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Court upholds Mutual Fund companies' allowable expenses above 6% liability, including IT infrastructure costs. Appeal dismissed. The Court upheld the Tribunal's decision, ruling that expenses exceeding 6% of liability of Mutual Fund companies should be allowed, as per statutory ...
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Court upholds Mutual Fund companies' allowable expenses above 6% liability, including IT infrastructure costs. Appeal dismissed.
The Court upheld the Tribunal's decision, ruling that expenses exceeding 6% of liability of Mutual Fund companies should be allowed, as per statutory provisions. Additionally, IT infrastructure expenses were deemed permissible as separate expenses, consistent with previous assessment years. The Appeal was dismissed, with no costs awarded, and the Assessee's counsel withdrew the Notice of Motion.
Issues: Appeal pertains to assessment year 2006-07 - Whether expenses exceeding 6% of liability of Mutual Fund companies should be allowed - Whether IT infrastructure expenses should be allowed as a capital nature expense.
Analysis: 1. The Appellant argued that the Tribunal erred in allowing expenses exceeding 6% of the liability of the Mutual Fund Company, stating that the liability was not of the Respondent and, therefore, should not have been allowed. Additionally, the Appellant contended that IT infrastructure expenses, being capital in nature, should not have been permitted.
2. The Assessee's counsel referred to Regulation 52(5) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, stating that any expense not specified in certain sub-regulations should be borne by the Asset Management Company, which the Respondent is. The counsel also highlighted a previous decision where a similar issue was considered and argued that the IT infrastructure expenses were accepted in the first assessment year.
3. The Court examined Section 52(5) and its proviso, which clearly states that any excess over 6% initial issue expense should be borne by the Asset Management Company. The Assessing Officer had acknowledged the Assessee as the Asset Management Company, making it statutorily liable for expenses exceeding 6%. This statutory obligation was correctly considered by the Tribunal.
4. Regarding the IT infrastructure expenses, the Court noted that in a subsequent assessment year, the Assessing Officer had accepted and allowed such expenses as separate expenses. Therefore, there was no reason to deviate from this approach for the present assessment year.
5. Consequently, the Court found no substantial question of law in the Appeal and dismissed it, with no order as to costs. Subsequently, the Assessee's counsel withdrew the Notice of Motion, which was disposed of as withdrawn.
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