9911796707
TMI Blog2019 (3) TMI 809X X X X Extracts X X X X X X X X Extracts X X X X ..... eal No.PN/CIT(A)-5/Dy.CIT, Cir-7/9/2015-16) granted substantial relief to the assessee. Aggrieved by the order of Ld.CIT(A), Revenue is now in appeal before us and has raised the following grounds : "1. On the facts and circumstances of the case and in law the learned CIT(Appeals) erred Treating of income of Rs. 82,24,637/- as Capital gains against the claim of the Assessing Officer to treat the same as income from business. 2. On the facts and circumstances of the case and in law the learned CIT(Appeals) erred holding the activity of transaction in shares / mutual fund by engaging PMS was an investment activity and resultant gain was assessable under the head "Capital Gains". 3. Both the grounds being inter-connected are considered together. 4. During the course of assessment proceedings, AO noticed that during the year assessee had transacted heavily in shares through DSP Merrill Lynch Fund Managers, Portfolio Management Service Provider (PMS) and the income earned through PMS was shown as income from capital gains. Assessee also earned income from investments in mutual funds. On perusing the agreement entered between the assessee and DSP Merrill Lynch Fund Managers, AO not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at earning of profits on purchase and sale of shares employing the services of Portfolio Management Services is taxable under the head capital gains. Further, Ld. Counsel submitted that, on similar facts, the Pune Bench of the Tribunal has decided number of cases treating the said income as capital gains only. Before us, Ld. Counsel for the assessee filed the order of Pune Bench of the Tribunal in the case of Yugmarg Investment & Trading Pvt. Ltd. Vs. DCIT - ITA No.310/PUN/2015, dated 12-05-2017 for the A.Y. 2008-09. Ld. Counsel for the assessee submitted that the decision is relevant for the similar proposition. The said decision was delivered relying on the decisions of Pune Bench of the Tribunal in the case of KRA Holding & Trading Pvt. Ltd. Vs. DCIT dated 31-05-2011 and Shri Apoorva Patni Vs. ACIT, dated 21-06-2012. 6. Ld. DR for the Revenue relied on the order of the AO dutifully. 7. We heard both the parties and perused the orders of the Revenue on this issue and the decisions relied on by the assessee. We proceed to extract the finding of Tribunal in the case of Yusmarg Investment & Trading Pvt. Ltd. (supra) and the same reads as under : "8. We find that similar issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in the investments made through PMS during the year was 19.06 crores involving 62 scrips, whereas, in the share trading business separately shown by the appellant, the sales turnover was 73.21 crores involving 76 scrips. This shows that in the share trading business activity, the turnover was almost 4 times higher even though the number of scrips were only marginally high. It was emphasized that in the trading activity even though the shares involved were proportionately much less as compared to the turnover, since the intention was to carry on business activity, the same was shown under the head Business income'. It also included speculative transaction and day trading, whereas no such transactions were entered into by the PMS. The appellant has also emphasized that i was prudent investment activity of the PMS to buy a target quantity of a particular scrip in small lots for averaging purpose; and it should not be treated as frequent and repetitive transactions. The appellant then goes on to cite the decision of the ITAT, Mumbai Bench in the case of Janak S. Rangwala, 11 SOT 627 in which it was observed that mere volume and magnitude of transaction will not alter the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is case and still the appellant sold the same before the shares becoming ex-dividend. Similarly, in the case of ACC, two particular sale dates mentioned when the scrip was transacted by DSPML, were 24.3.2005 and 16.11.05, whereas the ex- dividend date has been mentioned as 29.3.2006. It cannot therefore be said that the appellant had knowingly sold the shares after declaration of the dividend before it became ex-dividend. Again in respect of shares of Jet Airways, the exdividend date has been mentioned as 14.9.2005 by the AO, and the date of sale has been mentioned as 17.10.2005 and 23.1.2006 in the case of two different PMS's. This instance points out to a wrong conclusion by the AO as here the shares have been sold after those have become exdividend. Coming to two more instances pointed out by the AO in this chart, shares of Nalco have been sold on 30.3.2006 which was after the ex-dividend date of 23.9.2005; and the sale of ONGC shares by DSPML was made on 30.12.2005, which also is after the ex-dividend date of 1.9.2005. It is, therefore, clear that the instances pointed out by the AO did not support this argument, except in the case of two or three instances, where the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gain of Rs. 83,09,187/- was also shown. In fact, the AO has treated even this LTCG of Rs. 83,09,187/- as Business income, which cannot be justified. On the other hand, depending on the market conditions, vis-a-vis the analysis of the fundamentals of particular scrip, decision may have to be taken to exit at a particular point of time, and to re-enter after a few months on change of fundamentals. This does not mean that it was in the nature of repeated trading activities in the same commodity; in which case there could be multiple repetitions within a few days; or even during the same day." 14. In this context, we find that the Assessing Officer has treated even the gain on investments held for more than 12 months also as business income. Quite clearly as per the statement in respect of gains and investment in shares through PMS provider placed at page 73 of the Paper Book, the holding period goes upto even 18 months before the investment was liquidated. Be that as it may, the factor of period of holding cannot be ascribed to the assessee, inasmuch as it has no control on such decision making in a Discretionary PMS arrangement, because such decisions are taken by the PMS provider ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
