2012 (11) TMI 1143 - AT - Income Tax

Summary

Issues involved: Appeal against order dated 09.11.2010 passed by CIT(A)-1, Mumbai for assessment year 2007-08 regarding treatment of Rent & Service Charges, disallowance of maintenance expenses, rejection of expenses u/s. 14A, and disallowance of Portfolio Management Fees.

Treatment of Rent & Service Charges:
The Assessing Officer treated rent and service charges as income from house property, while the First Appellate Authority assessed it as business income, allowing deduction for repair and maintenance expenses. The Tribunal upheld the AO's treatment, citing the assessee as deemed owner u/s 27(iiib) of the Act, dismissing the appeal by the assessee.

Disallowance u/s. 14A:
The AO disallowed expenses related to exempted income under section 14A by applying Rule 8D. However, the FAA held that Rule 8D was not applicable for the relevant assessment year based on the decision in the case of Godrej Boyce Mfg. Co. Ltd. The Tribunal endorsed the FAA's decision, directing the AO to decide the disallowance afresh after affording a reasonable opportunity to the assessee.

Disallowance of Portfolio Management Fees:
The AO disallowed Portfolio Management Fees (PMF) paid by the assessee, stating that the expenditure could not be allowed under section 40A and 112. The FAA upheld the AO's decision, emphasizing that PMF was not allowable under the head capital gains. The Tribunal dismissed the cross objections filed by the assessee, following previous decisions and coordinating benches' rulings.

Conclusion:
The Tribunal partly allowed the appeal filed by the AO and dismissed the cross-objection filed by the assessee, maintaining the treatment of rent and service charges, disallowance u/s. 14A, and disallowance of Portfolio Management Fees. The orders were pronounced on 7th November 2012.