DEUTSCHE ASSET MANAGEMENT (INDIA) PVT. LTD., MUMBAI V. DCIT- CIRCLE 2(1)(1), MUMBAI

ITA 2870/MUM/2018

AI Insights

The case involves Deutsche Asset Management India P.Ltd, which appealed against the orders of the Commissioner of Income-tax (Appeals) concerning the assessment years 2011-12 and 2014-15. The primary issues revolved around the classification of losses incurred from the sale of investments and the taxability of certain expenses. The Tribunal examined whether the losses were to be treated as business losses or short-term capital losses and whether certain expenses were subject to TDS. The Tribunal found that the losses were incurred out of business exigency to protect the company's reputation and prevent investor withdrawals, thus allowing them as business losses. Additionally, it was determined that certain expenses did not require TDS deduction, leading to the allowance of those claims.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125774 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 18-12-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 06-05-2018
• Other Referred Cases: Bafna Charitable Trust v. CIT, CIT vs. TEMPLETON Asset Management (India) (P. Ltd.), SBI Funds Management P. Ltd
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business expenditure; Revised return; TDS; Capital Gains
• Section: 143(3); 43

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JM & SHRI PRASHANT MAHARISHI, AM आयकरअपीलसं./ I.T.A. No.2599/Mum/2017 (निर्धारणवर्ा / Assessment Year: 2011-12) Deutsche Asset Management India P.Ltd 14 th Floor, The Capital G Block, C-70, BKC, Mumbai-400051 बिधम/ Vs. Asst CIT CIR 2(1) (1) Mumbai- 400021 स्थायीलेखासं./जीआइआरसं./PAN No AABCD5226D (अपीलाथी/Appellant) : (प्रत्यथी / Respondent) आयकरअपीलसं./ I.T.A. No.2870/Mum/2018 (निर्धारणवर्ा / Assessment Year: 2014-15) Deutsche Asset Management India P.Ltd 14 th Floor, The Capital G Block, C-70, BKC, Mumbai- 400051 बिधम/ Vs. DCIT- CIRCLE 2(1) (1) Room No.561, 5 th Floor, Aayakar Bhavan, M.K Road, Mumbai- 400020 स्थायीलेखासं./जीआइआरसं./PAN No AABCD5226D (अपीलाथी/Appellant) : (प्रत्यथी / Respondent) अपीलाथीकीओरसे/ Appellant by : Shri. P.J. Pardiwala, Niraj Sheth प्रत्यथीकीओरसे/Respondent by : Shri. Rakesh Garg (Sr.Ar) सुनवाईकीतारीख/ Date of Hearing : 19.12.2022 घोषणाकीतारीख / Date of Pronouncement : 28.02.2023 2 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD आदेश / O R D E R Per Amit Shukla, Judicial Member: The aforesaid appeal has been filed by the assessee against separate impugned order dated 31.01.2017, passed by the Ld. CIT (appeals) 3 Mumbai, for the quantum of assessment passed u/s 143(3) for the AY 2011-12 and by Ld. CIT (appeals) 4 Mumbai for the quantum of assessment passed under section 143(3) for the assessment Year 2014-15. 2. In the Assessment Year 2011-2012 Assessee has raised following grounds. (1) On the facts and circumstances of the case and in law, the Commissioner of Income-tax (Appeals) 3. Mumbai (hereinafter referred to as the CIT (A)) erred in upholding the disallowance made by the assessing officer (hereinafter referred to as AO) of business loss on sale of investments of Rs 2.81.01.349 and treating the same as 'Short term capital loss. (2) On the facts and circumstances of the case and in law, the CIT (A) erred in upholding the taxability of interest income of Rs.36,389,963 generated out of investment of surplus business income under the head income from other sources as against offered to tax as 'business income by the appellant in Revised Return of Income. 3 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD (3) On the facts and circumstances of the case and in law, the CIT (A) erred in confirming the disallowance of stale cheque liabilities of Rs. 21.09.456 by holding that these could not have been discharged after a long time span of five years without appreciating that these have been reversed in FY 2016-17. The CIT (A) ought to have directed the AO to grant deduction of such liabilities in the year under appeal or alternatively in FY 2016-17 after due verification. (4) On the facts and circumstances of the case and in law, the CIT (A) erred in confirming the disallowance of Rs. 44,62.117 debited to profit & loss account as 'scheme related expenses under section 40(a)(ia) of the Act. The CIT (A) failed to appreciate that these are brokerage expenses on mutual fund units and hence exempt from TDS under the provisions of the Act. (5) On the facts and circumstances of the case and in law, the CIT (A) erred in confirming the disallowance of Rs 1.51,00,806 debited to profit & loss account as 'scheme related expenses under section 40(a)(ia) of the Act. The CIT(A) failed to appreciate that these expenses are payable to Deutsche mutual fund and hence, exempt from TDS under the provisions under the Act In any event, these are pure reimbursements and hence no tax was required to be deducted at source. 4 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD (6) The CIT (A) erred in confirming interest of Rs. 44,78,779 levied by the AO under Section 234D of the Act. Based on the outcome of the appeal, the AO be directed to re- compute interest under section 234D of the Act. 3. The facts in brief are that Assessee Company was incorporated on 21 st March, 2002 as a Pvt. Ltd Company which obtained registration from the Securities and Exchange Board of India (SEBI) to function as an Asset Management Company for the Deutsche Mutual Fund with effect from 29 October 2002. The company has also been granted a Certificate of Registration as 'Portfolio Manager' by SEBI on 16th January 2008, to carry on Portfolio Management Services ('PMS'). The Assessee Company acts as an investment manager to the Fund' Further it also provides investment advisory and marketing advisory services to various entities including group entities. Deutsche India Holdings Private Limited ('DIHPL), a company incorporated in India, and its nominees hold 100% of the share capital of the Company. 4. In so far as the issue raised in ground no.1 is concerned, the Assessing Officer noted that Assessee has debited amount of Rs. 2.81 Crores in the profit and loss account under the head “loss on 5 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD sale of investment”. In response to the show cause notice the Assessee submitted and stated as under: "Note on business exigency for purchase of debentures issued by Vishal Retail Limited from Deutsche Trustee Services India Pvt. Ltd. (DTSIPL)  DAMIPL is an asset management company. Under an investment management agreement with Deutsche Trustee Services Private Limited (DTSIPL), DAMIPL is the investment manager of all the schemes of Deutsche Mutual Fund (DMF). DAMIPL manages all the equity and debt schemes of DMF.  One of the schemes managed by DAMIPL is DWS Money Plus Fund which had made an investment in unsecured debentures of Vishal Retail Ltd. This investment had turned into NPA on 25 October 2009 requiring the writing off of the value of investments as per the provisioning requirements prescribed by SEBI for NPA.  Due to such provisioning/writing down requirements, the NAV of the Fund would have decreased causing a loss to the customers of this scheme. This is on account of the fact that the customers invest in debt schemes to protect their capital investment and earn a 6 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD consistent returns on the same as debt returns are less volatile than equity scheme returns.  Due to this loss, the customers would have withdrawn funds from not only this scheme but also other schemes of DMF. Customers of debt schemes are loss averse and tend to completely withdraw their investments from the schemes of the Mutual Fund. This would have resulted in a situation of borrowings to meet the redemption.  This would have further severely impacted the business of DAMIPL and also its future profitability. The future growth of the assets of all schemes was at stake and accordingly it was decided by DAMIPL to purchase the asset.  DAMIPL therefore, bought out the investments in unsecured debentures of Vishal Retail Ltd, at written down value from the Trustees of DWS Money Plus Fund (i.e. DTSIPL) in September 2010.  Further, TPG V W Ltd. and TPG Wholesale Pvt. Ltd. (TEG Group) were in discussion with Vishal Retail Limited for buyout of the Company and Debt Restructuring. Subsequently, DAMIPL entered into settlement arrangement with TPG Group in March 2011 and received a total consideration as full settlement. 7 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD  The amount paid towards purchase of debentures was Rs. 22,81,01,349 and therefore the consequent loss of Rs.2,81,01,349 being the business loss arising out of the settlement has been debited to profit and loss account of the Company." 5. However, the Ld. AO held that loss on account of purchase in sale of investments, i.e., debenture is a capital asset and therefore, any loss or gain will fall under the head capital gains. Thus he held that loss of Rs. 2,81,01,349/- is a short term capital loss and same can be carried forward/ set of with other heads during the year. Apart from that, he also held that, the Assessee has purchased the loss from another entity and therefore, Assessee was not legally liable to purchase the loss. Further, Investment is not part of stock- in-trade for the Assessee Company and therefore, same cannot be allowed as business loss. 6. The Ld. CIT (A) confirm the staid addition after observing and holding as under: 6.3 I carefully considered the rival submissions and facts of the case. However, I did not find any merit in the submission of the appellant. The appellant's business is to provide management services to Deutsche Mutual Fund. The appellant has stated that 8 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD as per Regulation 25 of SEBI (MF) Regulations, 1996, it is obliged to exercise due diligence and care in all its investment decisions, and responsible for the acts of commission or omission by its employees or the persons whose services have been procured by the Asset Management Company. I did not find any force in the argument of the appellant because of the fact that: Firstly, the said regulations do not bind the AMC to buy out any distressed asset purchased on behalf of mutual fund managed by it. Secondly, even if it might be a commercial decision of the appellant to buy such debentures, still it would be incorrect to say that the said debentures became stock- in-trade of the appellant. Buying an asset for business may also be a commercial decision. The appellant is not in the business of regular buying/selling of securities, and itself defined the debentures purchased as "Investment" in books of accounts, hence, the same constituted a "capital asset" in hands of the appellant. 6.4 The Hon'ble High Court of Bombay in the case of Bafna Charitable Trust v. CIT [1998] 230 ITR 864 (Bom.) has held that "Capital asset' has been defined in clause (14) of section 2 to mean property of any kind held by an assessee, whether or not connected with his business or profession, except those specifically excluded. The exclusions are stock-in-trade, consumable stores or raw materials held for the business or profession, personal effects, agricultural land and certain bonds. It is clear from the above definition that for the purpose of this clause, property is a word of 9 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD widest import and signifies every possible interest which a person can hold or enjoy except those specifically excluded." The debentures purchased by the appellant does not fit into the said exclusions, hence constitutes a capital asset in hands of appellant. Further, the use of phrase 'whether or not connected with his business or profession' also signifies that the existence of business expediency in purchasing a capital asset is not a relevant factor. 6.5 The case laws relied upon by the appellant are distinguishable, since the same are in regard to business expenses and not purchase of business asset. The appellant's alternate plea that it could have reimbursed the loss to the Fund or not claimed the AMC fees from the fund could have been on a difference footing. In my opinion, the manner in which a transaction is executed can have bearing on its treatment for tax purposes. In present case, the capital asset is purchased and sold hence loss from such transactions is correctly assessed as short term capital loss. In view of above facts and circumstances of the case, I did not find any reason to interfere in the finding of the Assessing Officer and hence Ground No. 1 is dismissed. 7. We have heard the rival submissions and also perused the relevant finding given in the impugned orders. As noted above Assessee is an Asset Management Company registered with „SEBI‟, under the Investment Management Agreement with Deutsche Trustee Services Private Limited (DTSIPL), whereby the assessee 10 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD is the asset manager of all the schemes of Deutsche Mutual Fund (DMF). The assessee manages all the equity and debt schemes of DMF. One of the schemes managed by the appellant was „DWS Money Plus Fund‟ which had made an investment in unsecured Non-Convertible debentures (NCDs) of Vishal Retail Limited (VRL) on 25 February 2009 with maturity on 25 August 2009. 8. Before us, the Ld. Senior Counsel on the basis of records submitted that VRL paid its interest dues up to 25 June 2009. For Interest due on 25 July 2009, cheque given by VRL was dishonored on the grounds of insufficient funds. However, as the principal and the interest amount was not paid on the due date, no further interest was accrued and the asset was classified as a non performing asset with effect from October 25, 2009 in the books of DMF as per SEBI circular bearing reference no. MFD/CIR/8/92/2000 dated 18 September, 2000. Further, the net worth of VRL as on March 31, 2010 was also eroded. A provision for non-performing asset, aggregating Rs. 224,282,527 was made by DMF against the receivable as at 31 March 2010 representing 44.86% of the NCD amount. During the year ending 31 March 11 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD 2011, additional provision for the period April 01, 2010; September 17, 2010 to the extent of Rs.47,616,124 was made. Accordingly, a total provision aggregating to Rs.271,898,650 was made by the DMF representing 54 % of the total receivables from VRL. The Fund's gross assets fell sharply as a consequence as stated below. Assessment Year Financial Year Gross Gross Assets (Rs.) Investment Management & Advisory Fees (Rs.) 2009-10 2008-09 3,4048,95,000 719,15,000 2010-11 2009-10 2,857,258,914 3,597,694 2011-12 2010-11 6,380,962,112 4,006,754 The NPA as a % of net assets of the fund as at August 2009 end was 36% with the reduced size of the fund, further NPA provision could not be made without significant fall in the fund NAV. 9. Ld. Counsel explained that during this period, the assessee was in discussion with TPG V W Limited and PTG Wholesale Private Limited (TPG Group), who were the potential buyer of VRL. This was subject to necessary approval by the shareholders of VRL. TPG made a tentative offer to buy out the debt from the books of the said fund and the indicative price was around 25% as a one-time 12 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD settlement. Alternatively, the assessee was likely to be offered new instruments in the new company floated by TPG. As per the estimates available at that point of time, the realisable amount by participating in the Corporate Debt Restructuring (CDR) would have been around 40% of the amount due, subject to the fact that the debts are to be held for about 6-9 months. If the Value of the NPA was to be written down in accordance with the valuation at that point in time, then the NAV of the fund would have taken a sharp hit and returns would have turned negative. Since DWS Money Plus Fund was a money market oriented fund, the impact of returns turning negative would have adverse consequences on the AMC as there was a high likelihood of redemption run across other funds. This would have caused: i) Distress sale of assets in all funds to create liquidity, ii) Returns of other funds getting impacted; iii) Situation of borrowing to meet possible redemptions. As a result, the business of the AMC would have been severally impacted which would have had a bearing on the future profitability of the assessee. In the view of non-recoverability of outstanding 13 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD amounts and taking into account the financial conditions and market reputation of the issuer;  Firstly, the assessee took over the entire holding in the VRL NCDs on September 17, 2010 at book value at 46% of the amount invested aggregating to Rs 228,101,349.  Secondly, as VRL failed to fully repay the outstanding principal and interest in connection with the NCD's, the assessee entered into a settlement arrangement with TPG Group in March 2011. Under the settlement agreement, the assessee received a total consideration of Rs. 20,00,00,000 as full settlement of claims in respect of NCD against Vishal Retail Limited.  Lastly, the amount paid towards purchase of NCD was Rs.22,81,01,349 and therefore, the consequent loss of Rs 28,101,349 (i.e., Rs 22,81,01,349 - 20,00,00,000) being the business loss arising out of the settlement has been debited to profit and loss account of the appellant. 10. Accordingly, Ld. Counsel submitted that the Assessee being an Asset Management Company and as Investment Manager of all the scheme of Deutsche Mutual Fund, it manages all the equity and 14 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD date schemes. It earns investment management fees based on the average of daily net asset under management of mutual funds schemes of the mutual fund. Even according to the Regulation 25 of “SEBI (MF) Regulations, Asset Management Company” assessee is responsible for the nature and type of investments made by the funds, and if a particular investment does not provide returns or is not performing well, it reflects in the capabilities and the obligation of the “Asset Management Company”. Here in this case, the decision to purchase the debenture of VRL was taken out of „business exigency‟ to save the business reputation and the investors running away from the Assessee. If the Assessee would not have purchase the debentures, the unit holders of the mutual funds would have withdrawn funds from all schemes of DMF which could have impacted severally the profitability of the Assessee. It was purely to protect its business form loss; Assessee purchased the debentures at written of value. Thus, the loss of Rs. 2,81,01,349/- incurred was for the purchase of business necessitated by commercial expediency. In support of his contention its strongly relied upon the decision of Hon‟ble Bombay High Court in the case of, CIT vs. TEMPLETON Asset 15 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD Management (India) (P. Ltd.) (2012) 340 ITR 379 (Bom), wherein, it was held that AMC of mutual funds due to business exigency claimed and recovered from mutual funds lesser amount of amount expenditure, fees, etc, actually incurred during the course of its business, then same is a allowable as revenue expenditure. Further, he strongly relied upon the decision of ITAT Mumbai bench in the case of “SBI Funds Management P. Ltd” ITA No. 4001/Mum/2002 order dated 27 June, 2007 wherein similar facts the matter was decided in the favor of the Assessee. 11. On the other hand, the Ld. DR submitted that, first of all, Assessee was not legally obliged to suffer the loss or to buy the debenture at a loss, because, it is only a Asset Management Company. Moreover the Assessee had shown it as AN investment in the books and therefore, it has rightly been held to be short term capital loss. He THUIS strongly relied upon the order of the Ld. CIT (Appeals). 12. We have noted the submissions of the parties and the facts borne from the records as discussed here in before in detail. The Assessee as AMC was managing the scheme of „DWS Money Plus 16 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD Fund‟ which has made investment in un secured non-convertible debentures of “Vishal retail Ltd”. Due to various circumstances as stated above, this Asset was classified as None Performing Asset in the books of DMF as per SEBI circular and net worth of VRL was also eroded. Due to this factor Assessee entered into a deal with TPG Group which made an offer to by the debts from the books of the said funds which was 25% as one time settlement, Thus, Assessee genuinely made efforts to save the investment and also the interest of investors in the said scheme. The Assessee received Rs. 20 crores as a full settlement of claims in respect of debentures and has paid Rs. 22.81 crores for the debenture and therefore, there was a loss of Rs. 2.81crores. Thus, in order to save its reputation with the investors not only in this scheme, but also in other schemes, in order to prevent investors withdrawing the funds, Assessee had taken this business decision to buy the debenture and in that process has incurred a loss. The Assessee though earning management fees as an investment advisory, but it would have impacted its entire earning and profitability, if the investors would have withdrawn the funds from the various schemes. This decision was to preserve the business reputation and to preserve 17 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD the primary source of business. If the reputation of Assessee as a Asset Management is at stake and if a particular mutual fund in which assessee had advised for the investment was going down the stream, the Assessee would have been impacted and equally the looser not only in this particular scheme but also its reputation for others schemes also as an Investment adviser. Such decision taken for commercial consideration and business exigency cannot be held that it is not for the business purpose. If expenses have been incurred for the preservation and protection of the Assessee‟s business, then same has been held to be allowable by the Hon‟ble Supreme Court the case of CIT vs. Birla Cotton Spinning and Weaving Ltd., reported in 82 ITR 166. Even though, Assessee might have shown purchase of NCD of VRL under the head investment that does not lead to conclusive decision that any loss of sale of investment is purely on account of capital. 13. We find that the similar issue had come for consideration before this Tribunal in the case of SBI Funds Management P.Ltd (Supra) wherein this bench after referring and relying upon various decisions on similar set of facts & circumstances held that it of 18 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD business expenditure. Accordingly, we agree with the contention of the Ld. Counsel that loss of Rs 2.81 crores sale of debentures is allowable as business loss. 14. In so far as ground no .2 is concerned the same has not been pressed by the Ld. Counsel on the ground that does not make any difference in this year. Accordingly, the same is not pressed. 15. In so far as, ground no.3 is concerned, facts in brief are that the Ld. Assessing Officer noted that an amount of Rs. 43,24,153/- was shown as stale cheque. In response to the show cause notice, Assessee has provided party wise break up, date from which amount was outstanding and subsequent date of discharge of liability. The Assessing Officer held that Assessee has failed to file the details of the parties and whose names the amount is outstanding. Accordingly, he added Rs. 43,24,153/- as cessation of liability. 16. The Ld. CIT (A) has confirmed the said as partly allowed this issue after observing as under. 8.3 I carefully considered the rival submissions and facts of the case. However, I did not find any merit in the submission of the 19 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD appellant I find from details at pages 100 to 106 of the Paper Book that the appellant has given liability of stale cheques as on 31.03.2011, 30.03.2012, 31.03.2013, 31.03.2014, 31.03.2015, 31.03.2016, & 1 April 2016 onwards till date. Also, in such list as on 31.03.2012 onwards, against the figure of each party, the corresponding figure as on 31.03.2011 is given. The party- wise stale cheque list as on 31.03.2013 shows liability of Rs. 24 ,54,092/- and corresponding liability of such parties as on 31.03.2011 at Rs. 21,09,456/-. It means that out of 43 ,24,153/- outstanding as on 31.03.2011 from various parties, the liability remained as on 31.03.2013 was at Rs. 21,09,456/- only, hence the balance amount of Rs. 22,14,697/- (i.e. Rs. 43,24,153 21,09,456) was cleared and already offered to tax till 31.03.2013 as claimed by the appellant. Therefore, the claim of appellant that an amount of Rs. 22,14,697/- was reversed in FY 2012-13 is verified from said statements. The clearance of liability to such extent had been affected much before relevant enquiries made during assessment proceedings, and hence genuineness of the same cannot be doubted. Also, taxing the same in AY 2011-12 20 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD would amount to double taxation, hence the appellant's contention is accepted in that regard. 8.4 However, the appellant's submission that the balance liability of Rs. 21 ,09,456/- (i.e. Rs. 43,24,15322,14,697) was cleared in FY 2016-17 is not free from doubts as to its genuineness. It is hard to presume that the said parties did not turn up for more than 5 years (before 31.03.2011 till 31.03.2016), and then suddenly all of them were paid off. Hence, it appears to be an afterthought of the appellant to get the addition made deleted in appeal, which cannot be accepted. The list of such parties derived from appellant's statements is as under: Date Cheque Name of the party Liability which existed on 31 st March 2011 24 Jan 09 1200000099 Rasilaben- Dadar Rental 1,391/- 26 Jan 09 30000363 Stale Cheque 1,16,830/- 22 Apr 09 110001185 Central Depositary Services 49,469/- 28 Jul 09 30000398 Stale Cheque 18,400/- 04 Aug 09 130001548 Stale Cheque 1,04,621/- 19 Aug 09 110002393 Steel City Courier Service 1,015/- 10 Sep 09 120000749-50 Stale Cheque 9,894/- 15 Sep 09 110002609 Krishna Das 1,500/- 27 Apr 07 30000217 ICICI BANK LTD 1,58,932/- 27 Apr 07 30000217 Stale Services tax June-Mar. 06 on Salary 36,452/- 27 Apr 07 30000217 Stale- Leo Fort Hotel 17,500/- 27 Apr 07 30000217 Stale 3S Entertainment Co. 13,224/- 28 Jun 07 30000280 Stale Cancelled Cheque for MTNL 9,414/- 21 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD 28 Jun 07 30000280 Stale Cancelled Cheque for MTNL 9,294/- 11 Dec 06 30000274 Stale Cheque 6,550/- 27 Apr 07 30000217 Stale International Computer Resource 5,184/- 11 Dec 06 30000274 Stale Cheque 4,744/- 27 Apr 07 30000217 Stale Travelling Expenses Suresh S. Adv. Adj 4,024/- 28 Jun 07 30000280 Stale Drona Basu 2,400/- 28 Jun 07 30000280 Stale Hutch Bill 1,509/- 11 Dec 06 30000274 Stale Cheque 1,469/- 27 Apr 07 30000217 Stale Travelling Expenses Abhishek Gupta 550/- 26 Mar 09 30000141 Stale Cheque 4,713/- 26 Mar 09 30000416 Stale Cheque 26,996/- 14 Oct 10 110002923 Stale Cheque 14,80,542/- 26 May 09 110001541 Stale Cheque 8,229/- 09 Sep 09 30000462 Stale Cheque 5,500/- 19 Feb 10 110000601 Stale Cheque 9,111/- Total 21,09,456/- It may be noticed that in most of the cases, the names of parties are not given, which the appellant was supposed to disclose. Also, the FY 2016-17 is still in progress, and return for the year is yet to be filed, hence taxing the said amount of Rs. 21,09,456/- in AY 2011-12 would not lead to double taxation. 8.5 In view of above, the appellant gets relief of Rs. 22,14,697/-, and the balance addition of Rs. 21,09,456/- is confirmed. Therefore, the Ground No. 3 is partly allowed. 17. After hearing both the parties and on perusal of the aforesaid facts, firstly, the liability on account stale cheques cannot be taxed u/s 41(1), because at the end of the financial year Assessee 22 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD prepared list of expenses for which cheques were issued for payment. However, when no payment is claimed by the payee and cheques remain unpaid, same are reflected as liability in the books. It is not in dispute that in the subsequent financial year 2016-17, assessee has offered to tax Rs. 21,09,456/- and his fact has been brought on record by the Ld. Counsel before us. Accordingly, we do not find any reason for sustaining an addition u/s 41(1), accordingly this ground is allowed. 18. In so far as, ground no. 4 & 5 are concerned made u/s 40(a)(ia), the Assessing Officer noted that Assessee has not deducted TDS on payment of scheme related expenses of Rs. 2,66,26,890/-. The Assessee has stated expenses were divided into three types of expenses like fund accounting, brokerage and reimbursement to DWS/Brokerage. With respect to fund accounting expenses, the same was paid to JP Morgan chase bank which on has obtained no deduction TDS certificate u/s 195(3), therefore, there was no requirement of deduction of TDS. In so far as, TDS with respect to brokerage, the Assessee‟s contention is that the 23 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD same was in respect of securities and therefore provision of 194H is not applicable. 19. In so far as, JP Morgan payment of fund accounting to JP Morgan Chase Bank the Ld. CIT (A) accepted the same. However, with regard to brokerage he has confirmed the action of the Assessing Officer, that the explanation of the Assessee is vague. Similarly, with regard to reimbursements of TWS expenses / brokerage of Rs. 1,51,00,806/-, the Ld. CIT (A) held that, Assessee has not submitted any details of such expenses and supporting evidences that no profit element was involved in such reimbursements. 20. After hearing both the parties, we find that in so far as the brokerage amount of Rs.44,62,117/ on account of brokerage on securities, we find that same is clearly excluded by virtue of Explanation (i) to section 194H and accordingly, we hold that TDS was not required to be deducted an accordingly disallowance of amount of Rs. 44,62,117/- is directed to be deleted. 21. In so far as, disallowance of Rs. 1,1,12,00,806 on account of TDW expenses / brokerage which has been stated to the 24 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD reimbursements of DMF in accordance with SEBI (Mutual Fund) regulations, 1996, we hold that in case if it is reimbursements of expenses to DMF in accordance with the SEBI regulations, the same should be excluded. The Assessee is directed to file these details before the Assessing Officer and if it is the nature of reimbursements, the same cannot be disallowed. Accordingly, the aforesaid grounds are allowed. 22. In so far as, ground 6 is concerned on account of interest in the section 234D, no argument has been placed, accordingly the same is held to be consequential. 23. In the AY 2014-15 only ground raised is with regard to liability of Rs. 1,22,11,083/- on account of brokerage expenses. Before us, it has been stated that Assessee has paid the entire brokerage expenses on the schemes during the year, which was although amortized in the books over the period of 10 years of the scheme in the financials and the method of accounting followed from year to year. Since, the business was discontinued in the financial year 2015-16 the remaining brokerage expenses unamortized in the balance sheet as on 31 st March, 2016. The Assessee then has 25 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD claimed it in the AY 2015-16 by filling the revised return of income. Once this fact is not in dispute that brokerage is to be allowed, but instead allowable for the period of 10 years, that is, till the period of scheme and was accordingly amortized and claimed amortized portion every year. Once the assessee has closed the business then no longer the balance brokerage can be claimed by the assessee, therefore, in the year of closure if the balance has been claimed, then same has to be allowed because the assessee had already incurred the expenditure in year one. Thus, we hold that the Assessing Officer is incorrect in holding that the same is not allowable in the revised return. If there is unamortized brokerage expenses the same has to be allowed, irrespective of the fact that, it was to be claimed over the period of the scheme. Accordingly, same is directed to be allowed. Orders pronounced in the open court on 28 th Feb, 2023. Sd/- Sd/- (Prashnt Maharishi) (Amit Shukla) Accountant Member Judicial Member मुंबई Mumbai;ददनांक Dated : 28.02.2023 Mrs. Urmila 26 I . T . A . N o . 2599/ M u m / 2 0 1 7 & 2 8 7 0 / M u m / 2 0 1 8 DEUTSCHE ASSET MANAGEMENT INDIA P.LTD आदेशकीप्रनिनिनिअग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलाथी/ The Appellant 2. प्रत्यथी/ The Respondent 3. आयकरआयुक्त(अपील) / The CIT(A) 4. आयकरआयुक्त/ CIT- concerned 5. दवभागीयप्रदतदनदध, आयकरअपीलीयअदधकरण, मुंबई/ DR, ITAT, Mumbai 6. गार्डफाईल / Guard File आदेशधिुसधर/ BY ORDER, .उि/सहधयकिंजीकधर (Dy./Asstt.Registrar) आयकरअिीिीयअनर्करण, मुंबई/ ITAT, Mumbai