TMI Blog2012 (7) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of estate of EFD, were not subjected to tax again. constituting the transaction as adventure in the nature of trade there has to be some business relationship or some commercial features in the transactions. Since assessee was not owner of the properties, there is no question of transferring any rights in such properties. Further, the administrator could not distribute the proceeds from sale of the properties unless the administration was complete i.e. expenses and taxes of the estate were paid - mere receipt of sale proceeds by the assessee from the estate of EFD would not amount to any extinguishment of his rights and, accordingly, the receipt of the sum cannot be taxed under the head ‘capital gains'- the assessee had invested in 55 companies during the year and these figures, by no stretch of imagination, would lead us to a conclusion that the assessee is not the investor but a trader in shares - decided in favour of assessee. - ITA No.7847/Mum/2011 ITA No.7848/Mum/2011 ITA No.3004/Mum/2009 ITA.No.2544/Mum/2009 - - - Dated:- 30-5-2012 - SHRI G.E. VEERABHADRAPPA, SHRI AMIT SHUKLA, JJ. Appellant by: Mr. Pravin Varma Respondent by : Mr. Dilip S. Panle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hasers of the constructed unit. The Estate filed income-tax return as well as wealth tax return on the income on the transfer of proportionate interest in the immovable properties. The income was accordingly being charged as capital gains in the hands of the Estate. 2.1 As transpired later on, the administrator realized that in view of Section 118 of the Indian Successions Act, no man having a nephew or niece or nearer relative had the power to bequeath any property to religious or charitable purposes, unless certain conditions were satisfied. In the case of Will of Mr. EFD, these conditions were not satisfied. Accordingly, the administrator filed a suit before the Bombay High Court in the year 2000, challenging the validity of the Will of EFD bequeathing his properties to the two American charitable organisations. During the pendency of the suit, by an indenture dated 26-9-2001, Mrs. Woronzow transferred and conveyed all her rights and interest over the sale proceeds and/or disposal of the corpus of the estate in India (to the extent of immovable property) to Mr. Wadia and four of his associate companies, contingent upon the High Court holding that the same is vested in Mrs. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the ratio of 60% to the administrator and 10% each to the four companies, namely, Nidhivan Investment and Trading Co.Pvt.Ltd. , M/s Sahara Investment Pvt. Ltd. , M/s Heera Holding and Leasing Pvt. Ltd. and Go Investment Trading Pvt. Ltd. as per terms of indenture dated 26-9-2001. 2.3 Now, such a distribution of money in the hands of various assessees i.e. Mr. N. Wadia and four other companies as mentioned above, is the subject matter of the dispute before us, whether it should be taxed as capital gain being consideration received on transfer of asset or not. 3. In all these cases, the Assessing Officer has taxed the amount received by way of distribution from the administrator as capital gain or business income. Except for the figures of receipts, other matters are common. Hence, we proceed to decide all the matter altogether except that there are certain modification in the grounds of appeal, which would be dealt with separately. 4. At the very outset, it has been admitted by both the parties that exactly similar issue has been dealt with and decided by the ITAT Mumbai Bench in I.T.A.No.4573 4424/M/2008 for the assessment year 2004-2005 in the case of Shri Nusli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estates of EFD and upon her death the properties were to go to the two American Charities. The bequeathal of the properties two American Charities was held to be invalid by the Bombay High Court. In the meantime, BW sold her rights to receive the distribution of sale proceeds after her death to the assessee. In fact, assessee has received the money out of such distribution. The estate had received monies either by way of advances or by sale proceeds against sale of properties. Here again, we have to remember that the properties have already been given for development to certain developers and estate was entitled only to 12% of the sale proceeds and the balance of 88% was to go to developers because they were not only required to develop the properties, but were also required to remove the encroachments and other legal impediments. Whenever any advance was received the same was treated as liability in the hands of the estate and whenever a conveyance was executed the same was treated as receipts of sale consideration and even proper taxes arising out of transfer were paid by the estate. Such sale proceeds and advances were accumulated over the years and during the relevant year asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EFD. The assessee only acquired the rights to sale proceeds and the estate still continued because the Hon'ble High Court in its order dated 20-11-2003 allowed the assessee to continue as Administrator. Thereafter, assessee kept on administering the estate and also filed income tax as the income tax and wealth tax returns were not made part of the original paper book and on the direction of the Bench same have been filed vide letter dated 16-6-2011. A perusal of these documents clearly shows that the assessee in the capacity of Administrator has filed income tax and wealth tax returns on behalf of the estate of EFD for A.Yrs. 2004-05 to 2010-2011. For A.Yrs. 2005-06, 2006-07 and 2008-09 the assessment orders have been passed u/s.143[3] in the name of the Administrator of the estate of late Mr. E. F. Dinshaw. This clearly shows that the existence of the estate of EFD was accepted even by the department. We further find that the Ld. CIT(A) has dealt with this aspect at paras 45 to 59 by referring to various provisions of Indian Succession Act, 1925 and various case laws as to how the estate was required to be administered and in whom such properties would vest. We are of the view th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operties. The developers were required to remove all encroachments as well as other legal impediments. BW who had life interest in the properties was confirming party to these agreements. In consideration, estate of EFD was to receive 12% of the sale proceeds received from the customers for the built up area and 88% of the sale proceeds were to go to the developers as their share. Consequent to these development agreements, the estate started receiving certain advances as well as sale consideration. Now before these amounts could be distributed the estate was required to file separate income tax returns in terms of sec.168 of the I.T.Act. From the copies of the returns made available before us, it becomes clear that estate of EFD had regularly filed income tax returns upto A.Y 2010-2011, some of which have been scrutinized and assessment orders have been passed u/s.143[3]. The returns have been filed in the name of the Administrator of estate of late EFD and assessment orders have also been made in that name. Initially the income received by the estate were assessed as business income in the hands of the estate, but the Ld. Sr. Advocate of the assessee pointed out that the estate c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as raised in the case of the assessee. In case of this company the assessment was reopened on the basis that income has escaped assessment on account of the sum of Rs.11,93,88,000/- which was credited to the capital reserve account, but not offered for taxation. As observed right at the beginning of this order that assessee had entered into the indenture dated 26-9-01 along with four associate companies and assessee along with these four companies had paid a consideration of Rs.20 lakhs to BW for getting the right to receive the sale proceeds from the Administrator of the estate. 60% of the rights were to go to the assessee and 10% each of the rights were to go to each of these associate companies. Therefore, M/s Sevakunj Investments Co. Pvt. also became entitled to receive 10% of the sale proceeds by way of distribution. In the case of the assessee the argument that this income had suffered tax in the hands of the estate was rejected by the AO because details were not available. However, Ld. CIT(A) has accepted this position who after detailed discussion held that same item of income cannot be taxed twice. While dealing with this argument at page 10 clause [vii] of the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offered for taxation in the hands of estate of EFD. Even if such advances have been distributed by the Administrator to the transferees which included the assessee also, would not change the basic character of the receipts. As pointed out earlier, the estate of EFD continued to be the owner of the properties in question at least for income tax purposes because as per sec.168 of the I.T.Act it is the Administrator who has to pay taxes on the income of such estate. 45. Section 168 reads as under: x x x x x Explanation to above section very clearly provides that executor would include the administrator. Further, as observed by the Ld. CIT(A) the Hon'ble Bombay High Court in the case of CIT vs. Mrs. Usha D. Shah [supra] has clearly held that in the case of estate the taxes have to be paid by the executor. In this case assessee was a widow of other deceased member of an HUF. For A.Yrs. 1961-62 to 1963-64, the AO included the income of the assessee s 1/6th share of income arising from the HUF property, rejecting the assessee s contentions that as the income from the estate of the property in question has remained undistributed, she had not received any portion of the income and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o observe that the sum of Rs.71.63 crores received by the assessee included a sum of Rs.44.50 crores being the value of tax free Government of India bonds was also transferred only by way of mere accounting entry. As pointed out by the Ld. Sr. Advocate of the assessee as per the notification of Government of India, Ministry of Finance Company Affairs dated 13th March, 2003 [copies of the relevant documents are placed at pages 97 to 159 of the paper book] the bonds could have been applied only in the name of an individual and there was no provision for making an application in the name of the estate. The bonds were applied in the name of Administrator in his individual name and even P.A.No. of estate was given which becomes clear from the copy of the application, particularly page 122 where the P.A.No. has been given as AAEPD8394A which we have verified from the assessment order of the estate and same belongs to the estate of EFD. Further, these bonds were not transferable and assessee might have transferred the bonds by way of distribution under a wrong notion. It was stated that even such entries have been reversed. Moreover, these bonds have been distributed out of the advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se relationship with the assessee. Further, as mentioned clause [l] of the indenture dated 26-9-01 BW had entered into the indenture in view of her advanced age and was desirous of settling her affairs in her own life time. It was also mentioned in para-16 in petition before the High Court for continuing the appointment of the assessee as administrator that BW had total confidence in the assessee and treated him like her son. This assertion is supported by BW s personal will which was executed on 21-10-2001 i.e. almost within a month s time from the date of indenture [Copy of the said will has been placed in the paper book at pages 41 to 54]. Through this will BW had bequeathed her movable properties to her two cousins, namely, Ms. Rutty C.P.Wadia and Ms. Mary C.P.Wadia and all the immovable properties have been bequeathed to Mr. Ness N. Wadia and Mr. Jeh N. Wadia, who were the sons of the assessee. This clearly shows that BW had a very close relationship with the assessee and his sons. Naturally, before writing the will she must have expressed her desire to give the properties to assessee s sons and if that is so there was no need for the assessee to do any business with BW becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was indebted to the assessee in his money lending business. It was an isolated transaction, although probably entered into by him as a speculation, as he happened to make a good profit out of it. We are quite unable to see that it has any connection whatever with any other trades or businesses carried on by the assessee. By itself, the purchase of an interest in legacies, the subject of litigation, cannot certainly be described as a trade or business. Reference has been made to the case of Rutledge vs. IRC (1929) 14 Tax Cases 490 (C. Sess.) : TC12R.572 by Mr. Patanjali Sastri in support of his argument. In that case, the appellant was a money lender who was also in 1920 interested in a cinema company. He had since that time been interested in various businesses. Being in Berlin in 1920 on business connected with the cinema company he was offered an opportunity of purchasing very cheaply a large quantity of paper. He effected the purchase and, within a short time after his return to England, sold the whole consignment to one person at a considerable profit and it was held that the profits in question were liable to assessment to income-tax and to excess profits duty as being profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction, it cannot be treated as an adventure in the nature of trade. 50. Coming to the second aspect regarding taxability of the receipt as capital gains, the Ld. Sr. Standing Counsel in the alternative had argued that, in any case, after the order of the High Court dated 22-10-2001 declaring BW as having absolute right over the properties after declaring bequeathal in favour of the two American Charities as invalid, therefore, in terms of an indenture dated 26-9-01 assessee got the rights over the properties which have been transferred and the amounts received by the assessee are chargeable to tax under the head capital gains . In any case, the right to receive sale proceeds would definitely constitute a capital asset and even the Ld. CIT(A) has also held that right to receive the proceeds would definitely constitute a capital asset and this fact was not disputed by the assessee, therefore, atleast transfer of these rights in terms of extinguishment would constitute transfer and same is taxable under the head gains . In this regard he had strongly relied on the decision of the Hon'ble Supreme Court in the case of Kartikeya V. Sarabhai [supra]. However, these submissions s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, for charging any amount under the head capital gains , the same has to be covered by sec.45 of the I.T.Act. section 45 reads as under: 45. [(1)] Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections [***] [54, 54B, [***] [54D, [54E, [54EA, 54EB,] 54F [, 54G and 54H]]]]], be chargeable to income-tax under the head Capital gains , and shall be deemed to be the income of the previous year in which the transfer took place. The above clearly shows that for any capital receipt which can be brought under the provisions of sec.45 there has to be disposal of an asset by any of the mode referred to the definition of transfer u/s.2[47]. Unless and until there is a transfer of an asset as envisaged in sec.2[47], no capital gain or loss can be computed under these provisions, which mean that if there is any gain or loss on account of any receipt but transfer of asset is not involved then provisions of sec.45 cannot be applied. Thus, it is clear from the provision itself that transfer of an asset is the primary condition which must be satisfied before a receipt can be called as capital gain and/o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as the Ld. Sr. Standing Counsel have strongly relied on the decision of the Hon'ble Supreme Court in the case of Kartikeya V. Sarabhai [supra]. In that case assessee had purchased certain non cumulative preference shares and some money was paid to the assessee by reducing the face value of the preference shares. The revenue was of the view that receipt of this money was taxable under the head capital gains . The Hon'ble apex court held that since upon part redemption and reduction in the paid up value of preference shares, the right of the assessee as a shareholder against the company as well as other shareholders was partly extinguished and, therefore, transfer took place within the meaning of sec.2[47] of the I.T.Act and assessee was liable to pay capital gains tax. The head note reads as under: Section 2[47] of the Income-tax Act, 1961, defines transfer in relation to a capital asset. It is an inclusive definition which, inter alia, provides that relinquishment of an asset or extinguishment of any right therein amounts to a transfer of a capital asset. It is not necessary for a capital gain to arise, that there must be a sale of capital asset. Sale is only one of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be easily understood by way of a simple example. Let us say one Mr. A acquired rights to take out water from a well belonging to X . Now whenever some water is extracted, can we say that right to take out water is extinguished? In our opinion, it cannot be said that right to extract the water comes to an end the moment few buckets of water are taken out. This right may come to an extinguishment when Mr. A gives further rights to say Mr. B to take out the water from 5 p.m. to 8 p.m. or any other hour, then it can be said that right of Mr. A is curtailed or partly extinguished to that extent. In these circumstances, we are of the view, that since there was no transfer of any capital asset during the previous year, therefore, no capital gain tax can be charged on the impugned sum. 52. Both the parties have also made submissions on the applicability of sec.47(iii) and according to the Ld. Sr. Standing Counsel these provisions could not apply in the assessee s case because assessee is not a beneficiary under the will. On the other hand, Ld. Sr. Advocate for the assessee had argued mainly that this provision can be applied in every case where an asset was transferred under a w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought out by the AO that the said income should be taxed under the head capital gain. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in ignoring Hon ble Bombay High Court s order dated 22.10.2001 and indenture dated 26.9.2001 by which right of development of the properties of the Estate of Late Shri E.F.Dinshaw and Mrs. Bachhoobhai Woronzow got transferred in the hand of the assessee and any subsequent transfer needed to be taxed under capital gain. The issues raised herein, as stated in foregoing paras, are squarely covered by the decision of the Hon ble ITAT passed in ITA No.4573/M/2008 (supra) as have been reproduced above. Accordingly, the grounds taken by the department have no merits and are dismissed. 11. C.O.No.05/Mum/2012 (AY2004-05) (By Assessee):- In this cross objection, learned AR has not pressed ground No.1 and grounds No.2, 3 4 have been accepted by both the parties that they had been held to be academic by the ITAT, whereas the ground No.5 relates to initiation of penalty under Section 271(1)(c), which is also not maintainable. In view of the above, the cross objection filed by the assessee is treated as dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the estate of E.F. Dinshaw and assessee had not offered this amount to tax. 2. The Ld. CIT(A) has failed to appreciate that the above amount is revenue receipt. 3. The Ld. CIT(A) has failed to appreciate that the above amount of receipt is liable to tax The grounds raised by the department are similar to the above appeals. Therefore, in view of the above findings and ITAT s order (supra), the appeal filed by the department is hereby dismissed. 16. ITA No.2204/Mum/2009 (AY2004-05) (By Assessee):- In this appeal, the assessee has taken following grounds of appeal :- 1. The learned Commissioner (Appeals) erred in holding that the Assessing Officer had the reason to believe that income had escaped assessment in the hands of the Appellant and accordingly upholding the action of the Assessing Officer with reference to the re-opening proceedings u/s.147 of the Income-tax Act, 1961. 2. The learned Commissioner (Appeals) erred in not considering the alternative plea of the appellant that as the amounts received by the appellant could not have been distributed by the Estate of Mr. E.F. Dinshaw, the question of any amount being taxed in the hands of the appellant does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial/general in nature. 3. The learned Commissioner (Appeals) erred in not giving a specific finding as to the Appellants contention that the Assessing Officer erred in not correctly computing the cost of acquisition in the hands of the Appellant, since in his opinion this ground was consequential/general in nature. 4. The learned Commissioner (Appeals) erred in not adjudicating on the Appellants contention that the Assessing Officer erred in initiating penalty proceedings u/s.271(1)(c) of the Income-Tax Act, 1961. These grounds as stated earlier are only academic and as such this appeal has become infructuous and it is dismissed accordingly. 18. ITA No.1883/Mum/2011(AY2004-05) (By Department):- In this appeal, the revenue has taken following grounds of appeal :- I. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in holding that the amount of `.4.50 crs. Received by the assessee as consideration for transfer of property is in the nature of advances and not chargeable to tax without appreciating that - (i) Mrs. Bachoobai Woronzow was the residuary legatee and not the assessee. There was no bequest or gift by will or ltestament of Late ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia and he was not the legatee or the residuary legatee. (ii) In fact and in reality, the control, management and ownership of the properties consisting of the Estate of Shri E.F. Dinshaw vests totally with the assessee Shri Nusli Wadia who is in enjoyment of the fruits of the same and has to be held as the owner of these properties as there is no other claimant to these properties. (iii) The assessee had no locus standi in the Will of Mr. E.F. Dinshaw, he and his 4 companies comes into the picture only by purchasing the right of Mrs. Bachoobai Woronzow for a cost of `.20 lakhs in the year. (iv) That the assessee as the holder of the Power of Attorney of Late Mrs. Bachoobai Woronzow had possession and management control over the immovable properties and was in a position as owner to hand over the possession of the properties by receiving consideration. (iv) The Hon High Court had conferred ;absolute ownership rights to Mrs. Bachoobai Woronzow, over the immovable properties of her late brother and the assessee had, by virtue of his agreement with Mrs. Bachoobai Woronzow, obtained ownership over the said properties in return for the consideration of `.20 lakhs (jointly with f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lower. The assessee has not borrowed any funds for making these investments. Most of the investments were made through three portfolio management schemes. The Tribunal in ARA trading and Investment P. Ltd., ITA no.499/Pn./2008, Pune Bench B , order dated 31st August 2009, held as follows:- 25. In the backdrop of above decisions, the facts of the case indicate that it was an activity of wealth maximization rather than profit maximization. To arrive at the right conclusion in such type of cases and considering the peculiarity of the facts we have to take shelter of a landmark judgment in the case of H. Holck Larsen, 160 ITR 67 (SC) (supra) wherein the observation was that the High Court made a mistake in observing whether transaction of sale and purchase of shares were trading activity or whether those were in the nature of investment. The Court has said that such a question was not question of law but mixed question of law and fact. Therefore, on due consideration of the relevant facts, the result was that the assessee was a prudent investor and not of a plunger in the waters of trade. The intention of the assessee was considered as that of nursing of the investment. 26. Bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arent that the assessee has no business income although the A.O. has treated the advances received by the appellant as business income. In earlier part of this order I have already directed the A.O. to delete this addition on account of business income. Therefore, it is evident that the assessee has not claimed any expenditure for earning the exempt dividend income. Since there is no claim of expenditure no disallowance can be made u/s. 14A read with Rule 8 D. Even the A.O. has not disallowed any expenditure towards direct or indirect interest expenditure. He has only disallowed 0.5% of the average investment yielding exempt income. Since there is no claim for any expenditure towards earning of exempt income no disallowance is called for. The A.O. is directed to delete this addition. After considering the submissions and the findings of the CIT(A), we find that there is no infirmity in the conclusion drawn by the CIT(A) as admittedly the assessee is receiving income from salary, income from capital gain and income from other sources. There is no claim for expenditure on which disallowance under Section 14A can be made. Thus, ground raised by the department does not have any meri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a receipt from adventure in nature of trade or Short Term Capital Gain. Herein this case also the grounds No.1 2 are similar and the issue involved in ground No.3 has been decided by us in ITA No.1888/Mum/2011 following the order of the ITAT for the Assessment Year 2005-2006. Accordingly, all the grounds taken by the department are treated as dismissed. 23. CONo.04/Mum/2012(AY2005-06) (By Assessee) :- The grounds taken in this Cross Objection are similar to earlier assessment years wherein it has been held to be academic. Therefore, the cross objection filed by the assessee has become infructuous and the same is treated as dismissed. 24. ITA No.4405/Mum/2011(AY2007-08) (By Assessee):- In this appeal, the assessee has raised the ground of disallowability on PMS expenses as deducted from capital gains. Learned AR has relied upon the decision of the ITAT Pune Bench in the case of KRA Holding Trading P. Ltd. Vs. DCIT passed in ITA No.500/PN/08 and in the case of ARA Trading Investments P. Ltd. Vs. DCIT, passed in ITA No.499/PN/08. On the other hand, learned CIT DR has relied upon the decision of ITAT Mumbai Bench in the case of Pradeep Kumar Harlalka Vs. ACIT, passed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in connection with such transaction. We find that this aspect was highlighted by the Mumbai Bench of the Tribunal in the case of Devendra Motilal Kothari vs. DCIT [supra] while deciding the identical issue against the assessee. The held column of the decision reads as under: The deduction on account of fees paid for PMS has been claimed by the assessee as deduction in computing capital gains arising from sale of shares and securities. He however has failed to explain as to how the said fees could be considered as cost of acquisition of the shares and securities or the cost of any improvement thereto. He has also failed to explain as to how the said fees could be treated as expenditure incurred wholly and exclusively in connection with sale of shares and securities. On the other hand, the basis on which the said fees was paid by the assessee shows that it had no direct nexus with the purchase and sale of shares and as rightly contended by the Departmental Representative, the said fees was payable by the assessee going by the basis thereof even without there being any purchase or sale of shares in a particular period. As a matter of fact, when the CIT(A) required the assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat necessity of expenditure would make the same allowable. 14. We would also like to observe that income of an assessee has to be charged in view of the five heads given under the I.T.Act. Each head of income gives detailed procedure to determine the receipts as well as out goings and only those items can be deducted which have been specifically provided under the respective heads. This position was made clear by the Hon'ble Supreme Court in the case of CIT vs. Udayan Chinubhai And Ors. [222 ITR 456]. Again the Hon'ble Supreme Court in the case of CIT vs. Dr. V. P. Gopinathan [248 ITR 449] where the issue was whether interest paid by the assessee to the bank against loan taken on FDR could be allowed against the interest income, the apex court clearly held that such claim was not allowable because interest that assessee received from the bank was income in his hand and it could be diminished only if there was a provision in law which permits such diminution. In other words, a deduction can be allowed under a particular head only when there is a provision for the same. This can be easily understood by a simple example. Let us say there is one Mr. X who is a salaried employee. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the head business and accordingly we reject the alternate claim. The above view is further supported by the decision of the Hon'ble Bombay High Court in the case of CIT vs. Radio Talkies [238 ITR 872]. In this case the issue was allowability of expenditure on payment of retrenchment compensation to the ex-employees. It was one of the conditions precedent to the sale of property that the ex-employees must be paid retrenchment compensation. The Hon'ble High Court while reversing the order of the Tribunal held that such expenditure was not allowable. In fact after quoting the provision of sec.48 it was observed as under: This section lays down the mode of computation of capital gains. Two items are allowed as deductions from the full value of the consideration for which the transfer is made for arriving at capital gains. The first item is expenditure incurred wholly and exclusively in connection with such transfer. The second item is the cost of acquisition of the capital asset and the cost of any improvement thereto. In this case, we are concerned only with the first item. The question that arises for consideration is whether the retrenchment compensation paid by the assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The expression means intrinsically linked with the transfer. Such expenditure has to be wholly and exclusively in connection with the transfer. Even if such expenditure has some nexus with the transfer it does not qualify for deduction unless it is wholly and exclusively in connection with the transfer. The Tribunal was, therefore, right in its conclusion that the payment of interest was in the shape of damages for late payment of unearned increase. That being so, the interest paid cannot be treated as expenditure incurred wholly and exclusively in connection with the transfer. The answer to the question is in the negative, in favour of the Revenue and against the assessee. Thus it is clear that unless and until expenditure is incurred in connection with such transfer the same cannot be allowed and as observed by us the expenditure for payment of portfolio management fee has nothing to do with the transfer of shares and this was taken as a specific argument by the Ld. DR against which no submissions were made by the Ld. Counsel of the assessee. Therefore, in our view such expenditure cannot be allowed. Similar view was taken in the case of Devendra Motilal Kothari vs. DCIT [su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed before the appellate authority. Therefore, the power of the appellate authority to entertain such claim is still there. Therefore, in the interests of justice we set aside the order of the ld. CIT(A) and remit the matter to the file of the AO with a direction to consider this claim. Thus, respectfully following the decision of the coordinate Bench, this issue is decided against the assessee. In the result, the appeal filed by the assessee is dismissed. 25. ITA No.4505/Mum/2011(AY2007-08) (By Department):- The issue involved in the present appeal, is similar to the earlier years and is therefore, squarely covered by the decision of the Hon ble ITAT passed in ITA No.4573/M/2008 (supra) as have been held in other appeals above. Accordingly, the grounds taken by the department are dismissed. 26. ITA No.4506/Mum/2011(AY2007-08) (By Department):- The issue involved in the present appeal is again similar to earlier years and is squarely covered by the decision of the Hon ble ITAT passed in ITA No.4573/M/2008 (supra). Accordingly, the grounds taken by the department are dismissed. 27. CONo.11/Mum/2012(AY2007-08) (By Assessee):- This Cross Objection has been filed by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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