ACIT, CC-VI, Kolkata, Kolkata V. Shri Raghupati Singhania, Kolkata

ITA 1761/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48170 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-05-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 10-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K MISHRA
• Assessee Lawyers: CROSS OBJECTOR SHRI S K LAHIRI
• Keywords: Capital asset; Business income; Cost of acquisition; Assessment record
• Section: 143(3)

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE . . . . . . . . , , , , ! ! ! ! /AND ' #!' , $% ) [BEFORE HONBLE SHRI G. D. AGRAWAL, V.P. & HONBLE SHRI MAHAVIR SINGH, JM] !& !& !& !& / I.T.A NO. 1761/KOL/2010 #'( )* #'( )* #'( )* #'( )*/ // / ASSESSMENT YEAR: 2007-08 ASSISTANT COMMISSIONER OF INCOME-TAX VS. SHRI RAG HUPATI SINGHANIA CENTRAL CIRCLE-VI, KOLKATA. (PAN-AJWPS 3239 E) (,- /APPELLANT ) (./,-/ RESPONDENT ) & C.O.NO.165/KOL/2010 !& !& !& !& / I.T.A NO. 1761/KOL/2010 #'( )* #'( )* #'( )* #'( )*/ // / ASSESSMENT YEAR: 2007-08 SHRI RAGHUPATI SINGHANIA VS. ASSISTANT COMMISSIO NER OF INCOME-TAX CENTRAL CIRCLE-VI, KOLKATA. (CROSS OBJECTOR) (./,-/ RESPONDENT ) & !& !& !& !& / I.T.A NO. 1762/KOL/2010 #'( )* #'( )* #'( )* #'( )*/ // / ASSESSMENT YEAR: 2007-08 DEPUTY COMMISSIONER OF INCOME-TAX VS. SHRI VIKRAM PATI SINGHANIA CENTRAL CIRCLE-VI, KOLKATA. (PAN-AJWPS 3243 A) (,- /APPELLANT ) (./,-/ RESPONDENT ) & C.O.NO.166/KOL/2010 !& !& !& !& / I.T.A NO. 1762/KOL/2010 #'( )* #'( )* #'( )* #'( )*/ // / ASSESSMENT YEAR: 2007-08 SHRI VIKRAMPATI SINGHANIA VS. DEPUTY COMMISSIONE R OF INCOME-TAX CENTRAL CIRCLE-VI, KOLKATA. (CROSS OBJECTOR) (./,-/ RESPONDENT ) & !& !& !& !& / I.T.A NO. 1763/KOL/2010 #'( )* #'( )* #'( )* #'( )*/ // / ASSESSMENT YEAR: 2007-08 DEPUTY COMMISSIONER OF INCOME-TAX VS. M/S. SHRI H ARISHANKAR SINGHANIA CENTRAL CIRCLE-VI, KOLKATA. (PAN-AJWPS 3240 D) (,- /APPELLANT ) (./,-/ RESPONDENT ) 2 ITA 1761-1763/K/201 0 SH. RAGHUPATI SINGHANIA & ORS.. A.Y. 07-08 C.O. NOS. 165-167/K/2010 & C.O.NO.167/KOL/2010 !& !& !& !& / I.T.A NO. 1763/KOL/2010 #'( )* #'( )* #'( )* #'( )*/ // / ASSESSMENT YEAR: 2007-08 M/S. SHRI HARISHANKAR SINGHANIA VS. DEPUTY COMMIS SIONER OF INCOME-TAX CENTRAL CIRCLE-VI, KOLKATA. (CROSS OBJECTOR) (./,-/ RESPONDENT ) FOR THE APPELLANT/DEPARTMENT: SRI P. K. MISHRA FOR THE ASSESSEE/CROSS OBJECTOR: SHRI S. K. LAHIRI $01 / ORDER PER MAHAVIR SINGH/ ' #!' ' #!' ' #!' ' #!' : APPEAL IN ITA NOS.1761 TO 1763/K/2010 BY REVENUE AN D CROSS OBJECTION NOS.165 TO 167/K/2010 BY ASSESSEE ARE ARISING OUT O F THE ORDERS OF CIT(A), CENTRAL-1 KOLKATA IN APPEAL NOS. 75/CIT(A),C-1/CC-VI/09-10, 7 6/CC-VI/CIT(A),C-1/09-10 AND 74/CIT(A),C-1/CC-VII/09-10 ALL DATED 21.06.2010 RESPECTIVELY. ASSESSMENTS WERE FRAMED BY ACIT, C.C-VI, KOLKATA FOR ASSESSMENT YEAR S 2007-08 U/S. 143(3) INCOME TAX ACT, 1961(HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS SEPARATE ORDERS ALL DATED 30.10.2009. FOR THE SAKE OF BREVITY AND CLARITY, WE DISPOSE OF ALL THESE APPEALS AND CROSS OBJECTIONS BY THIS CONSOLIDATED ORDER. 2. THE ONLY COMMON ISSUE IN ALL THESE THREE APPEALS OF REVENUE IS AGAINST THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE BY ASSESSING O FFICER BY HOLDING THAT PROFIT ON SHARE TRADING BY THE ASSESSEE THROUGH PMS AS INCOME FROM CAPITAL GAIN AND NOT BUSINESS INCOME. FOR THIS, THE REVENUE IN ALL THE THREE APPEALS HAS RAISED COMMON GROUND EXCEPT QUANTUM AND THE RELEVANT GROUNDS AS RAISED IN ITA NO.1761/K/201 0 READ AS UNDER: 1.THAT, THE LD. CIT(A), C-I, KOLKATA HAS ERRED IN HOLDING THAT PROFIT ON SHARE TRADING BY THE ASSESSEE THROUGH PMS AS INCOME FROM CAPITAL GAI N AND NOT BUSINESS INCOME. 1A). THAT, IN DOING SO THE LD. CIT(A) ERRED IN PUTT ING EMPHASIS ON THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE AS THE SOLE CRITER ION, IGNORING OTHER IMPORTANT FACTORS LIKE FREQUENCY AND VOLUME OF TRANSACTION. 2. THE LD. CIT(A), FAILED TO APPRECIATE THAT UNDER PMS FUND IS DEPLOYED TO BE USED IN CAPITAL MARKET UNDER EXPERTS AND ARE OBVIOUSLY NOT MEANT FOR LONG TERM INVESTMENT. 3 ITA 1761-1763/K/201 0 SH. RAGHUPATI SINGHANIA & ORS.. A.Y. 07-08 C.O. NOS. 165-167/K/2010 3. THE DECISION OF THE SUPREME COURT RELIED UPON BY THE LD. CIT(A) IS CLEARLY DISTINGUISHABLE AS IN THE INSTANT CASE THE FUND HAS BEEN INVESTED THROUGH PMS WHICH CLEARLY CHANGES THE NATURE OF TRANSACTION. SINCE THE FACTS AND CIRCUMSTANCES ARE EXACTLY IDENT ICAL IN ALL THREE APPEALS, WE WILL DISCUSS THE FACTS FROM ITA NO. 1761/K/2010 AND DECIDE THE ISSUE 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT THE ASSESSEE ALONG WITH OTHER FAMILY MEMBERS (CONNECTED IN OTHER APPEALS I.E. ITA NOS.17 62&1763/K/2010) MADE INVESTMENT OF RS.20 LAKH WITH PMS PRUDENTIAL ICICI AND RS.38 LAK HS WITH AUM KOTAK SECURITIES LTD. FOR PURCHASE AND SALE OF SHARES AND SECURITIES ON THEIR BEHALF AS PER AGREEMENT WITH THEM. ASSESSEE IN ITS BOOKS OF ACCOUNT DECLARED THE SURPL US UNDER THE HEAD SHORT TERM CAPITAL GAINS. ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN WHY SURPLUS SHOULD NOT BE ASSESSED AS TRADING PROFIT OR BUSINESS PROFIT. ASSESSEE EXP LAINED THAT THIS PORT FOLIO MANAGERS (IN SHORT PFM) PURCHASE AND SALE OF SHARES AND SECURITIES ON BEHALF OF THEIR CLIENT ARE DISCLOSED AT THE END OF THE YEAR IN ACCOUNTS SHOWING PROFIT AND LOSS AFTER CHARGING MANAGEMENT FEES, CUSTODY FEES, AUDIT FEES AND OTHER EXPENSES. ASSESSEE ALSO EXPLAINED THAT IT HAD ALWAYS BEEN AN INVESTOR AS SHARES AND NOT A TRADER, WHICH IS EVIDE NT FROM THE PAST ACCOUNTS AND PAST ASSESSMENT RECORDS. HE ALSO CONTENDED THAT HE IS I N INVESTMENT FROM THE VERY BEGINNING I.E. AT LEAST TWENTY YEARS BACK. ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND TREATED THE ENTIRE SALE TRANSACTION AS SHARE TRADING BUSINESS BY HOLDING AS UNDER: IF THE ASSESSEE INTENTS TO BE ASSESSED UNDER CAPIT AL GAIN HEAD, HE SHOULD HAVE SHOWN CAPITAL GAIN WITHOUT DEDUCTING ALL THESE FEES AND EXPENSES LIKE SERVICE CHARGES, MANAGEMENT FEES, OTHER EXPENSES, CUSTODY F EES, NSDL CHARGES ETC. I, THEREFORE, HAVE NO DOUBT THAT INCOME OF THE ASSESSE E FROM TRANSACTIONS OF SHARES AND MUTUAL FUND SHOULD BE ASSESSED UNDER THE HEAD S HARE TRADING BUSINESS. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A)A ND HE ALLOWED THE CLAIM OF ASSESSEE VIDE PARA 3.1 AS UNDER: 3.1. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LD. A.R. THERE IS NO DISPUTE THAT THE ASSESSEE HAS ALWAYS BEEN AND INVESTOR IN S HARES AND NOT A TRADER IN SHARES. THE ONLY DIFFERENCE IN THIS YEAR IS THAT THE ASSESS EE HAS TAKEN PROFESSIONAL HELP FROM THE PORT-FOLIO MANAGERS TO MAXIMISE HIS INVESTMENT. IT IS A SETTLE ISSUE THAT THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE O F THE SHARES DETERMINES WHETHER IT IS BEING MADE FOR INVESTMENT OR TRADE. THE TRANSACTION CARRIED OUT THROUGH THE PORT- FOLIO MANAGERS WILL NOT CHANGE THE CHARACTER OF THE INVESTMENT. CONSIDERING ABOVE AND THE SUBMISSION OF THE LD. A.R THE A.O IS DIREC TED TO CALCULATE THE PROFIT FROM SHARE TRANSACTION UNDER THE HEAD CAPITAL GAINS. AGGRIEVED AGAINST THIS FINDING, REVENUE IS IN APPEA L BEFORE US. 4 ITA 1761-1763/K/201 0 SH. RAGHUPATI SINGHANIA & ORS.. A.Y. 07-08 C.O. NOS. 165-167/K/2010 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE HAD ALWAYS BEEN AN INVEST OR IN SHARES AND NOT A TRADER AND TO SUPPORT THIS CONTENTION, THE ASSESSEE FILED COPIES OF ACCOU NTS FOR THE PAST ASSESSMENT YEARS I.E. 2000-01 TO 2005-06 AND RELEVANT COPIES OF ASSESSMENT ORDERS FOR THESE ASSESSMENT YEARS. HE ENCLOSED THESE COPIES IN HIS PAPER BOOK. THE ASSESSEE ALSO F ILED COPIES OF ACCOUNT FOR THE RELEVANT ASSESSMENT YEAR 2007-08 IN HIS PAPER BOOK WHICH PRO VES THAT SHARES AND SECURITIES ARE HELD AS INVESTMENT AND NOT STOCK IN TRADE. EVEN THE COPIES OF PFM LIKE PRUDENTIAL ICICI PORT-FOLIO MANAGEMENT SERVICES LTD. AND AUM KOTAK SECURITIES L TD ARE ENCLOSED IN THE ASSESSEES PAPER BOOK, CLEARLY REVEALS THAT THE SAME SURPLUS GENERATED IS REFLECTED UNDER THE HEAD SHORT TERM CAPITAL GAINS OR LONG TERM CAPITAL GAINS, AS T HE CASE MAY BE. IT WAS THE CONTENTION OF THE ASSESSEE THAT THE PFMS HAVE NO AUTHORITY TO CHA NGE THE CHARACTER OF THE INVESTMENT. IN VIEW OF THESE EVIDENCES, WE ARE OF THE VIEW THAT TH E TRANSACTIONS CARRIED OUT BY PFMS ON BEHALF OF THESE ASSESSEES WERE IN THE CAPITAL FIELD AND THE SURPLUS GENERATED IS EITHER SHORT TERM CAPITAL GAINS OR LONG TERM CAPITAL GAINS, AS T HE CASE MAY BE. WE FURTHER FIND THAT THE REVENUE IN EARLIER YEARS IS ASSESSING THE SAME INVE STMENT AS SHORT TERM CAPITAL GAINS OR LONG TERM CAPITAL GAINS SINCE INCEPTION OF INVESTMENT MA DE BY THE ASSESSEE. WE ARE OF THE VIEW THAT THE ASSESSEE WHILE MAKING INVESTMENT HAS TAKEN EXPERTS ADVISE AND FOR THAT UTILISED THE SERVICES OF PFMS TO MAXIMIZE HIS INVESTMENT AND INT ENTION OF THE ASSESSEE FROM THE TIME OF PURCHASE OF SHARES TO THE SALE OF SHARES IS VERY C LEAR I.E. THE INVESTMENT. WE ARE OF THE VIEW THAT IN CASE TRANSACTIONS ARE CARRIED OUT THROUGH P FMS, IT CANNOT CHANGE THE CHARACTER OF TRANSACTION AND TRANSACTION WILL REMAIN OF INVESTME NT. ACCORDINGLY, WE ARE OF THE VIEW THAT CIT(A) HAS RIGHTLY HELD THE SURPLUS TO BE ASSESSED UNDER CAPITAL GAINS EITHER SHORT TERM CAPITAL GAINS OR LONG TERM CAPITAL GAINS, AS THE CA SE MAY BE. ACCORDINGLY, WE CONFIRM ORDERS OF CIT(A) AND THIS ISSUE OF ALL THE THREE AP PEALS OF THE REVENUE ARE DISMISSED. 5. COMING TO CROSS OBJECTIONS OF THE ASSESSEE. THE SAME ISSUE RAISED IN ALL THE THREE CROSS OBJECTIONS AND SINCE THE FACTS AND CIRCUMSTAN CES ARE EXACTLY IDENTICAL, EXCEPT QUANTUM INVOLVED IN ALL THREE CROSS OBJECTIONS, WE WILL DIS CUSS THE FACTS FROM C.O. NO. 165/K/2010 AND DECIDE THE ISSUE. THE GROUND RAISED IN CO NO.16 5/K/2010 READS AS UNDER: THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN HOLDING T HAT THE MANAGEMENT FEES AND OTHER EXPENSES PAID TO PORTFOLIO MANAGERS AT RS.1,3 8,108/- AND CUSTODY FEES PAID AT RS.5,945/- ARE NOT ALLOWABLE DEDUCTIONS U/S . 48 OF THE I. T. ACT, 1961 IN COMPUTING THE SHORT TERM CAPITAL GAINS DERIVED THRO UGH THE PORTFOLIO MANAGERS. 5 ITA 1761-1763/K/201 0 SH. RAGHUPATI SINGHANIA & ORS.. A.Y. 07-08 C.O. NOS. 165-167/K/2010 6. WE FIND THAT THE ASSESSING OFFICER HAS DISALLOWE D EXPENSES UNDER THE HEAD MANAGEMENT FEE AND OTHER EXPENSES, CUSTODY FEE AND SECURITY TRANSACTION TAX AS NOT ALLOWABLE. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). ASSESSEE BEFORE CIT(A) SUBMITTED THE DETAILS AS UNDER: I AM FURNISHING BELOW A CHART SHOWING MY CLAIM OF DEDUCTIONS FROM MY INCOME UNDER HEADS LONG TERM CAPITAL GAINS AND SHORT TER M CAPITAL GAINS THROUGH PORTFOLIO MANAGERS DURING THE ASST. YEAR 2007-08. HEADS OF EXPENDITURE AGAINST SHORT TERM CAPITAL GAINS AGAINST LONG TERM CAPITAL GAINS TOTAL MANAGEMENT FEE & OTHER EXPENSES CUSTODY FEE SECURITIES TRANSACTION TAX TOTAL RS.1,38,108/- RS. 5,945/- RS. 14,454/- RS.1,58,507/- RS.19,117/- RS. 1,117/- RS. 2,132/- RS.22,366/- RS.1,57,225/- RS. 7,062/- RS. 16,586/- RS.1,80,873/- THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OF FICER BY CONFIRMING THE ADDITION OF MANAGEMENT FEE AND CUSTODY FEE BY GIVING FOLLOWING FINDING IN PARA 3.2 OF HIS APPELLATE ORDER: 3.3. HOWEVER IT IS NOTICED THAT THE ASSESSEE HAS N OT CALCULATED THE CAPITAL GAIN AS PER PROVISION OF SECTION 48 OF THE ACT. THERE IS NO DIS PUTE THAT AS PER PROVISION OF SECTION 48 ONLY FOLLOWING DEDUCTION ARE ALLOWABLE FROM THE VAL UE OF THE CONSIDERATION RECEIVED NAMELY A) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN C ONNECTION WITH SUCH TRANSFER B) THE COST OF ACQUISITION OF THE ASSET AND THE COS T OF IMPROVEMENT THERETO THE MANAGEMENT FEE AND THE CUSTODY FEE PAID IS NEIT HER RELATED TO THE COST OF ACQUISITION NOR IN ANY WAY SAID TO IMPROVE THE VALU E OF THE ASSET. FURTHER THIS EXPENDITURE IS ALSO NO WAY SAID TO HAVE BEEN INCURR ED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER OF THE SHARES. THESE EXPENDITURE CAN ONLY BE SAID TO HAVE BEEN MADE ON PAYMENTS TO THE EXPERTS TO MAXIMISE TH E INVESTMENT OF THE ASSESSEE. HOWEVER THE DEDUCTION ALLOWABLE UNDER SECTION 48 IS SPECIFIC .THE EXPENDITURE SHOULD MUST BE DIRECTLY RELATED TO ACQUISITION AND TRANSFE R OF THE CAPITAL ASSET. FURTHER THE SECURITIES TRANSACTION TAX IS NOT AN ALLOWABLE EXPE NDITURE AS ADMITTED BY THE APPELLANT. CONSIDERING ABOVE THE A.O IS DIRECTED TO RECALCULAT E THE S.T.C.G AFTER DISALLOWING THE EXPENDITURE CLAIMED UNDER THE HEAD MANAGEMENT FEE, CUSTODIAN FEE AND S.T.T. THE INCOME DECLARED BY THE ASSESSEE UNDER THE HEAD S.T. C.G WILL BE ENHANCED ACCORDINGLY. 7. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE HAS CLAIMED MANAGEMENT FE E AND OTHER EXPENSES PAID TO PMFS AND ALSO CLAIMED CUSTODY FEE FOR DEMAT CHARGES. NOW TH E CLAIM OF THE ASSESSEE IS THAT THESE EXPENSES ARE ADMISSIBLE DEDUCTION U/S. 48 OF THE AC T. FOR THIS LD. COUNSEL FOR THE ASSESSEE HAS MADE ARGUMENTS AS UNDER: 6 ITA 1761-1763/K/201 0 SH. RAGHUPATI SINGHANIA & ORS.. A.Y. 07-08 C.O. NOS. 165-167/K/2010 AS PER PROVISION OF SECTION 48, THE INCOME CHARGEA BLE UNDER THE HEAD CAPITAL GAIN SHALL BE COMPUTED BY DEDUCTING FROM THE FULL VALUE OF THE CO NSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET THE FOLLOWING AMOUNT, NAMELY: I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH SUCH TRANSFER, II) THE COST OF ACQUISITION OF THE ASSET AND THE COST O F IMPROVEMENT THERETO. AS REGARDS TO CUSTODY FEE FOR DEMAT CHARGES THE LD. COUNSEL ARGUED THAT THIS DEMAT CHARGES ARE PAID FOR CUSTODY OF SHARES AND SECURITIES AFTER PURCHASE AND TILL THE DATE OF SALE/TRANSFER. HE STATED THAT DEMAT ACCOUNT IS NOW STATUTORILY COMPUL SORY TO MAINTAIN AND WITHOUT THAT NO TRANSACTION IN STOCK EXCHANGES CAN BE CARRIED OUT. HE ALSO STATED THAT WITHOUT KEEPING THE SHARES AND SECURITIES IN THE DEMAT ACCOUNT, THE SAM E CANNOT BE PURCHASED OR SOLD AND IN SUCH CIRCUMSTANCES THESE EXPENSES ARE ALLOWABLE AS DEDUC TION UNDER CLAUSE (I) AND (II) OF SECTION 48 OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE RELIE D ON THE DECISION IN THE CASE OF DAMODAR G. NAGALIA VS. ACIT (2007)12 SOT 599 (MUM), WHEREIN TH E ASSESSEE OWNED A FLAT IN A HOUSING COOPERATIVE SOCIETY. HE PAID RS.4 LAKHS TO THE HOU SING COOPERATIVE SOCIETY TO OBTAIN NO OBJECTION CERTIFICATE (NOC) FROM THE SOCIETY AND CL AIMED THE SAME AS A DEDUCTION IN COMPUTING CAPITAL GAIN ON THE SALE OF THE FLAT. IN THE ASSESSMENT IT WAS DISALLOWED AS DEDUCTION. THE ITAT HELD THAT THE OBTAINING OF THE NOC FROM THE HOUSING COOPERATIVE SOCIETY WAS NECESSARY FOR THE PURPOSE OF SALE OF TH E FLAT. THEREFORE, IT WAS AN ALLOWABLE DEDUCTION U/S. 48 OF THE I. T. ACT IN COMPUTING CAP ITAL GAIN. 8. NOW WE HAVE TO EXAMINE THE PROVISION OF SECTION 48 AND THE RELEVANT PROVISIONS READS AS UNDER: ( MODE OF COMPUTATION) 48. THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAIN S 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 AMO UNTS, NAMELY I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN C ONNECTION WITH SUCH TRANSFER, II) THE COST OF ACQUISITION OF THE ASSET AND THE CO ST OF ANY IMPROVEMENT THEREOF; WHAT CAN BE DEDUCTED UNDER SECTION 48(1)(A)(I) AND (II) IS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER CONTEMP LATED BY SECTION 45. IN COMPUTING CAPITAL GAINS, EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF A CAPITAL ASSET HAS TO BE DEDUCTED UNDER SECTION 48(1)(A)(I)& (II). THE WORDS IN CONNECTION WITH SUCH TRANSFER OCCURRING IN THAT SECTION MEAN INTRINSICA LLY RELATED TO THE TRANSFER. THERE IS NO WARRANT FOR IMPORTING A RESTRICTION THAT, TO QUALIFY FOR DE DUCTION, THE EXPENDITURE MUST NECESSARILY HAVE 7 ITA 1761-1763/K/201 0 SH. RAGHUPATI SINGHANIA & ORS.. A.Y. 07-08 C.O. NOS. 165-167/K/2010 BEEN INCURRED PRIOR TO THE PASSING OF TITLE. IT IS IMMATERIAL WHETHER THE ELIGIBLE EXPENDITURE WAS INCURRED PRIOR OR SUBSEQUENT TO THE PASSING OF TITLE. BUT IN THE PRESENT CASE BEFORE US, THE EXPENDITURE IN THE NATURE OF MANAGEMENT FEE AND OTH ER EXPENSES PAID TO PMFS AND CUSTODY FEE PAID FOR MAINTAINING DEMAT ARE NOT IN RELATION TO T RANSFER OF SHARE RATHER IT IS PAID FOR PRESERVATION OF ASSETS I.E. THE SHARES AND SECURITI ES. MAINTAINING DEMAT ACCOUNT IS STATUTORILY COMPULSORY BUT CUSTODY FEE PAID ARE FOR TAKING CARE OF THE PORT FOLIO BY THE COMPANY FOR MAINTAINING DEMAT ACCOUNT. SIMILARLY, THE MANAGEME NT FEE AND OTHER EXPENSES PAID TO PMFS ARE ALSO IN THE NATURE OF ADVISORY EXPENSES AND CAN NOT BE DEDUCTED FROM THE CAPITAL GAINS UNDER SECTION 48 OF THE ACT. ACCORDINGLY, WE CONFI RM THE ORDER OF CIT(A) AND C.OS OF THE ASSESSEE ARE DISMISSED. 9. IN THE RESULT, THE APPEALS OF THE REVENUE AS WEL L AS THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. 10. ORDER PRONOUNCED IN OPEN COURT ON 27.05.2011. SD/- SD/- . . . . . . . . , ' #!' , $% (G. D. AGRAWAL) (MAHAVIR SINGH) VICE PRESIDENT JUDICIAL MEMBER ( 2 2 2 2) )) ) DATED 27TH MAY, 2011 34 #'5 #6 JD.(SR.P.S.) $01 7 .##8 08)9- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT DCIT/ACIT, CENTRAL CIRCLE-VI, KOLKATA. 2 ./,- / RESPONDENT SHRI RAGHUPATI SINGHANIA, SHRI VIKRA MPATI SINGHANIA AND SHRI HARISHANKAR SINGHANIA, 7, COUNCIL HOUSE ST REET, KOLKATA-700 001. 3 . #1' ( )/ THE CIT(A), KOLKATA 4. 5. #1' / CIT KOLKATA 8>#? .#' / DR, KOLKATA BENCHES, KOLKATA /8 .#/ TRUE COPY, $01'@/ BY ORDER, ' ! /ASSTT. REGISTRAR .