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2014 (1) TMI 708 - AT - Income TaxPurchase and sale of shares through PMS - Nature of income - Held that:- Following assessee’s own case for A.Y. 2003-04 - PMS Manager was authorized to purchase, acquire, obtain, take, hold, sell, transfer, substitute or change all or any of the investments made on behalf of the assessee - PMS Manager was also authorized to hold all or any of such investment in his name or at his discretion on behalf of the assessee and make every effort to maximize the value of investment - The PMS Manager was required to provide the assessee with quarterly statement of investment - The Tribunal noted that the PMS Manager had sole and absolute discretion to make investment for and on behalf of the assessee and the assessee had no role to 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 Tribunal accordingly concluded that the income earned from PMS has to be assessed as capital gain - STCG Rs.83,14,515/- earned by assessee and LTCG of Rs.70,39,652/- 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 – Decided in favour of assessee. Sale of shares - Income from business or income from capital gains - Held that:- Each case depends on its own facts and circumstances - There are various factors such frequency, volume, and entries in the books of account, nature of fund used, holding period etc which are relevant in deciding true nature of transaction and no single factor is conclusive – Following Raja Bahadur Visheshwara Singh. V/s CIT [1960 (12) TMI 12 - SUPREME Court] - 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- trade is a matter within the knowledge of the assessee and it is for the assessee to produce evidence from the records as to whether he maintained any distinction between shares which are held as investment and those held as stock-in-trade - The important factor is the intention of the assessee at the time of purchase, which has to be gathered from the actual conduct of the assessee while dealing with the shares subsequently and not only on the basis of entry in the books of account. The department accepted the transactions made by assessee of his own for purchase and sale of shares as investment i.e. for assessment years 2003-04, 2004-05, 2005-06 and 2006-07 in the assessment made under section 143(3) of the Act - In the assessment year under consideration the AO has taken a contrary view to 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 – The finding of the ld. CIT(A) has no merits and particularly when we observe from the period of holding of shares - The LTCG had accrued to the assessee, where the period of holding is more than 24 months and therefore, the order of ld. CIT(A) to treat the said LTCG accrued to the assessee as business income is not supported by facts particularly when there is no purchase of shares by assessee in the assessment year under consideration and said shares were held by assessee for a period of more than 24 months – Decided in favour of assessee.
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