TMI Blog2012 (9) TMI 1028X X X X Extracts X X X X X X X X Extracts X X X X ..... er expenditure other than this expenditure, therefore, no disallowance u/s.14A r.w. Rule8D can be made. The above factual finding given by the learned CIT(A) could not be controverted by the learned DR. Under these circumstances, we hold that the learned CIT(A) was justified in deleting the disallowance made by the AO. - 1534/PN/11, 1535/PN/11, 1568/PN/11 , 1569/PN/11 , 1570/PN/11 , 1571/PN/11 - - - Dated:- 27-9-2012 - Shri Shailendra Kumar Yadav Judicial Member and Shri R.K. Panda Accountant Member Appellant by : Sri C.H. Naniwadekar Respondent by : Sri Rajeev Harit ORDER PER BENCH : The above six appeals filed by the respective assessees are directed against the separate orders dated 06-09-2011 of the CIT(A)-II, Pune relating to Assessment Year 2008-09. Since common grounds are involved in all these appeals, therefore, these were heard together and are being disposed of by this common order for the sake of convenience. 2. In Grounds of appeal No. 1 to 10 the revenue has challenged the order the learned CIT(A) in holding that the activity of transacting in shares/mutual funds by engaging a Portfolio Management Service (in Short PMS ) was an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring both the sides, we find identical issue had come up before the Tribunal in assessee s own case in the immediate preceeding assessment year. We find the Tribunal in the consolidated order vide ITA No. 239/PN/2011 and other connected appeals vide order dated 21- 06-2012 for assessment year 2006-07 has decided the issue and allowed the claim of the assessee. The relevant observations of the Tribunal from Para 9 to 15 of the order are as under : 9. We have carefully considered the rival submissions. Ostensibly, in the present case, the transactions in focus are the transactions in shares and securities carried out by the assessee through the PMS provider. Further, as it emerges from the record that in the present case, the portfolio management services engaged by the assessee were in the nature of Discretionary Portfolio Management services. The features of such a scheme have been adequately elaborated by the Commissioner of Income-tax (Appeals) in the impugned order and is also borne out of the copies of a few agreements with the PMS provider, which have been placed in the Paper Book at pages 137 to 183. The Commissioner of Income-tax (Appeals) has brought out the features of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spects . Clearly, it envisages that what the assessee was looking for by engaging the services of an expert, namely, the PMS provider, was appreciation and maximization of wealth and not merely encashing of profits with a view of a trader. In the case specific before us, we find that in this factual background, the plea of the Revenue that the arrangement of appointing a PMS provider to manage the investments was with an intention of a trade, cannot be accepted. 10. In any case, in so far as the very nature of Discretionary Portfolio Management scheme is concerned, the same has already been considered by our co-ordinate Bench in the case of ARA Trading and Investment P. Ltd. and KRA Holding and Trading P. Ltd (supra). According to the Tribunal, the scheme is for an activity of wealth maximization rather than a profit maximization and accordingly, it has been held that gain from such activity was liable to be considered as derived from an activity of investments and not trading. Therefore, on this aspect of the controversy, we find that the Commissioner of Income-tax (Appeals) made no mistake in following the order of the Tribunal in the case of ARA Trading and Investment P. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter dt 14.6.2010 by the appellant in response to the AO s report. We have examined the position, in particular the analysis made out by the Commissioner of Income-tax (Appeals) in the extracted portion with reference to the statement and transactions which have been placed n the Paper Book filed before us. In our considered opinion, the inference drawn out by the Commissioner of Income-tax (Appeals) clearly establishes that the volume and frequency of transactions sought to be made out by the Assessing Officer with regard to the impugned activity stands on an entirely different footing and is quite distinct from the activity of trading in shares carried out by the assessee. In fact, it is notable that in the share trading business carried on by the assessee, he has carried out certain speculative and trading activities and that in the case of a PMS provider, such activities are prohibited in law. Having regard to the aforesaid discussion by the Commissioner of Income-tax (Appeals), which is borne out of the record, we, therefore, find no reasons to uphold the plea of the Assessing Officer on the basis of the volume and frequency of transactions. 12. The Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, such instances are few and far between; and it cannot lead to a conclusion of indulging in a business activity. Moreover, as has been explained elsewhere by the appellant, such day to day decisions regarding purchase and sale of particular scrips are not that of the appellant, but of the portfolio manager since the appellant s case was that of engagement of Discretionary Portfolio Management Services. It was explained that as per SEBI Regulations, there were two types of PMSs i.e. Discretionary and Non-discretionary. It was explained that in case of Discretionary PMS as availed by the appellant, he appellant did not have control on the day to day activities and did not give any directions, except for the broad guideline for not purchasing the shares of Patni Computers Systems Ltd. since it was promoted by the appellant and his family members. It was also explained during the appellate proceedings that in accordance with the Accounting Standard and CBDT Circular, dividend earning was not the only criterion and in any case substantial amount of dividend of ₹ 16,31,796/- was also earned during the year in the investments through the PMS. Thus, this point is adequately exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovider was to achieve growth prospects and the actuality of transactions carried out by the PMS provider in order to achieve the stated Investment objective of the assessee cannot be made a basis to charge the assessee of having a different objective. Considering the aforesaid matters, we, therefore, are of the view that the objections made out by the Assessing Officer have been adequately addressed by the Commissioner of Income-tax (Appeals) in coming to his findings that the investments carried out by the assessee through the PMS provider do not result in a gain assessable as business income. 15. In view of the aforesaid discussion, and having regard to the reasonings extended by the Commissioner of Income-tax (Appeals) with which we hereby affirm, we find that the grievance of the Revenue in this appeal is misdirected and accordingly the conclusion arrived at by the Commissioner of Income-tax (Appeals) on this aspect is hereby affirmed. Thus, on this Ground, Revenue fails. Respectfully following the decision of the Tribunal in assessee s own case and in absence of any contrary material brought to our notice by the revenue the grounds raised by the revenue on this issue ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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