Portfolio Management Services Fee is deductible from Capital Gain: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Kolkata has held that the fee paid in respect of the Portfolio Management Services can be deducted while computing the Short-Term Capital Gain.

The assessee is a private limited company engaged in the business of manufacture of cosmetics. While completing an assessment against the assessee, the assessing officer held that the fee paid for Portfolio Management Services (PMS) fees paid as not eligible for deduction while computing the capital gains of the assessee. He was of the opinion that the share transactions carried out by the assessee are to be considered as income from business because the services of portfolio managers were business income of the assessee availed by the assessee with the motive to earn the profit.

The assessee relied on the decision of the Pune Tribunal in the case of KRA Holding & Trading Pvt. Ltd. vs DCIT wherein the issue was decided in favour of the assessee.

While allowing the contentions of the assessee, the Tribunal said that “This goes to prove that the other issue decided in favour of the assessee by Pune Tribunal i.e. allowability of PMS fees as the deduction under Section 48 of the Income Tax Act was not admitted by Hon’ble Bombay High Court. Hence the decision of Pune Tribunal had attained finality. Respectfully following the said decision, we hold that the PMS fees paid by the assessee in the sum of Rs. 18,93,788/- is eligible for deduction while computing Short Term Capital Gain. Accordingly, ground no 2 raised by the assessee is allowed.”