ZARAH RAFIQUE MALIK,MUMBAI vs. ITO (INT TAX) WARD-3(2)(1), MUMBAI

ITA 5159/MUM/2025Status: DisposedITAT Mumbai10 March 2026AY 2022-23Bench: Justice (Retd.) C V Bhadang, Hon'ble (President), Shri Vikram Singh Yadav, Hon'ble (Accountant Member)1 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee's claim for proportionate IPO expenses was not allowable as the expenses were capital in nature and not directly incurred by the assessee. The arrangement was considered a tax-avoidance scheme, and the principle that what cannot be done directly cannot be done indirectly was applied.

What were the facts?

The assessee claimed proportionate Initial Public Offer (IPO) and Portfolio Management Services (PMS) expenses against long-term capital gains. The Assessing Officer (AO) disallowed these expenses, arguing they were not incurred by the assessee and were capital in nature. The Dispute Resolution Panel (DRP) upheld the disallowance, viewing the arrangement as a tax-avoidance scheme.

What were the issues?

Whether proportionate IPO expenses incurred by the company for an Offer for Sale (OFS) can be claimed as a deduction by the selling shareholder against capital gains. Whether the arrangement constitutes a colourable device for tax avoidance.

Which sections of the Income-tax Act were involved?

Section 48,Section 143(3),Section 144C(13)

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Income Tax Appellate Tribunal, MUMBAI BENCHES “I”, MUMBAI

Before: Justice (Retd.) C V Bhadang, Hon’ble & Shri Vikram Singh Yadav, Hon’ble

For Appellant: Shri K Gopal, Adv. & Shri Oom Kandalkar
For Respondent: Shri Krishna Kumar, Sr. DR
Hearing: 21.01.2026Pronounced: 10.03.2026

PER VIKRAM SINGH YADAV, A.M :

By this appeal, appellant-assessee challenged the order dated 15.07.2025 passed by the ITO (IT) Ward 3(2)(1), Mumbai (‘AO’ for short) u/s.143(3) r.w.s. 144C(13) of the Income Tax Act (‘Act’ for short) thereby making disallowance of Rs. 3,66,14,854/- of the proportionate Initial Public Offer (IPO) expenses and Portfolio Management Services (PMS) expenses. The appeal relates to A.Y.2022-23. 2. The brief facts are that the appellant filed Return of Income on 30.12.2022 declaring total income at Rs.139,39,53,300/-. The case was selected for scrutiny and draft assessment order was passed on 29.03.2024 assessing

The order continues below.

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