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2016 (5) TMI 200 - ITAT BANGALORE

2016 (5) TMI 200 - ITAT BANGALORE - TMI - Transaction in shares - income under the head business or income from capital gains - 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 highe .....

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income. See Commissioner of Income Tax, Deputy Commissioner of Income Tax Versus M/s Kapur Investments (P) Ltd. [2015 (5) TMI 616 - KARNATAKA HIGH COURT] - Decided against revenue - ITA No. 1859/Bang/2013 - Dated:- 29-4-2016 - Shri Abraham P. George, Accountant Member And Shri George George K., Judicial Member For the Appellant : Shri Sunil Kumar Agarwala, Jt. CIT (DR) For the Respondent : Shri H. N. Khincha, CA ORDER Per Abraham P. George, Accountant Member In this appeal, Revenue has taken the .....

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owing the appeal without appreciating the high volume of transaction in shares, and that the assessee company itself has treated loss on derivatives and mutual funds as "Business loss" in the earlier years in respect of which reliance is placed by the CIT(A). 4. The CIT (A) erred in not appreciating the fact that the principles of res-judicate do not apply in income tax proceedings for him to lay on his own orders for the A.Y's to 2006-07 & 2008-09. 5. For these and such other .....

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utual funds) Rs. (-) 2,38,334 Long term capital loss (mutual funds) Rs. (-)1,50,010 Short term capital gains on shares ₹ 11,43,347 Long term capital gains on shares ₹ 22,24,785 Total ₹ 29,83,788 3. Since volume of transaction of shares were found to be substantial, Assessing Officer proposed to treat the income arising from such transactions as business income against capital gains declared by assessee. Reply of assessee was that transactions in shares were made as an investmen .....

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assessee had invested borrowed funds for investment in shares. He held the sum of ₹ 29,83,788 as income under the head business and not as income from capital gains. 4. Aggrieved, assessee moved an appeal before the CIT(Appeals). Assessee relied on its own case for the AYs 2006-07 & 2008-09. Ld. CIT(Appeals) found that for AYs 2006-07 & 2008-09, the issue was decided in favour of the assessee. He held that for the impugned assessment year also, business income arising out of sale .....

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High Court on further appeals filed by the Revenue. 7. We have perused the record and heard the rival contentions. We find that the issue of treatment of surplus arising on sale of shares and mutual funds had come up before this Tribunal in the appeal of Revenue for AYs 2006-07 & 2008-09. This Tribunal in its decision dated 29.11.2013 held as under:- 6. We have carefully considered the rival submissions, perused the relevant materials on case records and also the case laws on which the lear .....

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o.4 of 2007 dated 15.6.2007. Likewise, for the AY 2008-09, the CIT (A) took a stand that the income from capital gains, short-term or long-term capital based on the period of holding of such assets cannot be treated as business income . The Revenue has not brought any documentary evidence or proof to contradict the conclusion arrived at by the CIT(A). Photocopy of the agreements entered by the assessee company with the Portfolio Manager (M/s. Kotak Securities Ltd) has been placed on record. On p .....

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essee s contentions. To illustrate further, the views of judiciaries are analyzed as under: (i) In the case of ITO v. Radha Birju Patel reported in A(2011) 11 Taxmann.com 293(Mum), the Hon ble Mumbai Tribunal has held, on a similar issue, as under: It was apparent from the record that the share transactions in question were carried out by the assessee s PMS Manager. Therefore, these transactions were clearly in the nature of transactions meant for maximization of wealth rather encashing the prof .....

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was engaged in a systematic activities of holding portfolio through the PMS Manager, it could not by any stretch of imagination, be said that the main object of holding the portfolio was to make profit by sale of shares during the course of maintaining the portfolio investment over the period. Therefore, the Commissioner (Appeals) was justified in accepting the gain on sale of shares as short-term capital gain as claimed by the assessee. (ii) Yet another finding, the Hon ble H Bench of Mumbai T .....

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ruled as under: that in the light of the findings recorded by Commissioner (Appeals) that the assessee had held the shares in question for fourteen months which is a long period for the purpose of long-term capital gain, the intention of the assessee had always been that of making investment in shares and not dealing in shares, which was also apparent from the fact that the shares had not been treated as stock in trade by the assessee; even after the sale, the assessee had made investment in bo .....

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unt all the facts and circumstances of the issue as discussed above and also in conformity with the ratios laid down by the Hon ble High Court of Gujarat and also the Hon ble Mumbai Tribunal (supra), we are of the view that the CIT (A) was justified in coming to right conclusion which does not warrant any interference. In essence, the findings of the CIT (A) for both the assessment years under dispute are upheld. 8. Revenue had carried the issue further in appeal before the jurisdictional High C .....

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essee and against the Revenue. Detailed reasons for the same have been given in the said judgment with which we concur. Even otherwise, it is admittedly not a case where the assessee had engaged its own persons or had a separate business infrastructure to carry out its share transactions for the purpose of business. It is merely a case where the assessee has invested funds through the Portfolio Management Service. 11. In our opinion, investment through Portfolio Management Service, which may dea .....

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