Case Law Details

Case Name : Shri Homi K. Bhabha Vs ITO (ITAT Mumbai)
Appeal Number : ITA No. 3287/Mum/2009
Date of Judgement/Order : 28/09/2011
Related Assessment Year : 2006- 2007

Shri Homi K. Bhabha Vs ITO (ITAT Mumbai)- Ordinarily neither the assessee nor the Revenue can be allowed to re argue the same issue over and over again, when it has already been decided by a coordinate bench of the tribunal. If such a course is allowed, then every single repetitive issue would require reconsideration time and again because the aggrieved party would always try to convince the later bench over its point of view. Following the earlier order or making a reference to the special bench depends on the satisfaction of the Bench about the correctness or otherwise of the earlier order and not that on the view point of the aggrieved party.

It is only when a subsequent bench, on being seized of the matter, finds itself unable to endorse the earlier view, either suo motu or on the arguments of the parties, that it may make reference for the constitution of the special bench. The party dissatisfied with the earlier view cannot compel the later bench to either take a contrary view or make a reference for the constitution of the special bench. Thus it follows that once a particular view is taken, the subsequent benches of the tribunal become functus officio on that issue, subject to the exceptions discussed supra. Needless to mention at this juncture that the party unconvinced with the tribunal order is not without remedy 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.

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 VS. Azadi Bachao Andolan (2003) 263 ITR 706 (726,727) (SC). 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.

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 the aspects now raised by the ld. AR before us. These cases do not fall into the exceptions, as discussed supra, justifying departure from the earlier view. We are, therefore, not inclined to revisit all the relevant facts and the legal position on it with a view to test the correctness of these orders. Respectfully following the rule of precedent, we refuse to take a contrary view from that expressed by the Mumbai Benches in the afore-noted cases. The disallowance is thus sustained and resultantly the impugned order is upheld.

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES “H”, MUMBAI

Before Shri R.S.Syal, AM and Shri V.Durga Rao, JM

ITA No. 3287/Mum/2009 :

Asst. Year- 2006- 2007

Shri Homi K. Bhabha, 49 Cuffe Parade, Colaba, Mumbai- 400005. PAN : AACPB8660M.

Vs.

The Income Tax Officer (International Taxation) 3(1) Mumbai.

(Respondent)

(Appellant)

Appellant by : Shri Nitesh Joshi Respondent by : Shri V.V.Shastri

Date of Hearing : 22.09.2011

Date of Pronouncement :28.09.2011

O R D E R

Per R.S.Syal, AM :

This appeal by the assessee is directed against the order passed by the ld. CIT(A) on 31.03.2009 in relation to the assessment years 2006-2007.

2. Initially the assessee raised a solitary ground challenging the impugned order in not allowing deduction of expenses incurred in connection with the 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 out 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 hearing.
4. Briefly stated the facts of the case are that the assessee declared gross long term capital gain of Rs. 67,32,921 and short term capital gain of Rs. 91,87,735. Thereafter a deduction was claimed in respect of professional fees / profit sharing fees paid to ENAM Asset Management Co. Ltd. for rendering portfolio management services and the net income from capital gains was determined as under:-
Long term capital gain

Rs.67,32,921

 

Less:

Professional

Management fees

Profit sharing fees

Rs. 3,05,688

Rs. 10,09,852

Rs. 13,15,540
Rs.54,17,381
Short term capital gain Rs.91,87,735
Less:

Professional

Management fees

Profit sharing fees

Rs.  4,17,141

Rs.13,78,044

 

Rs.17,95,185

Rs.73,92,550

5. The Assessing Officer observed that the Professional Management fees and Profit sharing fees (hereinafter collectively called as `fees’) paid to portfolio manager was unrelated to any profit or loss under the head `Capital gains’. There is no dispute on the fact that the assessee claimed long term capital gain as exempt, which was duly accepted. The A.O. did not allow deduction for fees of Rs. 17,95,185 claimed by the assessee against the short term capital gain, as it was, in his opinion, not related to the transactions resulting in to capital gain. It was argued before the learned CIT(A) that the assessee was entitled to deduction on account of fees against the short term capital gain, as it was directly related to sale of shares and hence should be taken as expenditure incurred wholly and exclusively in connection with transfer of shares. An alternative argument for considering it as diversion of income by overriding title, was also raised. The learned CIT(A) was unconvinced with the assessee’s submissions. He echoed the assessment order on this point by holding that such charges could not be allowed as deduction u/s 48. Now the assessee has assailed the impugned order in above terms.

6. We have heard the rival submissions and perused the relevant material on record. Both the sides have placed on record copies of the orders passed by the Tribunal in support of their respective stands. The Mumbai Bench of the Tribunal in the case of Devendra Motilal Kothari Vs. DCIT [(2011) 50 DTR 369 (Mum.)] [to which one of us, namely, the ld. JM is party] decided the issue against the 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. in ITA No.500/PN/08 etc., in which the Revenue relied on the Mumbai Bench order in Devendra Motilal Kothari (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 Vs. Shakuntala Kantilal [(1991) 190 ITR 56 (Bom.)]. Once again similar issue came up before the Mumbai Bench of the Tribunal in Pradeep Kumar Harlalka Vs. ACIT in ITA No.4501/Mum/2010. Vide its order dated 10.08.2011, the Mumbai Bench considered both the earlier decisions on the point, viz., Devendra Motilal Kothari (supra) and KRA Holding & Trading P. Ltd. (supra). Through an elaborate order, the Mumbai Bench in latter case followed the decision in the case of Devendra Motilal Kothari (supra) in priority over that of KRA Holding & Trading P. Ltd. (supra). In deciding so, the latter Bench observed that the decision of the Pune Bench in KRA Holding & Trading P. Ltd. is primarily based on the judgement of the Hon’ble Bombay High Court in the case of Shakuntala Kantilal (supra), which has been subsequently held to be not a good law by the Hon’ble Bombay High Court in CIT Vs. Roshanbabu Mohammed Hussein Merchant [(2005) 275 ITR 231 (Bom.)]. As the later judgement overruling the earlier judgement was not brought to the notice of the Pune Bench, the Mumbai Bench of the Tribunal in Pradeep Kumar Harlalka (supra) chose to follow the decision in the case of Devendra Motilal Kothari (supra), thereby deciding the issue against the assessee. The position discussed above has been fairly admitted by both the sides.

7. From the above discussion it is seen that the first order on this issue was passed against the assessee in Devendra Motilal Kothari (supra). The second order, in the point of time by the Pune Bench in KRA Holdings (supra), decided the issue in favour of the assessee after considering the first order. Third order, being the latest in the point of time in Pradeep Kumar Harlalka (supra), decided the issue against the assessee after considering both the earlier orders. Not only that, the third order also took note of the fact the basis of the Pune Bench order, being the judgment of the Hon’ble jurisdictional High Court in Shakuntala Kantilal (supra), already stood overruled by a subsequent judgment of the Hon’ble Bombay High Court in CIT Vs. Roshanbabu Mohammed Hussein Merchant (supra), which fact was not brought to the notice of the Bench. No other order, in favour of the assessee, has been brought to our notice by the ld. AR. Accordingly it is vivid that the majority opinion (in terms of the number of orders) on the issue and also the latest order (in the point of time) together with the special circumstances of the Pune Bench case (in considering an overruled judgment), bring us to a stage where the current and the majority view taken by the tribunal so far on the point, is against the assessee.

8. The learned 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 Rs.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 excess of 15% of the profits after deducting all the expenses. The sum and substance of his submissions was that such fees paid by the assessee has direct relation with the income arising from the transfer of shares and hence the same should be allowed as deduction, either by considering it as diversion of income by overriding title from the sale proceeds; or as part of the cost of acquisition of the shares; or alternatively as an expenditure incurred wholly and exclusively in connection with the transfer of shares. These aspects constitute three additional grounds stated to be articulation of the main ground on disallowance of the amount of fees. He relied on certain judgments to drive home his point of view on deductibility of the fees. In this process, he also took us through the judgment of the Hon’ble Supreme Court in CIT Vs. Sitaldas Tirathdas (1961) 41 ITR 367 (SC), which has been considered by the Mumbai bench in Devendra Motilal Kothari (supra), to argue that the ratio decidendi of this judgment was not properly understood by the Mumbai Bench in holding that there was no diversion of income.

9. Sounding a contra note, the ld. DR stated that there was no infirmity in the view taken by the authorities below as the fees had no direct relation with the purchase or sale of shares and hence was liable to be excluded from consideration. He vigorously accentuated on the orders passed by the Mumbai Benches and contended that all the aspects now raised on behalf of the assessee, have been already considered and decided against the assessee and there was nothing new to justify going away from the earlier view.

10.  We are not inclined to accept the submissions tendered by the ld. AR that the Mumbai Benches of the tribunal have not properly appreciated the matter in right perspective in deciding the issue against the assessee. It can be easily noticed that the facts and circumstances of the case in question and the two cases decided by Mumbai Benches are similar. It is axiomatic that the nature of services provided by any portfolio manager cannot be materially different, as has been fairly conceded by the ld. AR during the course of hearing. It is further manifest that all the contentions raised before us, being the treatment of fees as cost of acquisition of shares; or expenses in connection with transfer of shares; or diversion of income by overriding title, 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 jurisdictional High Court or earlier decisions of the same rank; or if it is sub silentio; or if it is rendered per incuriam in the sense that it is patently inconsistent with the statutory or settled legal position, the same should be respected and adhered to by the subsequent benches so that consistency in the approach of the tribunal is achieved. The above referred exceptions can be classified into two categories. First, when there is a direct contrary judgment of the Hon’ble Supreme court or that of the Hon’ble jurisdictional High Court on the point, rendered prior to or after the earlier tribunal order, the later Bench would be fully justified in differing from the earlier contrary view and following the higher wisdom. Second, when the subsequent bench perceives earlier view to be rendered per incuriam or sub silentio etc., the right course for it is to make a reference to the President of the tribunal for constitution of a special bench on the point so that the larger bench may consider whether the earlier view is correct or the perception of the latter bench is correct.

12. Ordinarily neither the assessee nor the Revenue can be allowed to reargue the same issue over and over again, when it has already been decided by a co­ordinate bench of the tribunal. If such a course is allowed, then every single repetitive issue would require reconsideration time and again because the aggrieved party would always try to convince the later bench over its point of view. Following the earlier order or making a reference to the special bench depends on the satisfaction of the Bench about the correctness or otherwise of the earlier order and not that on the view point of the aggrieved party. It is only when a subsequent bench, on being seized of the matter, finds itself unable to endorse the earlier view, either suo motu or on the arguments of the parties, that it may make reference for the constitution of the special bench. The party dissatisfied with the earlier view cannot compel the later bench to either take a contrary view or make a reference for the constitution of the special bench. Thus it follows that once a particular view is taken, the subsequent benches of the tribunal become functus officio on that issue, subject to the exceptions discussed supra. Needless to mention at this juncture that the party unconvinced with the tribunal order is not without remedy 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 VS. Azadi Bachao Andolan (2003) 263 ITR 706 (726,727) (SC). 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 the aspects now raised by the ld. AR before us. These cases do not fall into the exceptions, as discussed supra, justifying departure from the earlier view. We are, therefore, not inclined to revisit all the relevant facts and the legal position on it with a view to test the correctness of these orders. Respectfully following the rule of precedent, we refuse to take a contrary view from that expressed by the Mumbai Benches in the afore-noted cases. The disallowance is thus sustained and resultantly the impugned order is upheld.

15. In the result, the appeal stands dismissed.

Order pronounced in the open Court on this 28th day of September, 2011.

Mumbai : 28th September, 2011. Devdas*

______________________________________________________

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI ‘C’ BENCH

BEFORE SHRI D.MANMOHAN, VICE PRESIDENT &

SHRI T.R.SOOD, ACCOUNTANT MEMBER

I.T.A. NO. 4501! Mum! 2010 –

A.Y- 2006- 07

Pradeep Kumar Harlalka, 14 Thakur Niwas, 173, J.N.Tata Road, Church-gate, Mumbai- 400 020.

PAN: AAAAH 3461 N

Vs.

Asst. Commissioner of I.T., Circle 12(3), Mumbai.
(Appellant) (Respondent)

Appellant by

:

Shri Divyesh I. Shah.

Respondent by

:

Shri Alexander Chandy, Sr. DR

Date of Hearing: 19/07/2011

Date of Pronouncement:

O R D E R

Per T.R.SOOD, AM:

In this appeal various grounds have been raised but at the time of hearing Ld. Counsel of the assessee submitted that the only following four disputes are involved:

1. The Ld. CIT(A) erred in holding that loss arising out of transaction in Futures and Options before 25/01/06 were in the nature of speculative transactions (arising out of ground No.1).

2. The Ld. CIT(A) erred in confirming the disallowance of

i) Portfolio advisory fee of Rs.6,01,224/- &

ii)  50% of share transaction charges amounting to Rs. 1,17,585/- (arising out of ground Nos.2 & 3)

3. The ld. CIT(A) erred in not allowing deduction u/s.80C amounting to Rs. 30,000/-. (arising out of ground No.4)

2. Issue No.1: After hearing both the parties, we find that during assessment proceedings AO noted that assessee had offered a sum of Rs. 3,27,687/- arising out of F&O transactions under the head ‘short  term capital gains’. AO observed that as per the provisions of sec.43[5][d] profit from transaction in F&O was assessable under the head ‘business’ and not ‘capital gains’. He further observed that a sum of Rs.1,35,889/- on account of loss related to the period before 25-01-2006 and the total gain after that date was Rs.4,63,577/-. Therefore, AO subjected the amount of Rs. 4,63,577/- under the head business income and the loss amounting to Rs.1,35,889/- was allowed to be carried forward as speculation loss. On appeal, action of the AO has been confirmed by the ld. CIT(A).

3. Before us Ld. Counsel of the assessee submitted that this issue is covered in favour of the assessee by the decision of the Tribunal in the   case of Gajendra      Kumar T.       Agarwal         vs.      ITO,I.T.A.No.1798/Mum/10 [copy of the order filed] and by Circular No.3/2006 dated 20-7-2006 wherein in the explanatory notes this provision was explained.

4. On the other hand, Ld. DR relied on the order of the CIT(A).

5. After considering the rival submissions, we find that the issue involved in the case of Gajendra Kumar T. Agarwal vs. ITO [supra] is totally different. However, at the same time this issue is settled in favour of the assessee because most of the Benches have taken a view that the decision of the Special Bench of the Tribunal in the case of Shree Capital Services Ltd. [121 ITD 498] holding that insertion of clause [d] in sec.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 Rs.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 Rs.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 Rs.6,01,224/- under the head short term capital gains. The AO was of the view that no such expenditure is allowable u/s.48 and therefore disallowed the same.

7. On appeal, ld. CIT(A) observed that as per sec.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 management fee was in the nature of revenue outgoing therefore could not be treated as cost of acquisition of asset or improvement and since same had nothing to do with the transfer, same was not allowable.

8. Before us, Ld. Counsel of the assessee submitted that share transaction charges are charged by the brokers and therefore same should have been allowed. However, he could not even given bifurcation as to how much was in respect of F&O activity and how much related to the investment. In respect of the issue regarding disallowance of portfolio management expenses, he mainly submitted that this issue is squarely covered by the decision of the Pune Bench of the Tribunal in the case of KRA Holding & Trading Pvt. Ltd. vs. DCIT [11 Taxman 250]. He argued that this decision has been rendered even after considering the decision of the Mumbai Bench in the case of Devendra Motilal Kothari vs. DCIT [136 TTJ 188] wherein it was held that portfolio management fee is not allowable expenditure u/s.48. This has been distinguished in the light of the decision of the Hon’ble Bombay High Court in the case of CIT vs. Shakuntala Kantilal [190 ITR 56]. Therefore, the issue is covered by the latest decision of Pune Bench in the case of KRA Holding & Trading Pvt. Ltd. vs. DCIT [supra].

9. In the alternative the claim for advisory fee and share transaction should be allowed u/s.37[1] while computing the profits and gains from the business and profession. He argued that portfolio advisory fee could also be appropriately apportioned like the shares transaction charges which have been apportioned by the AO © 50% as pertaining to the F&O transactions. This fee should also be apportioned and allowed accordingly.

10. On the other hand, Ld. DR submitted that Pune Bench of the Tribunal in the case of KRA Holding & Trading Pvt. Ltd. vs. DCIT [supra] has used the expression “that expenditure incurred in connection with the transfer of capital assets/securities should be allowed notwithstanding inadequacy of the express provision of slec.48”. This only shows that the expenditure was not allowable as per the provisions and the Tribunal has tried to rewrite the law. He further submitted that in the detailed discussion by the Pune Bench, ultimately the decision of Mumbai Bench in the case of Devendra Motilal Kothari vs. DCIT [supra] where after 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 CIT vs. Shakuntala Kantilal [supra]. However, the decision of Shakuntala Kantilal [supra] came up for consideration later on before the Hon’ble Bombay High Court in the case of CIT vs. Roshanbabu Mohd. Hussein Merchant [275 ITR 231]. 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 Pvt. 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 Pvt. 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 vs. DCIT [supra] should be followed.

11. He further submitted that portfolio advisory fee has nothing to do with either cost of acquisition or even transfer of shares. The fee is charged on percentage basis and even if shares are not transferred or no fresh purchases are made even then such fee is chargeable. He submitted that the alternate contention of the Ld. Counsel that portfolio charges should have been allowed u/s.37[1] is not maintainable because no such contention was raised before the AO or CIT(A) and in any case assessee has not produced any material before the Tribunal to show that portfolio advisory fee related to the transactions of F&O so as to be allowable under the head income from business or profession. He submitted that as far as the expenditure on share transaction is concerned, AO has already bifurcated the same at 50% relating to F&O transactions because this was claimed under the head share trading expenses whereas portfolio fee has been claimed under the head capital gains.

12. We have considered the rival submissions carefully in the light of the material on record as well as decisions cited by the parties. The Ld. Counsel of the assessee has not rebutted the argument of the Ld. DR that portfolio advisory fee has been claimed under the head capital gains, therefore, the alternate contention cannot be entertained and further to examine the allowability we need to concentrate only on sec.48 and the same cannot be allowed u/s.37 because only expenditure incurred in relation to business and profession can be considered u/s.37. Section 48 which is the computing section for determination of capital gains reads as under:

Sec.48. The income chargeable under the head “Capital gains” shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :—

(i) expenditure incurred wholly and exclusively in connection with such transfer;

(ii) the cost of acquisition of the asset and the cost of any improvement thereto:

From the above it is clear that while computing the capital gains only two kinds of expenditure can be deducted from full value of consideration, viz., [i] expenditure incurred wholly and exclusively in connection with such transfer and [ii] the cost of acquisition or any improvement thereto. The thrust of the argument of Ld. Counsel of the assessee is that portfolio advisory fee would constitute an expenditure which has been incurred in connection with the transfor, 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 tranfer 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 vs. DCIT [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 securities. He however has failed to explain as to how the said fees could be considered as cost of acquisition of the shares and securities or the cost of any improvement thereto. He has also failed to explain as to how the said fees could be treated as expenditure incurred wholly and exclusively in connection with sale of shares and securities. On the other hand, the basis on which the said fees was paid by the assessee shows that it had no direct nexus with the purchase and sale of shares and as rightly contended by the Departmental Representative, the said fees was payable by the assessee going by the basis thereof even without there being any purchase or sale of shares in a particular period. As a matter of fact, when the CIT(A) required the assessee to allocate the fees paid for PMS in relation to purchase and sale of shares as well as in relation to the shares held as investment on the last date of the previous year, the assessee could not furnish such details nor could he give any definite basis on which such allocation was possible. The fees paid by the assessee for PMS was not inextricably linked with the particular instance of purchase and sale of shares and securities so as to treat the same as expenditure incurred wholly and exclusively in connection with such sale or the cost of acquisition/improvement of the shares and securities so as to be eligible for deduction in computing capital gains under s.48.”

13. Coming to the decision of Pune Bench of the Tribunal in the case of KRA Holding & Trading Pvt. Ltd. [supra], after perusing the judgment very carefully we find that in that decision the decision of co­ordinate Bench of Mumbai Tribunal in the case of of Devendra Motilal Kothari vs. DCIT [supra] was distinguished mainly on the basis of decision of Hon’ble Bombay High Court in the case of CIT vs. Shakuntala Kantilal [supra]. The Pune Bench referred to various paras of Hon’ble Bombay High Court’s decision in para-22 and ultimately concluded in para-23 that what was required was that the claim should be bona fide and claim for such genuine expenditure has to be allowed so long as incurring of the expenditure is a matter of fact and necessity. However, as pointed out by the Ld. DR this decision was specifically over ruled by the Hon’ble Bombay High Court in the case of CIT vs. Roshanbabu Mohd. Hussein Merchant [supra] and at placitum 18 it has been observed as under:

“As regards the decisions of this court in the case of CIT vs. 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 CIT vs. 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 by the Honourable Supreme Court in the case of CIT vs. Udayan Chinubhai And Ors. [222 ITR 456]. Again the Honourable Supreme Court in the case of CIT vs. Dr. V. P. Gopinathan [248 ITR 449] where the issue was whether interest paid by the assessee to the bank against loan taken on FDR could be allowed against the interest income, the apex court clearly held that such claim was not allowable because interest that assessee received from the bank was income in his hand and it could be diminished only if there was a provision in law  which permits such diminution. In other words, a deduction can be allowed under a particular head only when there is a provision for the same. This can be easily understood by a simple example. Let us say there is one Mr. X who is a salaried employee. He may incur some expenses in connection with his employment say on purchase of books necessary to discharge his duties as an employee. Earlier there was a provision u/s.16[1][a] for standard deduction and he could be allowed such standard deduction subject to limits prescribed. Now, that provision has been removed and thus whatsoever expenditure is incurred may be having close connection with his employment, but the same cannot be allowed in the absence of any such provision. The situation would be different if the same person was receiving the income as commission because in that case the income would be asses-sable under the head business income and purchase of books for rendering such services would constitute business expenditure. This means the allow-ability of expenditure is not dependant on the necessity of the expenditure but it is based on the provision of the Act under a particular head under which income has to be assessed. Another example is brokerage incurred by a person while giving his property on rent. Though this expenditure is necessary for earning rental income but in the absence of any provision, this expenditure is not allowable. See the decision of Honourable Delhi High Court in the case of CIT vs. S. G. Gupta & Sons [149 ITR 253]. Therefore, in case before us as observed earlier the allow-ability of portfolio advisory fee has to  be tested under the provisions of sec.48. As observed above, the Ld. Counsel of the assessee despite specific argument of Ld. DR did not show us as to how the portfolio fee has any connection with the transfer 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 u/s.37 without showing us that how this expenditure pertained to the income asses-sable under the head business and accordingly we reject the alternate claim. The above view is further supported by the decision of the Honourable Bombay High Court in the case of CIT vs. Radio Talkies [238 ITR 872]. In this case the issue was allow-ability of expenditure on payment of retrenchment compensation to the ex-employees. It was one of the conditions precedent to the sale of property that the ex-employees must be paid retrenchment compensation. The Honourable High Court while reversing the order of the Tribunal held that such expenditure was not allowable. In fact after quoting the provision of sec.48 it was observed as under:

“This section lays down the mode of computation of capital gains. Two items are allowed as deductions from the full value of the consideration for which the transfer is made for arriving at capital gains. The first item is expenditure incurred wholly and exclusively in connection with such transfer. The second item is the cost of acquisition of the capital asset and the cost of any improvement thereto. In this case, we are concerned only with the first item. The question that arises for consideration is whether the retrenchment compensation paid by the assessee to its former employees can be regarded as an expenditure incurred wholly and exclusively in connection with the transfer of land and building by the assessee to the purchaser. The expenditure incurred wholly and exclusively in connection with the transfer can be expenditure like commission paid to the broker and/ or similar other expenditure. The retrenchment compensation paid by the assessee to its employees, in our opinion, has no connection whatsoever with the transaction of sale of the land and building. It is connected only with the closure of the business of the assessee in March, 1972. Such expenditure by no stretch of imagination can be regarded as expenditure incurred wholly and exclusively for the purpose of the transaction of sale of the property. The retrenchment compensation has no connection whatsoever with the transfer of property in question. The stipulation in the agreement merely requires the owner to clear all its liabilities on certain accounts and to keep the transferee indemnified. This stipulation cannot change the character of the retrenchment compensation from a liability arising out of the closure of the business to expenditure incurred wholly and exclusively in connection with the transfer of the asset in question.”

From the above it is clear that despite there being a condition for payment of retrenchment compensation before the transfer of the property i.e. there was a necessity for such expenditure till the same was held to be not allowable. Similarly, Honourable Delhi High Court in the case of Smt. Sita Nanda vs. CIT [251 ITR 575] 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 Honourable High Court after quoting sec.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 Tribunal was, therefore, right in its conclusion that the payment of interest was in the shape of damages for late payment of unearned increase. That being so, the interest paid cannot be treated as expenditure incurred wholly and exclusively in connection with the transfer. The answer to the question is in the negative, in favour of the Revenue and against the assessee.”

Thus it is clear that unless and until expenditure is incurred “in connection with such transfer” the same cannot be allowed and as observed by us the expenditure for payment of portfolio management fee has nothing to do with the transfer of shares and this was taken as a specific argument by the Ld. DR against which no submissions were made by the Ld. Counsel of the assessee. Therefore, in our view such expenditure cannot be allowed. Similar view was taken in the case of Devendra Motilal Kothari vs. DCIT [supra]. In view of this discussion, we find nothing wrong with the order of the ld. CIT(A) and confirm the same.

15. However, as far as share transaction charges are concerned they would be allowable if they are in the nature of share brokerage or any other charges charged by the broker, but at the same time Ld. Counsel of the assessee could not give the exact nature of the charges and accordingly we set aside the order of the ld. CIT(A) and remit the matter to the file of the AO with a direction to examine the exact nature of the charges and then adjudicate this issue.

16. Issue No.3: After hearing both the parties we find that assessee had invested a sum of Rs.30,000/- in tax saving scheme of mutual funds and deduction for the same u/s.80C was not claimed in the original return. In fact, it was submitted before us that the claim was made by way of a letter without revising the return. AO has not dealt with this issue. The ld. CIT(A) on appeal rejected the claim on the basis that the claim could not be allowed in the absence of revised return by following the decision of the Honourable Supreme Court in the case of Goetze [India] Ltd. vs. CIT [284 ITR 323].

17. Before us, Ld. Counsel of the assessee argued that assessee had made investment of Rs. 30,000/- which was allowable as deduction u/s.80-C. This issue was taken up before the ld. CIT(A) who dismissed the same in view of the decision of the Honourable Supreme Court in the case of Goetze [India] Ltd. vs. CIT [supra]. He submitted 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. vs. DCIT [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 Honourable Supreme Court in the case of Goetze [India] Ltd. vs. CIT [supra]. However, the Honourable Supreme Court itself has observed in the case of Goetze [India] Ltd. vs. CIT [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 the result, assessee’s appeal is partly allowed for statistical purposes.

Order pronounced in the open Court on this day of 10/8/2011.

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