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TMI Blog2011 (8) TMI 479X X X X Extracts X X X X X X X X Extracts X X X X ..... ement and since same had nothing to do with the transfer, same was not allowable - the decision of the Mumbai Bench in the case of Devendra Motilal Kothari v. Dy. CIT [2011 (9) TMI 104 - ITAT MUMBAI] wherein it was held that portfolio management fee is not allowable expenditure u/s.48 - Decided against the assessee. Deduction under section 80C - the claim was made by way of a letter without revising the return - Revenue submitted that AO has no right to allow any claim in the absence of revised return - the decision of Hon'ble Supreme Court in the case of Goetze (India) Ltd. v. CIT [2006 (3) TMI 75 - SUPREME Court]. held that this restriction is not applicable if the issue is raised before the appellate authority - Therefore, the power of the appellate authority to entertain such claim is still there - Therefore, in the interests of justice we set aside the order of the ld. CIT(A) and remit the matter to the file of the AO with a direction to consider this claim. - 4501 (MUM.) OF 2007 - - - Dated:- 10-8-2011 - D. MANMOHAN, T.R. SOOD, JJ. Divyesh I. Shah for the Appellant. Alexander Chandy for the Respondent. ORDER T.R. Sood, Accountant Member. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 43(5) is applicable from A.Y 2006-07 and even loss incurred before 25-1-06 should also be reckoned as only business loss. Therefore, we set aside the order of the ld. CIT(A) and direct the AO to assess the net profit from F O at ₹ 3,27,687 under the head business. 6. Issue No. 2: After hearing both the parties we find that assessee had claimed a sum of ₹ 2,35,170 on account of transaction charges under share trading expenses. AO noted that most of the transactions were on account of F O transactions and, therefore, 50% of such amount was disallowed and the balance of 50% was disallowed. He further found that assessee had claimed portfolio management fee expenses amounting to ₹ 6,01,224 under the head short term capital gains. The AO was of the view that no such expenditure is allowable under section 48 and therefore disallowed the same. 7. On appeal, ld. CIT(A) observed that as per section 48 deduction from capital gains would be allowed in a case where the expenditure is incurred wholly or exclusively in connection with the transfer or for the cost of acquisition or cost of improvement thereto. Since the expenditure on account of portfolio managemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter detailed discussion portfolio management service fee was held to be not allowable under the head capital gains, was distinguished on the basis of the decision of the Hon'ble Bombay High Court in the case of Smt. Shakuntala Kantilal (supra). However, the decision of Smt. Shakuntala Kantilal's case (supra) came up for consideration later on before the Hon'ble Bombay High Court in the case of CIT v. Roshanbabu Mohd. Hussein Merchant [2005] 275 ITR 231/144 Taxman 720. He then referred to the judgment and pointed out that while dealing with this decision at para 18 the Hon'ble High Court very clearly held that the said decision is no longer a good law in the light of the subsequent decision of the apex court. He pointed out that in the decision in the case of KRA Holding Trading (P.) Ltd. (supra) the Tribunal had decided the issue without noticing the latest decision of the Hon'ble Bombay High Court and, therefore, the decision of KRA Holding Trading (P.) Ltd. (supra) is also not a good law and should not be followed and rather the decision of co-ordinate Bench in the case of Devendra Motilal Kothari (supra) should be followed. 11. He further submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Ld. Counsel of the assessee is that portfolio advisory fee would constitute an expenditure which has been incurred in connection with the transfer, because obviously it cannot be argued that such expenditure was in the nature of cost of acquisition or improvement of the asset. The Ld. DR has specifically contended that portfolio advisory fee has nothing to do with the transfer and such fee was payable even if no shares were transferred or any purchase of shares were made. The Ld. Counsel of the assessee did not rebut these arguments. No details have been filed before us to show how this expenditure has direct nexus with the purchase of shares or transfer of the shares. Therefore, this expenditure cannot be called to be an expenditure which has been incurred in connection with such transaction. We find that this aspect was highlighted by the Mumbai Bench of the Tribunal in the case of Devendra Motilal Kothari (supra) while deciding the identical issue against the assessee. The held column of the decision reads as under: The deduction on account of fees paid for PMS has been claimed by the assessee as deduction in computing capital gains arising from sale of shares and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been observed as under: As regards the decisions of this court in the case of CIT v. Shakuntala Kantilal [1991] 190 ITR 56 followed in the case of Abrar Alvi [2001] 247 ITR 312] and the decision of the Kerala High Court in the case of Smt. Thressiamma Abraham (No. 1) [2001] 227 ITR 802 which are strongly relied upon by the counsel for the assessee, we are of the opinion that the said decisions are no longer good law in the light of the subsequent decisions of the apex court referred to hereinabove. Thus, without going into further details we would only like to observe that the decision in the case of Smt. Shakuntala Kantilal (supra) is no more a good law in view of the latest decision and therefore that decision cannot be relied for the proposition that necessity of expenditure would make the same allowable. 14. We would also like to observe that income of an assessee has to be charged in view of the five heads given under the I.T. Act. Each head of income gives detailed procedure to determine the receipts as well as out goings and only those items can be deducted which have been specifically provided under the respective heads. This position was made clear b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer of asset and the same cannot be allowed. Therefore the theory that a particular expenditure is genuine and it is not disputed that same has been incurred and same was necessary for a particular purpose, the expenditure does not become allowable if there is no specific provision for the same. Therefore, in our view the expenditure incurred in connection with fee of portfolio management has nothing to do with the cost of acquisition of shares or transaction of shares and, therefore, is held to be not allowable. We find no force in the alternate submissions also because expenditure has been claimed under the head capital gains and now assessee cannot make a new case that such expenditure may be allowed fully or proportionately under section 37 without showing us that how this expenditure pertained to the income assessable under the head business and accordingly we reject the alternate claim. The above view is further supported by the decision of the Bombay High Court in the case of CIT v. Radio Talkies [1999] 238 ITR 872. In this case the issue was allowability of expenditure on payment of retrenchment compensation to the ex-employees. It was one of the conditions precedent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Smt. Sita Nanda v. CIT [2001] 251 ITR 575/119 Taxman 227 was concerned with the issue regarding a claim of expenditure in respect of payment of unearned increase to the government for effecting the transfer of lease-hold rights. Again the Hon'ble High Court after quoting section 48 observed as under: A bare reading of the provision makes it clear that what can be deducted under section 48(i) is expenses incurred wholly and exclusively in connection with the transfer. The amount which the assessee claimed to be covered was not really a part of the unearned increase. On the contrary it was the amount paid for making the payment demanded by the LDO belatedly. The interest, as was noted by the Tribunal, had to be paid by the assessee as she made the payment of unearned increase belatedly. The crucial words in the provisions are in connection with such transfer . The expression means intrinsically linked with the transfer. Such expenditure has to be wholly and exclusively in connection with the transfer. Even if such expenditure has some nexus with the transfer it does not qualify for deduction unless it is wholly and exclusively in connection with the transfer. The Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that when claim is made for the first time before the appellate authorities, then same should have been allowed. He relied on the decision of Mumbai Bench of the Tribunal in the case of Chicago Pneumatics India Ltd. v. Dy. CIT [2007] 15 SOT 252. 18. On the other hand, Ld. DR submitted that AO has no right to allow any claim in the absence of revised return and, therefore, ld. CIT(A) was correct in dismissing the claim particularly in view of the decision of Hon'ble Bombay High Court. 19. We have considered the rival submissions carefully and find that no doubt that a claim cannot be allowed without revised return in the light of the decision of the Supreme Court in the case of Goetze (India) Ltd. (supra). However, the Hon'ble Supreme Court itself has observed in the case of Goetze (India) Ltd. (supra) that this restriction is not applicable if the issue is raised before the appellate authority. Therefore, the power of the appellate authority to entertain such claim is still there. Therefore, in the interests of justice we set aside the order of the ld. CIT(A) and remit the matter to the file of the AO with a direction to consider this claim. 20. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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