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2015 (5) TMI 616 - KARNATAKA HIGH COURT

2015 (5) TMI 616 - KARNATAKA HIGH COURT - TMI - Sale of shares - capital gains or business income - Held that:- Investment through Portfolio Management Service, which may deal with the shares of the assessee so as to derive maximum profits cannot be termed as business of the assessee but would only be a case of a more careful and prudent mode of investment, which has been done by the assessee. Funds which lie with the assessee can always be invested (for earning higher returns) in the shares eit .....

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of assesse.

Generation of profits by purchase and sale of shares after availing loan - Held that:- The assessee having taken loan and having invested borrowed funds in purchase of shares, we are of the view that the Income Tax Act does not prohibit the assessee from making investments in capital assets after using borrowed funds. The Tribunal has also considered this aspect of the matter and decided in favour of the assesssee and we see no reason to differ with such opinion of the Tri .....

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l dated 29.11.2013 for the assessment years 2006-2007 and 2008-2009 in the case of the respondent-assessee. By the order of the Tribunal income from sale of shares by the assessee has been treated as capital gains, instead of business income as had been held by the Assessing Officer. 2. Briefly stated the facts of the case are: The respondent-assessee Company is engaged in the business of finance and films. For the assessment years 2006-2007 and 2008-2009, the assessee had invested money in shar .....

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In the first round, the Tribunal remanded the matter to the Commissioner of Income Tax (Appeals), which again held in favour of the assessee. Thereafter, the Tribunal by the impugned order, dismissed the appeals of the Revenue and hence, these appeals have been filed by the Revenue before this Court. 3. We have heard Sri K.V.Aravind, learned Counsel appearing for the appellants as well as Sri K.K.Chythanya, learned Counsel for the respondent and perused the record. 4. Sri K.V.Aravind, learned C .....

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arning income through strategic/planned transactions of specific shares and thus indulged in business? 2. Whether the Tribunal was justified, on the facts and in the circumstances of the assessee's case, in holding that no interference was warranted in the order of the Commissioner of Income Tax (A) without appreciating the fact that the assessee itself had admitted dealing in derivatives and mutual funds as business income in the previous assessment years and therefore, the assessee's g .....

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ss of the assessee and thus, such income derived from the sale and purchase of shares should not be given the benefit of 'short term or long term capital gains', but should be assessed as 'business income'. 6. He has further submitted that for carrying on such transactions, the assessee had also taken loan, which further fortifies that the assessee was carrying on the business of sale and purchase of shares and the trading activity carried on by the assessee should not be treated .....

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. He has further submitted that there is a clear finding of fact recorded by the Tribunal as well as the authorities below that the assessee had not employed any persons of its own for managing the investments. 8. In support of his submission that investments managed through the portfolio management service could not be termed as 'business income' simply because of the services of Portfolio Management Service having been engaged, learned Counsel for the assessee has relied on decision of .....

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d been taken for investment in shares will not mean that the same would become business of the assessee, as there is nothing in law which prohibits purchase of shares for investment purpose after taking loan. 10. As regards the first question that merely because of employment of Portfolio Management Service for investment in shares, the same would become business income, we are of the opinion that the said issue has been dealt with at length by the Delhi High Court in the case of Radials Interna .....

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