2015 (11) TMI 482 - AT - Income Tax

Sale of Shares, Units and Securities through Portfolio Management Services - Capital gain or Profit and Gains of Business or Profession - Held that - following the earlier years precedence in assessee s own case, right from assessment year 2005-06 to 2007-08, we hold that the transaction made through PMS is to be taxed under the head capital gains and not business income as relying on Manan Nalin Shah Versus DCIT 14(1), Mumbai 2012 (9) TMI 793 - ITAT MUMBAI - Decided in favour of assessee.

Summary

Issues:
1. Classification of gain/profit from the sale of shares through Portfolio Management Services as 'business income' or 'capital gain'.
2. Confirmation of interest charged under sections 234B & 234C of the Income Tax Act.

Analysis:

Issue 1:
The main issue in this appeal was whether the gain/profit from the sale of shares through Portfolio Management Services (PMS) should be treated as 'business income' or 'capital gain'. The appellant argued that previous tribunal decisions favored treating such gains as capital gains. The Departmental Representative (DR) supported the CIT(A)'s view that the gains should be treated as business income. The assessee had invested in PMS with Kotak Securities and earned short-term and long-term capital gains. The Assessing Officer (AO) classified the gains as 'profits and gains of business or profession' based on the agreement between the assessee and Kotak Securities. However, the CIT(A) upheld this classification as 'business income'. The Tribunal referred to previous cases and concluded that investments made through PMS were for wealth maximization, not trading, and should be assessed as capital gains. Therefore, the appeal was allowed, following precedence from previous years.

Issue 2:
The second issue involved the confirmation of interest charged under sections 234B & 234C of the Income Tax Act. However, the judgment did not provide detailed analysis or discussion on this issue. The focus was primarily on the classification of gains from the sale of shares through PMS as 'business income' or 'capital gain'. As a result, the appeal of the assessee was allowed based on the decision regarding the first issue.

In conclusion, the appellate tribunal ruled in favor of the assessee, holding that gains from transactions through Portfolio Management Services should be taxed as capital gains, not business income, based on previous tribunal decisions and the nature of the investments made. The judgment did not delve deeply into the issue of interest charged under sections 234B & 234C, as the primary focus was on the classification of income from share transactions.