2014 (6) TMI 1032 - AT - Income Tax

Disallowance of provision made for Leave Encashment on accrual basis - HELD THAT - Assessee at the outset submitted that the above ground is covered against the assessee by the decision of the Pune Bench of the Tribunal in the case of Sister concern namely Serum Institute of India Ltd. In view of the above the first ground by the assessee is dismissed. Claim of deduction of PMS fees from the capital gain - Claim u/s.48 against the Short Term Capital Gain declared in the return of income on sale of shares - Justification for claim under the head Capital Gain - capital gain or business income - HELD THAT - As decided in KRA Holding 2013 (9) TMI 1013 - ITAT PUNE e Tribunal in assessee s own case has already taken a view in favour of the assessee. Since the AO CIT(A) have followed the order for earlier year in the case of the assessee and since the order of CIT(A) for earlier year has been reversed by the Tribunal therefore unless and until the decision of the Tribunal is reversed by a higher court the same in our opinion should be followed. In this view of the matter we respectfully following the order of the Tribunal in assessee s own case for A.Y. 2004-05 allow the claim of the Portfolio Management fees as an allowable expenditure. We find no infirmity in the order of the CIT(A) allowing the claim claimed u/s.48 against the Short Term Capital Gain declared in the return of income on sale of shares. Grounds raised by the Revenue are accordingly dismissed.

Summary

Issues:
1. Disallowance of provision for Leave Encashment
2. Disallowance of expenses under Portfolio Management Services (PMS) fees

Issue 1: Disallowance of provision for Leave Encashment
The assessee challenged the disallowance of Rs. 2,29,750 on account of provision made for Leave Encashment on accrual basis. The Counsel for the assessee argued that this ground is covered against the assessee by a decision of the Pune Bench of the Tribunal in a related case. As a result, the first ground by the assessee was dismissed.

Issue 2: Disallowance of expenses under Portfolio Management Services (PMS) fees
The Revenue disallowed the claim of deduction of PMS fees from the capital gain, as the assessee had claimed the PMS fees as expenditure under the head "Capital Gains" instead of "Income from Business." The CIT(A) allowed the claim of the assessee based on a precedent set by the Pune Bench of the Tribunal in a related case. The Revenue appealed this decision, arguing that the CIT(A) erred in allowing the claim of PMS fees as an allowable expenditure. However, both the Counsel for the assessee and the Departmental Representative agreed that the issue was decided in favor of the assessee by the Tribunal in a related case. The Tribunal, following the precedent set in the related case, allowed the claim of the assessee for the PMS fees as an allowable expenditure from the capital gain. Consequently, the grounds raised by the Revenue were dismissed, and the appeal filed by both the assessee and the Revenue was also dismissed.

In conclusion, the Tribunal upheld the decision of the CIT(A) regarding the disallowance of expenses under the Portfolio Management Services (PMS) fees, based on the precedent set in a related case by the Pune Bench of the Tribunal. The judgment was pronounced on 13-06-2014.