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2016 (3) TMI 490 - AT - Income TaxInvestment portfolio - treated as capital gains OR business income - Held that:- We find that the assessee has consistently been in the subsequent assessment years also has given the same treatment to the shares kept in investment portfolio. The very intention of the assessee at the time of purchase was decipherable from the act and conduct of the assessee. The assessee has maintained two portfolios. The profits/loss incurred in respect of trading portfolio has been treated as business income whereas in respect of investment portfolio, the assessee has returned the income/loss as capital gains/loss. Even subsequently, the long term capital loss claimed by the assessee in respect of the same scripts has been accepted by the AO in assessment order for A.Y. 2011-12. Though the assessee had made the investments by using borrowed funds also but that itself cannot be a sole ground to treat the assessee as a trader in respect of the scripts which had been kept in the investment portfolio, especially when the assessee has clearly bifurcated the investment portfolio and trading portfolio and has consistently maintained the same. In view of the above, the profit on share transactions relating to investment portfolio of the assessee is ordered to be treated as capital gains and not as business income of the assessee. Appeal of the assessee is therefore allowed. - Decided in favour of assessee Applacablity of provision of section 73 - whether assessee would deemed to be carrying on a speculation business for the purpose of Sec. 73(1)? - Held that:- In order to determine whether the exception that is carved out by the explanation applies, the legislature has first mandated a computation of the gross total income of the Company. The words "consists mainly" are indicative of the fact that the legislature had in its contemplation that the gross total income consists predominantly of income from the four heads that are referred to therein. Obviously, in computing the gross total income the normal provisions of the Act must be applied and it is only thereafter, that it has to be determined as to whether the gross total income so computed consists mainly of income which is chargeable under the heads referred to in the explanation. Consequently, in the present case the gross total income of the assessee was required to be computed inter alia by computing the income under the head of profits and gains of business or profession as well. Both the income from service charges and the loss in share trading would have to be taken into account in computing the income under that head, both being sources under the same head. The assessee had a dividend income (income from other sources). Thus the assessee fell within the purview of the exception carved out in the explanation to Section 73 and that consequently the assessee would not be deemed to be carrying on a speculation business for the purpose of Sec. 73(1).See CIT vs HSBC Securities & Capital Markets India (P) Ltd [2012 (6) TMI 715 - BOMBAY HIGH COURT] - Decided in favour of assessee
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