TaxTMI 
TaxTMI 
2020 (2) TMI 708
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....7.2011 declaring an income of Rs. 24,60,50,090 comprising of following:- Income from house property 84,000 Income from Short Term Capital Gain 10,09,23,408 Income from Other Sources 14,50,42,677 24,60,50,085 4. The Assessee had paid Portfolio Management Services (PMS Charges) to Portfolio Managers for rendering services in relation to investments advise which resulted in the Assessee earning income in the form of interest which is chargeable to tax under the head "Income from other sources" and also Dividend which is exempt besides income in the form of Short term Capital Gain (STCG). The income earned from STCG is chargeable to tax at 15% whereas income in the form of interest is chargeable to tax at 30%. The Assessee paid PMS Charges of Rs. 72,94,053/-. The PMS Charges had been paid by the Assessee to two Portfolio Managers viz., HDFC Real Estate PMS and Morgan Stanley PMS. The payment made to HDFC Real Estate PMS was a sum of Rs. 50,20,034 and to Morgan Stanley PMS was a sum of Rs. 22,74,018 respectively. In the computation of total income the Assessee had claimed deduction of PMS Charges against income in the form of STCG which is chargeable....
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....nder: STCG (STT suffered) Rs. 10,10,75,329/- STCG (Non STT suffered) Rs. 6,63,040/- Rs. 10,17,38,069/- Less: Interest apportioned Rs. 37,71,050/- Rs. 9,79,67,019/- Interest received Rs. 1,06,86,059/- Less: PMS interest apportioned Rs. 3,96,452/- Rs. 1,02,89,607/- 7. The above bifurcation of PMS Charges did not result in any change in the total income, but consequent to apportionment of PMS charges as above, the income under the head "Income from other sources" stood enhanced and the income under the head "Capital Gain" stood reduced. Consequently the tax payable on the income returned became more because STCG was chargeable to tax at a lower rate whereas income under the head "Income from other sources" was chargeable to tax at a higher rate. The Assessee was therefore aggrieved by the aforesaid method of apportionment of PMS Charges and he filed appeal before CIT(A). 8. Aggrieved by the action of the AO, the assessee filed appeal before the CIT(Appeals). The assessee submitted the basis of allocation of PMS charges as done by the Assessee in the computation of income by submitting that the Assessee had u....
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....xpenditure which is dividend proportionate to income earned. 12. The following chart was filed before CIT(A) to explain the basis of apportionment of PMS Charges as done by the Assessee in the computation of total income:- Nature of Income Own Account HDFC PMS HDFC REP (real estate PMS) Morgan Stanley Empower Morgan Stanley Platinum Morgan Stanley capital Income from capital gains Short-term capital gains - STT suffered (-) 88,93,205 11,40,88,161 - -41,19,567 - - Short-term capital gains - Non-STT 4,34,110 93,303 1,35,625 - - - Long-term capital gains - STT suffered 9,04,39,346 2,73,28,590 - - - - Long-term capital gains - Non-STT (-) 20,23,042 18,48,087 - - - - Income from Other sources Dividend 56,28,23,134 1,18,14,892 51,79,426 1,46,166 17,94,078 4,06,100 Bank interest - - 1,75,441 5,26,325 1,75,441 Debenture interest income - 1,06,86,059 - - - Total income 64,27,80,282 15,51,73,034 1,60,01,112 -37,97,960 23,20,403 5,81,541 PMS Fee paid - - 50,20,034 9,18,....
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....nd this basis of apportionment is correct. 16. The ld. DR besides relying on the order of the CIT(A) further submitted that the allocation should be based on the services provided by the PMS provider and not on the basis of income. This argument of the ld. DR, however, is not sustainable because that was not the basis of apportionment either by the AO or the CIT(Appeals) and the revenue authorities have proceeded to apportion the PMS charges only on the basis of income earned. The ld. DR therefore cannot set up a new case before the Tribunal on the basis of allocation of PMS charges. 17. As far as the merits of the claim made by the assessee is concerned, We find from the Chart given as annexure to this order that the PMS Charges are apportioned on the basis of the income earned on the basis of services provided by the PMS provider. The basis of apportioning PMS Charges on the basis of income earned on the basis of service provided by the PMS provider has been accepted by the AO as well as the CIT(A). The reason why there is difference in apportionment between the Assessee and the revenue is because of inclusion of STCG earned by the Assessee on his own without the services o....
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....from PMS Account and AMC fees paid Total a) Income from Capital Gains Long Term Capital Gains Non STT Long Term Capital Gains STT Suffered Short Term Capital Gains Non STT Short Term Capital Gains STT Suffered b) Income from Other Sources Debenture Interest Income Bank Interest Dividends Total income PMS Asset Management Charges (AMC) Allocation of PMS AMC Fee to Income from Capital Gains Short Term Capital Gains STT Suffered Short Term Capital Gains Non STT 88,93,265 11,40,88,161 41,19.567 4,34,110 93,303 1,35,627 9,04,39,346 2,73,28,590 20,23,042 18,48,087 Capital DETEC 87'95 1,18,14,892 51,79,426 1,46,166) 17,94,078 4,06,100 1,75,441! 5,26,325 1,75,441 1,06,86,059 64,27,80,282 15,51,73,034 1,60,01,112 096/6'LE 23,20,403 5,81,541 50,20,034 9,18577 4,16,950 9,38,491 7,72.411 42,550 Long Term Capital Gains Non STT Long Term Capital Gains STT Suffered Income from Other Sources Bank Interest Dividends 16,24,943 1,46,166) 4,16,9501 9,38,491 PMS Asset Management Charges (AMC) Debenture Interest Income 33,5....