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2016 (7) TMI 384 - ITAT AHMEDABAD

2016 (7) TMI 384 - ITAT AHMEDABAD - TMI - Profit on sale of shares - “business income” OR “capital gains” - Held that:- It is an undisputed fact that the assessee earned profit on sale of shares and it is also a fact that assessee has availed the services of Portfolio Managers for purchase and sales of shares and the act of the assessee of engaging the PMS and the profits earned therefrom has been considered to be a part of business of the assessee by the ld.CIT(A). - We find that Hon’ble Ka .....

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ome of the assessee. - ITA No. 1224/Ahd/2011 - Dated:- 6-6-2016 - SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER For The Assessee : Ms. Urvashi Shodhan, AR For The Revenue : Shri Ashish Pophare, Sr. DR ORDER PER ANIL CHATURVEDI, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of the Commissioner of Income-tax (Appeals)-XV, Ahmedabad dated 18.01.2010 for Assessment Year 2006-07. 2. The brief facts of the case for AY 2006-07 as culled out fr .....

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rieved by the order of the AO, assessee carried the matter before ld.CIT(A), who vide order dated 18th January-2010 in appeal No.CIT(A)-XV/DCIT(OSD)/Circle-9/215/08-09 granted partial relief to the assessee. Aggrieved by the order of the ld.CIT(A), assessee is now in appeal and has raised the following grounds:- 1) The ld. CIT(A) has completely erred on facts and in law in confirming the decision of the A.O. who held the Short Term Capital Gain made up of 1] Sale of shares on own 2] on redemptio .....

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n of the ITAT Ahmedabad, without realising the fact that use of borrowed funds and payment of interest was an observation made by A.O. but not established as against the correct fact submitted that borrowed funds were not utilised in buy/sale of shares but earning interest income which remained undisputed. 4) The Id. CIT(A) completing failed in not appreciating the facts of the case and thus failed to controvert facts established on records and in Statement of Facts and Written Submission and th .....

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m Short Term Capital Gain (STCG) of ₹ 11,45,160/- and Long Term Capital Gain (LTCG) of ₹ 3,37,983/-. On further perusal of the details filed by the assessee, he noticed that the assessee had made 372 transactions of purchase and sale of shares from which he had earned STCG. The AO therefore concluded that the assessee had indulged in frequent selling of shares throughout the year with the motive of earning profits and assessee has also indulged in trading in Future and Options from w .....

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,45,160/- as business income of the assessee. Aggrieved by the order of the AO, assessee carried the matter before the ld.CIT(A) who upheld the order of the AO by holding as under:- 4. After going through rival submissions following points emerge: 1 In the return as per copy of computation of income the appellant has not shown any receipts from his profession. The computation filed with the return is as under: Salary Nil House property Nil Business profession profits Nil Profit/loss from specula .....

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On mutual funds through ASK Raymond James ₹ 6,650 On sale of shares through Franklin Templeton Rs.2,18,731 On sale of shares through ASK Raymond James ₹ 7,83,950 Rs.11,45,160 This breaking up of shares does not mean that the appellant was holding the shares for a long time or was investing just for investment and long term gain. The number of companies for STCG is not 20 or 100 but more than 300. Rather still more- because the names of companies dealt into through portfolio managers .....

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appellant engaged services of not one but two portfolio managers - ASK Raymond James Securities India Pvt.Ltd. and Franklin Templeton Asset Management (India) Pvt.Ltd. - for dealing full time and in a big way in shares. The table from page 4 to 14 of the paper book shows that these portfolio managers at times did not hold shares for more than a few days. The names of the shares have not been given in the table only the name of the respective portfolio management company has been written, which m .....

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or 28.10.2005 or 31.10.2005 but all have been sold on 7.11.2005. Several shares have been informed purchased and sold on 7.11.2005 i.e. single day. Bank of Baroda shares were purchased on 8.2.2006 and sold also on the same date. Allahabad bank shares were purchased on 26.4.2005 and sold on the same date. 5 The appellant has not shown any business income and the AO has observed on page 5 of the assessment order that the appellant paid interest of ₹ 2,06,089. The observation of the AO that .....

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t High Court in the case of CIT vs. Rewashanker A Kothari 283 ITR 338 for judging an income from shares to be capital gains or business. The treatment of short term capital gains income by the AO of ₹ 11,45,160 as business income is upheld. 4. Aggrieved by the order of the AO, the assessee is now in appeal before us. 5. Before us, ld.AR reiterated the submissions made before the AO and ld.CIT(A) and further submitted that the main reason of ld.CIT(A) for upholding the view of AO and for co .....

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also accepted by the Revenue. She further submitted that investments made by assessee through PMS for maximizing profits cannot be termed as business of the assessee and for which she placed reliance on the judgement of Hon ble Karnataka High Court in the case of CIT-Bangalore vs. Kapur Investments(P) Ltd. reported at (2015) 61 taxmann.com 91 (Karnataka). She also relied on the judgement of Hon ble Delhi High Court in the case of Radials International vs. ACIT reported at (2014) 367 ITR 01 (Delh .....

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val submissions, perused the material available on record and gone through the orders of the authorities below as well as the judgements/decision relied upon by both the parties. The issue in the present case is about the treatment of profits earned on sales of shares. It is an undisputed fact that the assessee earned profit on sale of shares and it is also a fact that assessee has availed the services of Portfolio Managers for purchase and sales of shares and the act of the assessee of engaging .....

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t is as under:- 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 International (supra), wherein, in similar facts, the question has been answered in favour of the assessee and against the Revenue. Detailed reasons for the same have been given in the said judgment w .....

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