Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (11) TMI 482 - ITAT MUMBAI

2015 (11) TMI 482 - ITAT MUMBAI - TMI - Sale of Shares, Units and Securities through Portfolio Management Services - Capital gain or Profit and Gains of Business or Profession - Held that:- following the earlier years precedence in assessee’s own case, right from assessment year 2005-06 to 2007-08, we hold that the transaction made through PMS is to be taxed under the head “capital gains” and not ‘business income’ as relying on Manan Nalin Shah Versus DCIT 14(1), Mumbai [2012 (9) TMI 793 - ITAT .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

1. On the facts & circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in confirming the addition Capital Gains (arising out of sale of Shares, Units and Securities through Portfolio Management Services) of ₹ 34,27,306/0 as Profit and Gains of Business or Profession . Under the facts and circumstances of the case the Learned Commissioner of Income Tax (Appeals) ought to have accepted that a sum of ₹ 3,17,699/- as Short Term Capital Gain an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rising out of transaction of sale of shares carried out by Portfolio Management Services (PMS) is to be treated as business income or capital gain . This precise issue had comeup for consideration in the case of the assessee and his family members in the earlier years before the Tribunal, wherein, this issue after detailed discussion has been decided in favour of the assessee, by inter alia holding that the gain arising out of transactions of shares made through PMS is to be taxed under the head .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

order of the CIT(A), wherein after details analysis, the Ld. CIT(A) held that the transaction of shares through PMS is to be treated as business income. 4. We have heard the rival contention and also perused the relevant finding given in the impugned orders and material on record. During the year, the assessee had invested a portion of his capital in Portfolio Management Scheme of Kotak Securities, who were appointed as Portfolio Managers PMS by the assessee. During the year, the assessee has e .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

AO inasmuch as it has held to be taxable under the head capital gain . Here only controversy is with regard to investment made through PMS. The Ld. AO after discussing the Letter of Agreement between the assessee and Kotak Securities, noted various salient features and held that the dealing through PMS are to be classified as adventure in the nature of trade. He further observed that, in the AY 2005-06 and 2006-07, the CIT(A) has upheld this view of the AO. Accordingly, he treated the gain amoun .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. We find that, exactly similar issue had come-up for consideration in the case of Manan Nalin Shah and also in the case of the assessee for the assessment years 2005-06 to 2007-08, wherein the Tribunal after detailed discussion came to the conclusion that the investments made through PMS and gain arising out of such transactions of shares and stocks and mutual funds is to be assessed under head capital gains and not as business income . In the case of the assessee, the Tribunal has relied upon .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

placed a part of fund of ₹ 50 lakhs with Kotak Securities as PMS and entered into agreement, copy placed at pages 30 & 31 of PB. In A.Y. 2003-04, there is a profit of ₹ 52,127. We observe that assessee while filing the return, has shown the said income as business income. However, during the course of assessment proceedings, assessee filed a letter dated 25.11.2005 and stated that the said income is to be assessed under the head capital gains . The authorities below did not acce .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r provisions of I.T. Act. Moreover, when the assessee has taken the said ground before ld CIT(A), ld CITA) could not reject the claim of the assessee merely on the ground that the assessee has shown particular income under a particular head. It is a legal ground and the same could be considered by ld CIT(A) on the basis of the facts and as per provisions of law. The Hon ble P&H High Court in the case of Ramco International(supra) has held that non-filing of the revised return of income shoul .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er authorizes to hold all or any of such investments in its name or at its discretion on behalf of the assessee. Further as per clause 6 of the agreement, it is stated that the portfolio manger will make every effort to maximize the value of investment. Clause 9 of the said agreement stipulates that Portfolio Manger will provide the assessee with quarterly statement of the investments. On perusal of the contents of the agreement, we observe that assessee has placed funds with PMS to make investm .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n shown by assessee which has arisen by making directly purchase & sales of shares/units. During the course of hearing, ld D.R. submitted that when the Portfolio Manager is appointed, he acts as an agent on behalf of the assessee to do trade. However, similar issue has been considered by Pune Bench of Tribunal in the case of ARA Trading & Investment Pvt Ltd (supra). The relevant extracts from paras 22 to 27 have been produced hereinabove. We observe that Portfolio Manager is appointed in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rchase and sale of shares on behalf of the client against securities after obtaining written permission. They are not authorized to undertake purchase and sale of securities which are settled otherwise than by actually delivery or transfer of securities. The Portfolio Manager at their own discretion can make investments. Considering the above scheme of Portfolio Management, we are of the considered view that the investments made by the assessee through PMS is meant for maximization of wealth and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tional(supra) relied upon by ld D.R. is not applicable to the facts of the case as in that case, the Tribunal observed that holding period of shares by Portfolio Manager ranges from 2 days to few months at the most and the number of transactions were huge. Therefore, the transactions were found to be not investment but an adventure in the nature of trade. However, in the case before us, ld A.R. has stated the relevant facts, which we have discussed hereinabove, and on that basis, we agree with l .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rdinary line of business of purchase and sale of shares and not for the purpose of investments. In the case before us, the said facts are not borne out as the average period of holding was varying for more than two months. Similarly, we agree that the decision of ITAT Mumbai in the case of Mafatlal Holdings Ltd (supra) is not applicable to the facts of the case of the assessee as in that case, the Board of Directors specifically passed a resolution to place ₹ 100 crores for purchase and sa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version