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The ACIT 19 (3) , Mumbai Versus The Azavedo Family Trust

Purchase and sale of shares - “Capital Gains” or “Business Income” - whether the assessee had purchased/sold the shares in question as an investor or as a share trader; whether any borrowed funds were utilized or the assessee has invested its own funds and whether the shares in question were purchased/sold under a Portfolio Management Scheme or the assessee has made the transaction as a share trader? - Held that:- Admittedly, the objective of the appellant trust is to ensure effective succession .....

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se of the shares in question. In view of the aforesaid facts the contention of the revenue that the assessee has indulged in business activities in the guise of share investment has no merit. It is quite clear that the over-riding intention of the assessee is not to trade in shares even when the purchase and sale of shares was made through various Portfolio Managers. Therefore the CIT(A) has rightly held the income in question as ‘Capital Gains’ and not the ‘Business Income’.

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Prakash Jotwani PER RAM LAL NEGI, JM The present appeal has been filed by the revenue against order dated 18/02/2013 passed by the Ld. CIT(Appeals)-30, Mumbai for the assessment year 2010-11. 2. Brief facts of the case are that the assessee is a Private Discretionary Trust settled vide Trust Deed dated 03/06/2008. The main objective of the trust is to ensure effective succession planning mechanism and transfer of funds from generation to generation for the benefit of the family members includin .....

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value of ₹ 1 each were contributed to the trust on 01/10/2008. 2.2. Thus, the corpus of the Appellant Trust consisted of; • Contribution in cash - ₹ 1,90,932/- • 9,96,000 equity shares of Glenmark Pharmaceuticals( transferred to the De-mat A/c on 01/10/2008) 2.3. The settler held the shares of Glenmark Pharmaceuticals Ltd. for a period of about 30 years. With changing market conditions, the value of share dropped from ₹ 503.50/-to ₹ 120.85/-. With a view to div .....

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ing the total income of ₹ 1,58,76,556/- i.e., Short Term Capital Gain ₹ 81,28,460/- and Long Term Capital Gain of ₹ 77,48,096/- Subsequently, the trust submitted its revised return on 02/02/2012 after obtaining audited financial statements, declaring the total income at ₹ 68,96,296/-. During the year under consideration, the trust earned total income of ₹ 16,38,27,822/-, which was offered for tax under the following heads of income in the revised return. • Divi .....

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e was to make quick profit, therefore, the transaction is business in nature. 2.6. Aggrieved by the impugned assessment order, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) after hearing the appellant/assessee relying upon the decisions of various Benches of the Tribunal and Hon ble High Courts, allowed the appeal of the assessee. Dissatisfied with the impugned order passed by the Ld. CIT(A), the revenue is in appeal before this Tribunal. 3. The Revenue has challenged the im .....

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said income after paying substantial expenses by way of management fees to the said portfolio managers and which was nothing but act of adventure in the nature of trade and, therefore, the Assessing Officer had rightly assessed the total sum of ₹ 16,89,87,945/- as business income 4. Before us, the Ld. DR heavily relying on the assessment order has submitted that the AO has rightly assessed the total income of the assessee by making additions in question in view of the nature of the transac .....

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Pharmaceuticals Ltd. were sold by the assessee. As regards short term capital gain, the Ld. Counsel has submitted that the assessee has disclosed the short term capital gain of ₹ 68,96,296/- from the sale of shares held under the different Portfolio Management Scheme. The Ld. Counsel has also relied on the decision of ITAT Mumbai passed in Mr. Bhartan M. Ghia vs. DCIT, ITA 6319/M/10 and cross appeals filed by the Revenue and the assessee ITA No 5397/M/2013 and 5709/Mum/2013 respectively f .....

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issue in question, it is essential to ascertain some of the material facts i.e., whether the assessee had purchased/sold the shares in question as an investor or as a share trader; whether any borrowed funds were utilized or the assessee has invested its own funds and whether the shares in question were purchased/sold under a Portfolio Management Scheme or the assessee has made the transaction as a share trader? 4.4. Admittedly, the objective of the appellant trust is to ensure effective succes .....

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rchase of the shares in question. In view of the aforesaid facts the contention of the revenue that the assessee has indulged in business activities in the guise of share investment has no merit. It is quite clear that the over-riding intention of the assessee is not to trade in shares even when the purchase and sale of shares was made through various Portfolio Managers. Therefore the CIT(A) has rightly held the income in question as Capital Gains and not the Business Income . From the aforesaid .....

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shares from its own funds with a view to keep the funds in equity shares to earn considerable return on account of enhancement in the value of share over a period then merely because the assessee liquidates its investment within six months or eight months would not lead to the conclusion that the assessee had no intention to keep the funds as invested in equity shares and but was actually intended to trade in shares. In Salil Shah Family Pvt. Trust vs. ACIT, ITA No 2446/M/2012, the sole grievan .....

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