One time payment capital expenditure or revenue expenditure
CA Shraddha Vora
(Querist) 16 December 2013
This query is : Resolved
Upfront fees (Initial expenditure) paid to Asset Management Company (AMC) and also paid management fees every year to the AMC for managing the funds on behalf of the assessee{Individual making an investment to portfolio management}.
AMC will manage the portfolio of the assessee, as per the agreement AMC will make decision of investment on behalf of the assessee and commitment period is 6 years.
My query about the treatment of the above expenditure, whether above expenditure i.e. Upfront fees and management fees is Capital expenditure or revenue expenditure for taxability purpose.
If any further clarification require please let me know
Guest
(Expert) 16 December 2013
You may need to clarify the following points:
1) Upfront fee on account of what type of asset provided by the AMC to be owned by the principal company that may start earning revenue or enhance the revenue earning capacity for the company?
2) In what manner your company is concerned with the portfolio management of the assessees?
3) Are you charging fee from the assessees for management of their assets or for making decision of investment on their behalf
4) If fee is charged by the company, whether that is treated as revenue of the principal company or the AMC?
prabhakar singh
(Expert) 16 December 2013
1)To me all is revenue expenditure.
2)For those stocks which are held for more than 1 year by AMC on assessee's behalf without any frequent trading,nothing would be allowed as deduction since long terms gains are non taxable.
T. Kalaiselvan, Advocate
(Expert) 18 December 2013
Mr. Singh, the author says that it involves investment but has not specified abut the frequency of investment, whether many times in a year or invest and reinvest etc., so question no revenue expenditure is slightly blurring, I think if Mr. Dingra's questions are answered, the author will get an answer as per the provisions.
prabhakar singh
(Expert) 18 December 2013
Well Mr.Kaliselvan!
I told it revenue expenditure only because
just like brokerage,the investor assessee is paying a fees to Asset Management Company,hence it adds to cost of acquisition.
