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TMI Blog2014 (7) TMI 1235X X X X Extracts X X X X X X X X Extracts X X X X ..... It is prayed that the disallowance of PMS fees be deleted. 2. On the facts and circumstances of the case and in law the learned CIT(A) further erred in disallowing the said PMS fees claimed deductible from the capital gains without considering the decision in favour of the appellant given by the Honourable Pune Tribunal in appellant's own case on the backdrop of the same set of facts for the preceding A.Y. 2005-06 and 2006-07 and which squarely covered the issue involved. 3. The learned CITA erred in not confronting the appellant with the case law referred to by him in the order and not giving an adequate opportunity to the appellant to present its case and in order to allow the appellant to make submissions and rebut the findings given. Your appellant craves leave to add to, amend or delete the above grounds. 2. The assessee is a non-banking financial company (NBFC) registered with the RBI as an investment company. The company belongs to the entrepreneurs of Thermax group of companies with the object to hold (in conjunction with other two holding companies) controlling stake in Thermax Ltd. The issue before us is with regard to disallowance made by the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various aspects of the services rendered by the portfolio manager and the manner in which the PMS fees were computed and quantified, the Assessing Officer emphasized that as per assessee's own submission, the capital gains in question had arisen solely and exclusively out of the agreement entered into with portfolio management services. According to the Assessing Officer, the assessee failed to substantiate as to how it could be claimed that the compensation paid to the Portfolio Management Services would amount to expenditure incurred wholly and exclusively in connection with the transfer of capital assets. According to the Assessing Officer, such expenses which were directly incurred while transferring the assets such as demat account charges paid directly to a Depository participant could be claimed as expenditure wholly and exclusively incurred in connection with the transfer of shares and securities but payments made to a Portfolio manager could not be said to be on a similar footing. The Assessing Officer stressed upon that a portfolio management Service acts as a service intermediary and the fees paid to them could not be termed as an expenditure incurred wholly and exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and submitted that the decision of authorities are fortified by the ratio of Jurisdictional High Court in the case of Roshanbabu Mohammed Hussein Merchant (supra). 6. The issue before us is with regard to deduction of part of Portfolio Manager's (PMS) fee paid by the assessee while computing capital gain. We find that ITAT Pune 'A' Bench in the case of ARA Holding & Trading Pvt. Ltd. and others in ITA No.94/PN/2012, has decided a similar issue in favour of the assessee by observing as under: "13. We have carefully considered the rival submissions and also the precedent in the assessee's own case by way of the order of the Tribunal dated 25.07.2012 (supra). In the said case, the Tribunal considered the allowability of expenditure incurred by way of payment of fees of ENAM Asset Management Company Pvt. Ltd. in terms of the investment agreement dated 01.01.2005, which is precisely the issue before us also. The Tribunal referred to its earlier decision in the assessee's own case for assessment year 2004-05 vide order dated 31st May, 2011 (supra) and noticed that the issue has been decided in favour of the assessee. Thereafter, the Tribunal noted that against the decision of the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of DCIT vs. KRA Holding & Trading Pvt. Ltd. in ITA No.356/PN/2011, ITAT, Pune 'A' Bench has decided a similar issue in favour of the assessee by observing as under: "10. The above decision of the Tribunal was not available before the CIT(A) while adjudicating the issue. We find the revenue has gone on appeal against the order of the Tribunal on the issue of treatment of income from Portfolio Management Scheme as "Capital gain" or "Business income". The relevant order of the Hon'ble High court in ITA No.3482 of 2010 dated 19-07-2011 reads as under: "Heard. Admit on the following question of law:- "Whether on the facts and circumstances of the case, the ITAT was justified in holding that the income earned by the assessee by the portfolio management scheme was liable to be assessed under the head "capital gains" instead of being assessed under the head "profit & gains of business or profession"? Nothing was filed before us to substantiate that the Revenue has gone on appeal against the order of the Tribunal allowing the claim of Portfolio Management fees as an expenditure from such capital gains. 11. The decision of Mumbai Bench of the Tribunal in the case of Homi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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