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TMI Blog2014 (3) TMI 404X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant on sale of shares and securities through Portfolio Management Services under the head "Income from Business or Profession". On the facts and in circumstances of the case, the aforesaid sum ought to be assessed as "Capital Gains". 2. Learned CIT(A) has erred in assessing the short term capital gains of Rs.75,17,459/- and long term capital gain of Rs.5,18,68,286/- earned by the appellant on sale of shares and securities carried out independently under the head "Income from Business or Profession". On the facts and in the circumstances of the case, the ld. CIT(A) ought not to have disturbed the assessment made in this regard and the aforesaid sums ought to be assessed as Capital Gains. Ld. CIT(A) erred in directing the AO to enhance the assessment by assessing the gains arising from purchase and sale of shares held for more than 30 days under the head "Income From Business or Profession" Instead of its assessment as "capital gains" by the AO. Ld. CIT(A) has erred in observing that the appellant has converted shares of Financial Technologies and Henkel Spice from "investment " to stock in trade, which is contrary to facts on record. 3. While confirming the action of the AO i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds by PMS Manager in liquid fund results in activity of PMS being treated as "business activity" Confirmation of the action of the AO on the basis of above observation being contrary to facts of the case ought to be deleted." 4. Grounds of appeal taken by the assessee in ITA No.1596/Mum/2012 are as under:. " 1. Learned Commissioner of Income Tax (Appeals)} has erred in confirming the action of the Assessing Officer (AO) in assessing short term capital gains of Rs.41,05,905/- (inadvertently considered as Rs.40,24,034/- by the AO) & long term capital gain of Rs.55,34,345/- earned by the appellant on sale of shares and securities through Portfolio Management Services under the head "Income from Business or Profession". On the facts and in circumstances of the case, the aforesaid sum ought to be assessed as "Capital Gains". 2. Learned CIT(A) has erred directing the AO to assess the short term capital gains of Rs.2,00,523/- and long term capital gain of Rs.2,88,83,346/- earned by the appellant on sale of shares and securities under the head "Income from Business or Profession" instead of assessed as "capital gains" by the AO and consequently enhancing the assessment. On the facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh by following the Portfolio Management Services, is in the business of share trading and the profit is to be held as "income from business" instead of considering it as "capital gain". 6. We have considered the submissions of ld. Representatives of the parties and the orders of authorities below in the light of the order passed by Tribunal dated 10.1.2014 for the assessment year 2007-08 in the cases of Shri Nalin Pravin Shah(ITA.Nos.1575/Mum/2012) and Shri Manan Nalin Shah ( I.T.A.Nos.1594/Mum/2012). We observe that the Tribunal in the said case after following its earlier orders in the case of above named assessee dated 6.7.2012 and in the case of Manan Nalin Shah V/s DCIT in ITA No.6166/Mum/2008 for assessment year 2003-04, ITA No.2125/Mum/2008 for assessment year 2004-05 and ITA No.4126/Mum/2008 for assessment year 2005-06 allowed the claim of the assessee stating that the very nature of PMS is such that investments made by assessee cannot be said to be scheme of trading of shares and stocks and therefore, the profit is to be assessed under the head "capital gains". It is also observed that the Tribunal by following the said order in the assessee's case its order dated 23.1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The decision of the Tribunal in case of Manan Nalin Shah in assessment year 2003-04 was followed by the Tribunal in assessment years 2004-05 & 2005-06 in ITA Nos.2125/M/2008 and 4126/Mum/2008.The said decision was again followed by the Tribunal in case of Nalin P. Shah in assessment year 2004-05 in ITA No.2122/Mum/2008. Similarly the same issue was decided by the Tribunal in case of Nalin P. Shah (HUF) in assessment year 2004-05 and 2005-06 in ITA Nos.2126/Mum/2008 and 4125/Mum/2008 in which the decision in case of Manan Nalin Shah (supra), was followed. Thus, issue raised in these appeals is covered by the decision of the Tribunal in assessees own case for the earlier years. No distinguishing feature have been brought to our notice by the ld. DR in these years with respect to factual position in the earlier years decided by the Tribunal. We, therefore, agree with the ld. AR that the issue raised is covered in favour of the assessee by the decision of the Tribunal in earlier years. We, therefore, respectfully following the decision in earli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties and the orders of the authorities below. We have also gone through the written submissions filed by assessee and have perused relevant pages of the paper book. We have also considered the assessment orders of earlier assessment years, copies placed at pages 78 to 114 of the paper book (supra). 16. The dispute is regarding the nature of income from share transactions entered into by the assessee. The issue is as to whether shares transactions in a particular case should be treated as investment activity or trading activity has been highly debatable issue. There are decisions of Tribunal on both sides. Each case depends on its own facts. 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. The Hon'ble Gujarat High Court in the case of CIT V/s Motilal Hirabhai Spg. & Wvg. Co. Ltd.. [1978] 113 ITR 173 (GUJ.) and the Hon'ble Apex Court in the case of. Raja Bahadur Visheshwara Singh. V/s CIT [1961] 41 ITR 685 (SC) have held that the treatment in the books of an assessee will not be conclusive and if the volum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the true nature of transactions. 18. In the light of above proposition, we have considered the facts of the case of the assessee before us. We observe that the assessee in the earlier assessment years had also carried out the transactions of purchase and sales of shares directly as well as through PMS. We observe that 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 as is evident from the copies of the assessment order placed at pages 78 to 114 of the paper book. However, 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. We observe that the AO as well as ld. CIT(A) have mentioned CBDT circular and the cases but have not discussed as to how those cases are relevant to the facts of the case of the assessee before us. As mentioned hereinabove that the Hon'ble Apex Court has held in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - shown by the assessee. Further, there is no transaction of purchase and sale of shares where the holding period is less than 15 days. We also observe on perusal of the details that there is no repeated sales and purchases of shares in respect of the same script. Considering the above facts and the facts that in the preceding assessment years the similar kind of transactions have been considered by the AO as an investment activity of the assessee and the profit has been considered as STCG. We are of the considered view that the said shares have been purchased by the assessee for the purpose of investment and a different view cannot be taken in the absence of any fresh material on record. 8. In view of aforesaid decisions in the earlier assessment years, we now propose to decide Ground No.2 of all the three appeals of the above named assessees. 8.1 In respect of appeal of Shri Nalin Pravin Shah (ITANo.1576/Mum/2012), we observe that the assessee has shown Shor t Term Capi tal Gain on shares /Mutual Funds of Rs.75,17,460/- and long term capital gain on equity and Mutual Funds of Rs.5,18,68,286/- for the purchase and sales of shares made by assessee himself. AO accepted the Long Te ..... X X X X Extracts X X X X X X X X Extracts X X X X
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