Expenses Incurred on Portfolio Management Services Directly Related to Securities Transaction Allowed While Computing Capital Gains | ITAT

Case Details: ACIT vs. Vireet Investments (P.) Ltd. - [2024] 169 taxmann.com 379 (Delhi-Trib.)

Judiciary and Counsel Details

• S. Rifaur Rahman, Accountant Member & Sudhir Kumar, Judicial Member
• Manish Jain, CA for the Appellant.
• Ms Sapna Bhatia, CIT DR for the Respondent.

Facts of the Case

The assessee-company was engaged in business of dealing in shares, stocks, debentures, etc. in the line of securities transactions. It claimed expenditure of general administration and Portfolio Management Services (PMS) towards maintenance of securities against income declared under capital gains. The Assessing Officer (AO) rejected the same contending that there was no provisions in section 48 to claim such expenses.

On appeal, the CIT(A) allowed the assessee’s claim. Aggrieved by the order, an appeal was filed to the Delhi Tribunal.

ITAT Held

The Tribunal held that it was observed that the assessee was dealing in the business of shares and securities. The assessee incurred certain expenses on PMS to monitor such securities. Thus, this expenditure was directly related to the securities transaction. The nature of the transaction demands such expenditures.

Relying on the decision of Pune Tribunal in Deputy Commissioner of Income-tax vs Serum Institute of India Ltd.* [2016] 72 taxmann.com 361 (Pune – Trib.) and Mumbai Tribunal in Nadir A. Modi vs JCIT, Tax 11(3), Mumbai [2017] 88 taxmann.com 868 (Mumbai – Trlb.), wherein it was held that the ‘PMS’ fees paid by the assessee is an allowable deduction from the capital gains, the Tribunal allowed the claim of the assessee.

With respect to general administrative expenses, it was observed that the assessee has incurred these expenditures on salaries, administration, depreciation etc,. and claimed these expenses in its profit and loss account. In the income tax computation, the assessee computed the income under the head income from business as well as capital gain. The income tax provisions allow the assessees to compute the income under different heads of income and the assessee was allowed to claim the expenses based on the relevant heads of income.

In the instant case, the assessee can claim the general expenses of running the business only under the head business income. Even if there is no income declared under the head business income, the assessee is allowed to claim these expenses as business expenditure, if there is no business income and the assessee is allowed to carry forward the same in case the assessee does not have income under other heads of income other than loss under the head capital gains.

Since the assessee has declared profit under the head capital gains, the assessee is allowed to adjust the same under section 71. Hence, the general administrative expense cannot be claimed under the head capital gains under section 48.