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TMI Blog2011 (9) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... earning of short term capital gain. Subsequently revised grounds were filed reading as under:- "The learned Comm. Of Income tax (Appeals) - 10, Mumbai has erred:- 1. in not allowing the appellant a deduction for expenses incurred in connection with earning of short term capital gains. He erred in not appreciating the nature of these expenses. 2. in not appreciating that the fees so incurred were a diversion of income by overriding title and hence ought to have been considered while computing income. 3. in not appreciating that the full value of consideration received had to be computed after deducting the fees which had been incurred and paid. 4. in not adjudicating that the fees paid were to be added to the cost of acquisition / improvement of assets." 3. The learned A.R. submitted that the ground taken in the original memo of appeal has been repeated as such as revised ground no.1 and the ground nos. 2 to 4 are additional grounds which arise out of an articulation of ground no.1. No serious objection was raised by the learned Departmental Representative against the admission of additional grounds. We, therefore, admit these grounds and take up the appeal for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee by holding that the payment of fees by that assessee for portfolio management services was neither diversion of income by overriding title nor cost of acquisition nor cost of improvement and was consequently not eligible for deduction in computing capital gain. Thereafter, similar issue came up before the Pune Bench of the Tribunal in KRA Holding & Trading (P.) Ltd. v. Dy. CIT [2011] 46 SOT 19/11 Taxman.com 250 in which the Revenue relied on the Mumbai Bench order in Devendra Motilal Kothari's case (supra). Vide its order dated May 2011 and after considering the case of Devendra Motilal Kothari (supra), the Pune Bench recorded a contrary view in assessee's favour. In so deciding, the Pune Bench, inter alia, relied on the judgement of the Hon'ble Bombay High Court in CIT v. Smt. Shakuntala Kantilal [1991] 190 ITR 56/58 Taxman 106. Once again similar issue came up before the Mumbai Bench of the Tribunal in Pradeep Kumar Harlalka v. Asstt. CIT [IT Appeal No. 4501 (Mum.) of 2010. Vide its order dated 10.08.2011, the Mumbai Bench considered both the earlier decisions on the point, viz., Devendra Motilal Kothari's case (supra) and KRA Holding & Trading (P.) Ltd.'s case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel for the assessee vehemently argued that certain important aspects of the matter were not taken into consideration by the Mumbai Benches of the Tribunal in both the cases in deciding the issue against the assessee. It was argued that there was no basis for excluding fees paid by the assessee to his portfolio manager from the computation of income under the head 'Capital gains' as there was no other purpose for its incurring, except in connection with the purchase and sale of shares. Referring to agreement of the assessee with the portfolio manager, ENAM Asset Management Co. Ltd., the learned A.R. explained that the assessee agreed to place a sum of ₹ 2.25 crore at the discretion of his portfolio manager, which was to be used for purchase and sale of securities etc. Referring to various clauses about the consideration payable to the portfolio manager, he stated that it was at half percent of the net asset value (market value of assets inclusive of all Securities and cash balances) under management at the beginning of each quarter and further the portfolio managers were entitled to a return based fee calculated at the rate of 20% per annum of the profits in exces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itle, have been elaborately discussed in these two cases. After considering all the aspects of the issue threadbare, the tribunal has held in both these cases that the fees cannot form part of computation of capital gains u/s 48 and has to be ignored. It is the only issue in the present appeal and the facts are in pari materia with those considered and decided by the Mumbai Benches. 11. The arguments advanced by the assessee on merits are an attempt to persuade us for not following the aforenoted view taken against the assessee. We are not impressed with this argument. Judicial discipline requires that when a particular issue has been decided by a bench, then the subsequent co-ordinate benches should normally follow the same. At the same time, we want to clarify that there are no fetters on the powers of the subsequent benches to doubt the correctness of the earlier order, if they are not convinced with it. Whereas following the earlier decision is a rule, calling into question its correctness is only an exception. Unless there are compelling reasons for not following the earlier view, such as, if it is inconsistent with judgment of the Hon'ble Supreme Court or that of the jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emedy as the Act enshrines the provisions enabling it to appeal to the Hon'ble High Court against the order and convince it about its stand. 13. We are reminded of the well known latin maxim 'stare decisis', which means to stand by the things decided. It expresses the underlying basis of the doctrine of precedent, which, in turn, means to abide by the former precedent when the same points arises again in litigation. It has got the seal of approval from the Hon'ble Supreme Court in several cases including Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706 (726,727)/132 Taxman 373. The maxim stare decisis provides that when a point of law has been decided, it takes the form of a precedent which is to be followed subsequently and should not normally be departed from. A decision which is followed for a long time will generally be followed, even though the court before whom the matter arises afterwards, might be of different view. 14. Adverting to the facts of the present case, we find that the issue raised before us has been predominantly decided in the above referred two cases against the assessee after making thorough analysis of the issue, dealing with all t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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