9911796707
TMI Blog2014 (3) TMI 404X X X X Extracts X X X X X X X X Extracts X X X X ..... play - The assessee had not taken any borrowed funds for placing money with the PMS Manager - the average holding period of the shares was more than two months - the income earned from PMS has to be assessed as capital gain - STCG earned by assessee and LTCG earned by assessee on sale/purchase of shares and securities through PMS is to be assessed under the head “capital gains” and not as business income of the assessee - the department has not been able to bring any distinguishing facts – thus, the order is liable to be set aside. Sale of shares - Income from business or income from capital gains - Whether the CIT(A) has erred in assessing the short term capital gains and long term capital gain earned by the appellant on sale of shares and securities carried out independently under the head “Income from Business or Profession” - Held that:- The treatment in the books of an assessee will not be conclusive and if the volume, frequency and regularity at which transactions are carried out indicate systematic and organized activity with profit motive then it becomes business profit and not capital gains – Whether a particular holding is by way of investment or form part of stock-in- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase and sale of shares held for more than 30 days under the head Income From Business or Profession Instead of its assessment as capital gains by the AO. Ld. CIT(A) has erred in observing that the appellant has converted shares of Financial Technologies and Henkel Spice from investment to stock in trade, which is contrary to facts on record. 3. While confirming the action of the AO in treating the income in respect of amount invested under the PMS Scheme as Business Income, Learned CIT(A) has erred in holding/observing that: a. The portfolio manager is keeping the record of the assessee in his books of accounts as stock in trade. b. Transaction in F O Scheme is shown by the assessee as investment. c. Investment in surplus funds by PMS Manager in liquid fund results in activity of PMS being treated as business activity Confirmation of the action of the AO on the basis of above observation being contrary to facts of the case ought to be deleted. 3. Grounds of appeal taken by the assessee in ITA No.1595/Mum/2012 are as under:. 1. Learned Commissioner of Income Tax (Appeals)} has erred in confirming the action of the Assessing Officer (AO) in assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, the aforesaid sum ought to be assessed as Capital Gains . 2. Learned CIT(A) has erred directing the AO to assess the short term capital gains of Rs.2,00,523/- and long term capital gain of Rs.2,88,83,346/- earned by the appellant on sale of shares and securities under the head Income from Business or Profession instead of assessed as capital gains by the AO and consequently enhancing the assessment. On the facts and in the circumstances of the case, the ld. CIT(A) ought not to have disturbed the assessment made in this regard and the aforesaid sums ought to be assessed as Capital Gains. Ld. CIT(A) erred in observing that the appellant has converted shares of Financial Technologies and Henkel Spice from investment to stock in trade, which is contrary to facts on record. 3. While confirming the action of the AO in treating the income in respect of amount invested under the PMS Scheme as Business Income, Learned CIT(A) has erred in holding/observing that: a. The portfolio manager is keeping the record of the assessee in his books of accounts as stock in trade. b. Transaction in F O Scheme is shown by the assessee as investment. c. Investment in surplus f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um/2008 for assessment year 2004-05 and ITA No.4126/Mum/2008 for assessment year 2005-06 allowed the claim of the assessee stating that the very nature of PMS is such that investments made by assessee cannot be said to be scheme of trading of shares and stocks and therefore, the profit is to be assessed under the head capital gains . It is also observed that the Tribunal by following the said order in the assessee s case its order dated 23.1.2013 in the case of Nalin Pravin Shah in ITA No.5635/Mum/2009 and ITA No. 5642/Mum/2009 for the assessment years 2005-06 and 2006-07, decided the issue in favour of assessee that making investment through PMS by placing certain funds with the PMS Managers is to be assessed under the head capital gain . We consider it prudent to reproduce para 8 of the order of Tribunal dated 10.1.2014 which is as under : 8. We have carefully considered the submissions of the ld. Representatives of the parties and the orders of authorities below as well as earlier orders of the Tribunal dated 6.7.2012 (supra) and the order dated 23.1.2013 (supra). We consider it prudent to reproduce para 5 of the order of Tribunal dated 23.1.2013 which reads as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the Tribunal in assessees own case for the earlier years. No distinguishing feature have been brought to our notice by the ld. DR in these years with respect to factual position in the earlier years decided by the Tribunal. We, therefore, agree with the ld. AR that the issue raised is covered in favour of the assessee by the decision of the Tribunal in earlier years. We, therefore, respectfully following the decision in earlier years set aside the order of CIT(A) and allow the appeals of the assessee. Since the Tribunal has considered the similar issue on identical facts in the case of assessee and the earlier decisions have also been decided by a Bench of the Tribunal to which both of us were parties, and in the absence of any distinguishing features brought out to our notice by ld. DR in respect of assessment year under consideration, we agree with the ld. AR that the issue is covered in favour of the assessee by the decision of the earlier orders. Respectfully following the orders of the Tribunal for the earlier assessment years (supra), we hold that STCG Rs.83,14,515/- earned by assessee and LTCG of Rs.70,39,652/- earned by assessee on sale/purchase of shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature of fund used, holding period etc which are relevant in deciding true nature of transaction and no single factor is conclusive. The Hon ble Gujarat High Court in the case of CIT V/s Motilal Hirabhai Spg. Wvg. Co. Ltd.. [1978] 113 ITR 173 (GUJ.) and the Hon ble Apex Court in the case of. Raja Bahadur Visheshwara Singh. V/s CIT [1961] 41 ITR 685 (SC) have held that the treatment in the books of an assessee will not be conclusive and if the volume, frequency and regularity at which transactions are carried out indicate systematic and organized activity with profit motive then it becomes business profit and not capital gains. The Hon'ble Apex Court in the case of CIT vs. Holck Larsen (supra) held that whether a transaction of sale and purchase of shares were trading transactions or they were in the nature of investment is a mixed question of law and facts. It is further held in the case of CIT vs. Associated Industrial Development Co. P. Ltd (supra) that it is possible that the assessee to be both an investor as well as dealer in shares. Whether a particular holding is by way of investment or form part of stock-in- trade is a matter within the knowledge of the assessee and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the earlier assessment years stating that the assessee is carrying on of his own purchase and sale of shares activities in a systematic and organized way which partake the character of business. We observe that the AO as well as ld. CIT(A) have mentioned CBDT circular and the cases but have not discussed as to how those cases are relevant to the facts of the case of the assessee before us. As mentioned hereinabove that the Hon ble Apex Court has held in the case of Holck Larsen (supra) that whether the transactions of sale and purchase of shares were trading transactions or were in the nature of investment is a mixed question of law and facts and therefore, each case is required to be examined to ascertain the true nature on the basis of the facts. We observe that the assessee has not borrowed any funds to undertake the activities of purchase and sale of shares. That the assessee has used his own funds in the said transactions of purchase and sale of shares. We observe that the AO has stated that the assessee has frequently indulged in dealing in shares and the period of holding is also short. However, we observe that in respect of LTCG claimed by assessee, the maximum amount of L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e earlier assessment years, we now propose to decide Ground No.2 of all the three appeals of the above named assessees. 8.1 In respect of appeal of Shri Nalin Pravin Shah (ITANo.1576/Mum/2012), we observe that the assessee has shown Shor t Term Capi tal Gain on shares /Mutual Funds of Rs.75,17,460/- and long term capital gain on equity and Mutual Funds of Rs.5,18,68,286/- for the purchase and sales of shares made by assessee himself. AO accepted the Long Term Capital Gain and considered out of the Short Term Capital Gain a sum of Rs.3,16,340/- as business income. However, ld. CIT(A) enhanced the Short Term Capital Gain as well as Long Term Capital Gain by considering the same as business income. Since facts were stated to be similar to the earlier preceding years and the ld. CIT(A) has also given same reasoning as given in the preceding assessment years (supra), we by following the reasoning given in the earlier assessment years(supra) hold that the said Long Term Capital Gain and Short Term Capital Gains shown by the assessee is to be assessed under the head capital gain . Thus, Ground No.2 of the appeal taken by assessee is allowed. 8.2 In respect of appeal of Shri Manan N ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
