KRA Holding & Trading Pvt. Ltd vs. DCIT (ITAT Pune)
The assessee entered into an investment management (Portfolio Management Scheme) agreement with ENAM AMC pursuant to which it paid Rs. 2.11 crores as “performance fees/ maintenance fee”. This was treated as a cost of purchase of the shares. The AO disallowed the claim & the CIT (A) confirmed it on the basis that the as the PMS gains were assessable as “capital gains”, the expenditure was neither cost of investment or improvement nor an expenditure incidental to sale. Before the Tribunal, the assessee relied on its own case (KRA Holding & Trading Pvt Ltd vs. DCIT) where it had been held (dissenting from Davendra Kothari 136 TTJ 188 (Mum)) that as there was a nexus between the expenditure and the acquisition of shares, the same was allowable u/s 48. The department relied on Homi K. Bhabha vs. ITO which had (dissenting from KRA Holdings) held that PMS fees is not deductible against capital gains. HELD by the Tribunal:
The assessee entered into an investment management (Portfolio Management Scheme) agreement with ENAM AMC pursuant to which it paid Rs. 2.11 crores as “performance fees/ maintenance fee”. This was treated as a cost of purchase of the shares. The AO disallowed the claim & the CIT (A) confirmed it on the basis that the as the PMS gains were assessable as “capital gains”, the expenditure was neither cost of investment or improvement nor an expenditure incidental to sale. Before the Tribunal, the assessee relied on its own case (KRA Holding & Trading Pvt Ltd vs. DCIT) where it had been held (dissenting from Davendra Kothari 136 TTJ 188 (Mum)) that as there was a nexus between the expenditure and the acquisition of shares, the same was allowable u/s 48. The department relied on Homi K. Bhabha vs. ITO which had (dissenting from KRA Holdings) held that PMS fees is not deductible against capital gains. HELD by the Tribunal:
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