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TMI Blog2024 (4) TMI 1024X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in the instant impugned order and ITAT allowed the claim of the Portfolio Management fees as an allowable expenditure. Similar view has been taken by the Tribunal in the case of Nadir A Modi [ 2017 (4) TMI 567 - ITAT MUMBAI] . In the aforesaid case payment of management fee was allowed to the assessee by placing reliance on the decision in the case of KRA Holdings Trading Investments Pvt. Ltd [ 2013 (9) TMI 1013 - ITAT PUNE] . There are contrary decisions of the Tribunal on allowability of Management Fee u/s. 48 of the Act. It is a well settled proposition that when two views are possible, the view in favour of assessee should be preferred [Re. CIT vs. Vegetable Products Ltd [ 1973 (1) TMI 1 - SUPREME COURT] . Thus, in the facts of the case and the decisions referred above, ground No.1 of appeal is allowed. Disallowance u/s. 14A - assessee has earned income exempt from tax u/s. 10 - No suo-moto disallowance was made by the assessee for earning of exempt income - HELD THAT:- AO has straight away invoked the provisions of Rule 8D without recording dissatisfaction with regard to assessee s claim of no disallowance of expenditure u/s. 14A of the Act. The provisions of section 14A(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain of Rs. 10,04,322/- on sale of Securities. The assessee paid Rs. 1,71,028/- to M/s. BNP Paribas Investment Services India Pvt. Ltd. ( in short BNP Paribas ) as management fees for sale of securities. The management fee paid to BNP Paribas is inextricably linked to earning of short term capital gain. The payment of management fee is not disputed by the Revenue. The Assessing Officer disallowed payment of the said fee only for the reason that management fee is not an allowable deduction u/s. 48 of the Act. The assessee had reduced management fee from short term capital gain and has offered net short term capital gain to tax. The Assessing Officer and the CIT(A) without appreciating the facts disallowed the payment of management fee. The ld.Authorized Representative of the assessee in support of his submissions that management fee is allowable u/s. 48 of the Act placed reliance on the following decisions: (i) KRA Holding and Trading Investments Pvt. Ltd. vs. DCIT, ITA No. 703/PN/2012 for A.Y. 2008-09 decided on 19/09/2013; and (ii) Nadir A. Modi vs. JCIT, ITA No.2996/Mum/2010 4859/Mum/2012 for A.Y. 2005-06, decided on 31/03/2017. 3.1 In respect of disallowance u/s. 14A of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not separately debited management fees but has reduced the same from short term capital gains. The Assessing Officer and the CIT(A) has outrightly disallowed assessee s claim of management fees on the ground that it is not an allowable expenditure u/s. 48 of the Act as it is not wholly and exclusively incurred in connection with transfer of asset. 7. Section 48 of the Act gives the mode of computation of income chargeable under the head Capital Gains . The section allows deduction in respect of expenditure incurred wholly and exclusively in connection with transfer of capital asset and the cost of acquisition and cost of improvement, if any. The contention of the assessee is that the management fee paid by the assessee to BNP Paribhas is linked to earning of short term capital gain arising from transfer of securities. We find that similar issue had come up before the Co-ordinate Bench in the case of KRA Holdings Trading Investments Pvt. Ltd. (supra). The Revenue rejected assessee s claim of deduction of Portfolio Management Fee for similar reasons as has been expressed in the instant impugned order. The Revenue in the said case had also placed reliance on the decision of Homi K. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The ground raised by the assessee is accordingly allowed. Similar view has been taken by the Tribunal in the case of Nadir A Modi (supra). In the aforesaid case payment of management fee was allowed to the assessee by placing reliance on the decision in the case of KRA Holdings Trading Investments Pvt. Ltd. (supra). 8. We observe that there are contrary decisions of the Tribunal on allowability of Management Fee u/s. 48 of the Act. It is a well settled proposition that when two views are possible, the view in favour of assessee should be preferred [Re. CIT vs. Vegetable Products Ltd., 88 ITR 192(SC)]. Thus, in the facts of the case and the decisions referred above, ground No.1 of appeal is allowed. Disallowance u/s. 14A of the Act: 9. The assessee has earned income exempt from tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expression 'prescribed' in section 2(33), must be prescribed by Rules made under the Act. What merits emphasis is that the jurisdiction of the Assessing Officer to determine the expenditure incurred in relation to such income which does not form part of the total income, in accordance with the prescribed method, arises if the Assessing Officer is not satisfied with the correctness of the claim of the assessee in respect of the expenditure which the assessee claims to have incurred in relation to income which does not part of the total income. Moreover, the satisfaction of the Assessing Officer has to be arrived at, having regard to the accounts of the assessee. Hence, sub-section (2) does not ipso facto enable the Assessing Officer to apply the method prescribed by the Rules straightaway without considering whether the claim made by the assessee in respect of the expenditure incurred in relation to income which does not form part of the total income is correct. The Assessing Officer must, in the first instance, determine whether the claim of the assessee in that regard is correct and the determination must be made having regard to the accounts of the assessee. The satisfa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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