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TMI Blog2020 (2) TMI 708X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessee through the services of the Two PMS providers is reflected in the Chart given as Annexure-II to this order . Therefore, the apportionment of PMS charges paid by the Assessee of ₹ 41,67,502/- has to be apportioned only on the basis of income earned through the respective PMS providers to the total PMS charges. This basis of apportionment as given in the chart given as Annexure-I to this order, in our view appears to be correct. This Chart was however not filed before the revenue authorities but Chart given as Annexure-II to this order was filed before the CIT(A) and there is no difference in the chart given as Annexure- I and II in principle except the manner of presentation. In our view, the CIT(A) was not justified in holding that the Assessee has not brought any documentary evidence to substantiate the basis of allocation of PMS fee to selective PMS providers. The documents in the form of statement of the PMS providers viz., HDFC Asset Management Company Ltd. and that of Morgan Stanley AMC (Empower fund) clearly show the income earned from the two PMS providers. CIT(A) accepts that allocation of expenses should have been done on the total income through earn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see to two Portfolio Managers viz., HDFC Real Estate PMS and Morgan Stanley PMS. The payment made to HDFC Real Estate PMS was a sum of ₹ 50,20,034 and to Morgan Stanley PMS was a sum of ₹ 22,74,018 respectively. In the computation of total income the Assessee had claimed deduction of PMS Charges against income in the form of STCG which is chargeable to tax under the head Capital Gains and which suffers tax at 15% of ₹ 8,14,961/- (₹ 42,550/- towards PMS Charges paid to HDFC Real Estate PMS and ₹ 7,72,411/- towards Morgan Stanley PMS). A sum of ₹ 33,52,541/- was claimed as deduction towards PMS Charges against income in the form of interest which was chargeable to tax under the head Income from other sources which is chargeable to tax at 30%. There is no dispute that out of the total PMS charges paid by the Assessee of ₹ 72,94,053, a sum of ₹ 31,26,551/- ( ₹ 72,94,053 ₹ 8,14,961 + ₹ 33,52,541) is with reference to Dividend Income earned by the Assessee which is tax exempt and was not claimed as deduction by the Assessee in the computation of total income. 5. According to the AO the aforesaid bifurcation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arges as above, the income under the head Income from other sources stood enhanced and the income under the head Capital Gain stood reduced. Consequently the tax payable on the income returned became more because STCG was chargeable to tax at a lower rate whereas income under the head Income from other sources was chargeable to tax at a higher rate. The Assessee was therefore aggrieved by the aforesaid method of apportionment of PMS Charges and he filed appeal before CIT(A). 8. Aggrieved by the action of the AO, the assessee filed appeal before the CIT(Appeals). The assessee submitted the basis of allocation of PMS charges as done by the Assessee in the computation of income by submitting that the Assessee had used the services of two portfolio managers viz., (1) HDFC Real Estate Portfolio and (2) Morgan Stanley PMS. 9. As far as HDFC Real Estate Portfolio PMS is concerned, the Assessee submitted that the Assessee had one PMS account was with HDFC named HDFC Real Estate Portfolio - 1, with Account No. 204986. The Assessee filed a copy of covering letter dated 18.12.2010 of the PMS provider to show the way, the performance fees was being charged by the aforesaid PM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nature of Income Own Account HDFC PMS HDFC REP (real estate PMS) Morgan Stanley Empower Morgan Stanley Platinum Morgan Stanley capital Income from capital gains Short-term capital gains STT suffered (-) 88,93,205 11,40,88,161 - -41,19,567 - - Short-term capital gains Non-STT 4,34,110 93,303 1,35,625 - - - Long-term capital gains STT suffered 9,04,39,346 2,73,28,590 - - - - Long-term capital gains Non-STT (-) 20,23,042 18,48,087 - - - - Income from Other sources Dividend 56,28,23,134 1,18,14,892 51 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxes applicable. 14. Aggrieved by the order of CIT(Appeals), the assessee has preferred the present appeal before the Tribunal. 15. The ld. counsel for the assessee filed the chart which is given as Annexure-I to this order and submitted that assessee has paid PMS charges to two different entities viz., HDFC Real Estate Portfolio Fund and Morgan Stanley PMS . The income earned from each of the PMS service providers have been identified and the PMS charges have been apportioned on the basis of income earned from dividend, interest on debentures and short term capital gain. The ld. counsel for the assessee submitted that the revenue authorities have made the allocation of PMS charges without recognising the income earned from service provided by the portfolio managers. According to him, the apportionment made by the Assessee is correct and is based on the income earned in the form of dividend, interest income on debentures and STCG and this basis of apportionment is correct. 16. The ld. DR besides relying on the order of the CIT(A) further submitted that the allocation should be based on the services provided by the PMS provider and not on the basis of income. This argu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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