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2014 (3) TMI 404 - AT - Income TaxComputation of STCG and LTCG - Purchase and sale of shares through PMS - Whether the CIT(A) has erred in confirming the action of the AO in assessing short term capital gains & long term capital gain earned by the appellant on sale of shares and securities through Portfolio Management Services under the head “Income from Business or Profession” – Held that:- The decision in Shri Nalin Pravin Shah, Shri Manan Nalin Shah Versus Addl. Commissioner of Income Tax [2014 (1) TMI 708 - ITAT MUMBAI] followed - 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 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 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- 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 – Decided in favour of Assessee.
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