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2015 (8) TMI 1516 - AT - Income TaxDisallowance u/s 14A read with Rule 8D - Suo moto disallowance made by assessee of PMS expenses - HELD THAT:- There is no dispute before me regarding Rule 8D(2)(ii). CIT(A), however while adjudicating the issue has held that the credit of PMS expenditure has been given under Rule 8D(2)(i) by the AO. His finding to this effect has already been quoted earlier in this order. In principle he has accepted the proposition of the assessee that credit of PMS expenses suomoto disallowed by the assessee should be given to him out of the disallowance computed under Rule 8D. It is a fact that for making investments, continuing with Portfolio Management, selecting portfolio manager and deciding about the amount of investments and period of investments involve decision making process at managerial level and therefore involve administrative costs. These all a part of overhead expenses which an assessee ought to incur for earning tax free income. A part of these activities are being taken care of by the Portfolio Manager, who take their fee inturn. In such circumstances, it cannot be denied that these are the expenses which have been perceived while drafting clause (iii) of Rule 8D. In such circumstances, the part of the expenses being in the nature of PMS expenses, which the assessee itself has disallowed, it is pertinent to give credit of the same to the assessee under the same clause. Credit of suomoto disallowance made by assessee on account of PMS expenditure incurred by it is to be allowed to it. AO is directed to reduce the amount of PMS expenses from the disallowance computed by him under Rule 8D(2)(iii).
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