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2016 (11) TMI 385 - AT - Income TaxTax on amount of interest income earned upon Non Resident External Rupee Accounts (‘NRE Accounts’) - denial of exemption claimed by the assessee u/s 10(4)(ii) - Held that:- Assessee was on deputation to India with a subsidiary of M/s Sunlife Assurance Co of Canada. It has been further held that assessee was a person not resident in India as per provisions of FEMA. It has been further held by Ld. CIT(A) that the assessee satisfied both the conditions of section 10(4)(ii) of the Act. It is further noted by us that in the year before us the assessment was done ex-parte and addition was made by the Ld. CIT(A) by way of enhancement. It is further noted that facts have not been properly analysed by Ld. CIT(A) in the impugned year. On the other hand, in the assessment year 2009-10 proper factual analysis were made by Ld.CIT(A) and his order has been accepted by the revenue as per the facts narrated before us by the ld. Counsel. Under these circumstances, we find that the interest income of the assessee is exempt u/s 10(4)(ii) of the Act and, therefore, addition made by the Ld.CIT(A) with regard to interest earned in NRE account is directed to be deleted. Sale of shares in mutual fund under Portfolio Management Scheme (PMS) - capital gain or busniss income - Held that:- Hon’ble Karnataka High Court in the case of CIT vs Kapur Investments (P) Ltd (2015 (5) TMI 616 - KARNATAKA HIGH COURT ) has decided this issue in favour of the assessee by holding that the profits earned from investment through PMS – whether directly or indirectly or though PMS, would still remain as profits to be taxed as capital gains as the same will not change the nature of investment i.e. in shares, and law permits it to be taxed as capital gains and not as business income. Taking into account the facts of this case and legal position as is brought before us and also the fact that the claim of the assessee has been accepted by the AO as well as the Ld. CIT(A) consistently in all subsequent years, we hold that the action of Ld.CIT(A) in treating the income from PMS as business income is contrary to law and facts. The AO is directed to treat the said income as income assessable under the head “Income from capital gains”. The addition proposed by the Ld. CIT(A) in this regard is directed to be deleted.
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