RAMESH MANGALDAS RAWAL, MUMBAI V. ITO WD 9(2)(4), MUMBAI

ITA 4024/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7890 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 18-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATBIR SINGH
• Assessee Lawyers: DEVAN BAFNA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI SMC BENCH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER I.T.A.NOS.4024 & 4025 /MUM/2010 - A.YRS.2006-07 & 2007-08 M/S RAMESH MANGALDAS RAWAL, 5 TH FLOOR, PLOT NO.125, GULMOHAR CROSS ROAD NO.10, JUHU, MUMBAI 400 093. PAN: ADIPR 4168 B VS. INCOME TAX OFFICER, WARD 9 (2)(4), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DEVAN BAFNA. RESPONDENT BY : SHRI SATBIR SINGH.. O R D E R IN BOTH THESE YEARS ASSESSEE HAS RAISED A COMMON GR OUND OBJECTING TO DISALLOWANCE ON ACCOUNT OF PORTFOLIO MANAGEMENT FEE S PAID BY THE ASSESSEE. 2. AFTER HEARING BOTH THE PARTIES, I FIND THAT ASSE SSEE HAS DONE CERTAIN SHORT TERM AND LONG TERM TRANSACTIONS IN SHARES AND MUTUA L FUNDS. THE AO DURING ASSESSMENT PROCEEDINGS NOTED THAT ASSESSEE HAD PAID CERTAIN PORTFOLIO MANAGEMENT FEES AND SERVICE TAX. IN RESPONSE TO THE QUERY, IT WAS STATED THAT SUCH FEES AND SERVICE TAX WAS PAYABLE TO THE OF POR TFOLIO MANAGER. THE AO OBSERVED THAT SINCE AGREEMENT WITH OF PORTFOLIO MA NAGER WAS NOT FILED AND THERE WAS NO EVIDENCE THAT THESE EXPENSES RELATED TO THE SHARES AND MUTUAL FUNDS TRANSACTIONS OF THE ASSESSEE, HE WAS OF THE VIEW, T HAT THESE EXPENSES HAD NO CONNECTION WITH THE PROVISIONS OF SEC.48 AND ACCORD INGLY PORTFOLIO MANAGEMENT EXPENSES WERE DISALLOWED. 3. ON APPEAL, ACTION OF THE AO WAS CONFIRMED BY THE LD. CIT[A]. 2 4. BEFORE ME, LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT ASSESSEE HAD PURCHASED AND SOLD SHARES AND MUTUAL FUNDS AND THE INCOME WAS SHOWN UNDER THE HEAD SHORT/LONG TERM CAPITAL GAINS AND PORTFOLI O MANAGEMENT FEE WAS PAID IN TERMS OF THE AGREEMENT. HOWEVER, NO SUCH AGREEMENT HAS BEEN FURNISHED BEFORE ME. LD. COUNSEL OF THE ASSESSEE AGREED THAT THE AGR EEMENT WITH THE PORTFOLIO MANAGER IS AVAILABLE AND HE WOULD HAVE NO OBJECTION IF THE MATTER IS REMANDED BACK AND HE WOULD PRODUCE THE AGREEMENT BEFORE THE AO. 5. ON THE OTHER HAND, LD. DR STRONGLY RELIED ON THE ORDER OF THE AO. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFULL Y. I FIND THAT IF TRANSACTIONS HAVE BEEN CARRIED OUT UNDER THE ADVICE OF PORTFOLIO MANAGER THEN, OBVIOUSLY, SOME FEE IS PAYABLE TO SUCH OF PORTFOLIO MANAGER. S UCH FEE IS DETERMINED THROUGH AN AGREEMENT BETWEEN THE PARTIES SUBJECT TO OVER ALL GUIDELINES LAID DOWN BY SEBI OR OTHER REGULATOR. THEREFORE, IT IS N ECESSARY TO EXAMINE THE AGREEMENT WITH THE PORTFOLIO MANAGER WHICH HAS NOT BEEN DONE SO BY THE AO OR THE CIT[A]. SINCE LD. COUNSEL OF THE ASSESSEE HAS A GREED THAT HE WOULD PRODUCE SUCH AGREEMENT BEFORE THE AO, I SET ASIDE THE ORDER OF THE LD. CIT[A] AND REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECT ION TO RE-EXAMINE THE ISSUE AFTER EXAMINING THE PORTFOLIO MANAGEMENT AGREEMENT AND THEN DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 7. IN THE RESULT, ASSESSEES APPEALS ARE ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 8/3/2011. S D/- (T.R.SOOD) ACCOUNTANT MEMBER MUMBAI: 18/3/2011. P/-* 3