stands. Though the merits of
the disputed additions shall be appropriately considered while hearing the
appeal of assessee, so however, insofar as it is necessary evaluate the
prima-facie nature of the case, we find that the assessee has a good
arguable case. The case set up by the assessee is that the Assessing
Officer himself in the course of remand proceedings formed a view that
expenses on account of Marketing and Distribution fee paid to the
Mauritius company was an allowable expense u/s 37(1) of the Act.
However, the CIT(A) has concluded to the contrary. Be that as it may, the
aforesaid does lend credence to the assertions of the Ld. Representative
for the assessee that assessee has a good prima-facie case so far as it is
necessary for evaluating the efficacy of the stay application. Similarly,
even with regard to the addition made out of the Advertisement expense,

                               Page 3 of 5
                                                    SA No. 189/Mum/2015
                                             Arising out of ITA 3418/Mum/2015
                                                   Assessment year 2011-12

we are of the view that assessee has a good arguable case. In view of the
aforesaid, in our considered opinion, it would meet the ends of justice if
the assessee is granted stay on the recovery of the outstanding demand
for a period of six months from today or till the date of order of the
Tribunal, whichever is earlier.

5.   Further, the appeal of the assessee, pending with the Tribunal is
directed to be posted for hearing on 03.09.2015 before the regular Bench.
Since the above date of hearing was announced in open court in the
presence of both parties, the requirement of issuance of formal notice of
hearing is hereby dispensed with.

6.   Resultantly, the captioned application of the assessee is
allowed as above.

     Above decision was pronounced in the open court in the presence of
both the parties at the conclusion of the hearing on 3.07.2015

                      Sd/-                               Sd/-

             (A.D. Jain)                         (G.S. Pannu)
          Judicial Member                    Accountant Member
     SKS Sr. P.S,
     Mumbai dated 03.07.2015

                               Page 4 of 5
                                                      SA No. 189/Mum/2015
                                               Arising out of ITA 3418/Mum/2015
                                                     Assessment year 2011-12

Copy to:

     1.   The   Appellant
     2.   The   Respondent
     3.   The   concerned CIT(A)
     4.   The   concerned CIT
     5.   The   DR, " " Bench, ITAT, Mumbai

                                        By Order

                                Assistant Registrar
                           Income Tax Appellate Tribunal,
                             Mumbai Benches, MUMBAI

S.No.     Details                             Date         Initials   Designation
1         Draft dictated on                   02.07.2015              Sr. PS/PS
2         Draft placed before author          02.07.2015              Sr. PS/PS
          Draft proposed & placed before
3                                                                     JM/AM
          the Second Member
          Draft discussed/approved by
4                                                                     AM/AM
          Second Member
          Approved Draft comes to the Sr.
5                                                                     Sr. PS/PS
6         Kept for pronouncement              02.07.2015              Sr. PS/PS
7         File sent to Bench Clerk            02.07.2015              Sr. PS/PS
          Date on which the file goes to
          Head Clerk
9         Date on which file goes to A.R.
10        Date of Dispatch of order

                                Page 5 of 5
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