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2014 (4) TMI 283 - HC - Income TaxNature of Income – Mutual funds sold - Whether the Tribunal fall into error in holding that the sum reported as long term capital gain by the assessee was to be treated as its business income – Held that:- CIT(A) rightly held that the surplus from the sale of the mutual funds had to be treated as long term capital gain and not business income – assessee has employed its own funds out share capital and accumulated free reserves that there was no borrowing at any time – also, Assessee’s is lacking proper infrastructure and is only holding worth of fixed assets - units of mutual funds are not freely transferable nor tradable and thus cannot be categorized as Business - The units can be bought or redeemed with mutual fund itself - the Income Tax Act itself recognized units of mutual funds as a special category of ‘‘investments’‘ as far as trusts were concerned, u/s. 11 (5) which placed this in an entirely separate class - The assessee had kept the amounts separately in an investment account and the mutual funds for about two years, the Tribunal clearly fell into error in holding that the amount was business income and not long term capital gains – Decided in favour of Assessee.
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