TMI Blog2019 (3) TMI 809X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of mutual funds. Assessee electronically filed its return of income for A.Y. 2012- 13 on 29.09.2012 declaring total income at ₹ 26,85,524/-. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the Act vide order dt.20.03.2015 and the total income was determined at ₹ 91,29,910/-. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who vide order dt.14.10.2016 (in appeal No.PN/CIT(A)-5/Dy.CIT, Cir-7/9/2015-16) granted substantial relief to the assessee. Aggrieved by the order of Ld.CIT(A), Revenue is now in appeal before us and has raised the following grounds : 1. On the facts and circumstances of the case and in law the learned CIT(Appeals) erred Treating of income of ₹ 82,24,637/- as Capital gains against the claim of the Assessing Officer to treat the same as income from business. 2. On the facts and circumstances of the case and in law the learned CIT(Appeals) erred holding the activity of transaction in shares / mutual fund by engaging PMS was an investment activity and resultant gain was assessable under the head Capital Gains . 3. Both the grounds being inter-connected are considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material on record. The issue in the present ground is about the treatment of capital gains earned from share transactions by engaging PMS to be an investment activity or capital gains. We find that identical issue arose in assessee s own case in A.Y. 2010-11. We find that the Co-ordinate Bench of the Tribunal has decided the issue in favour of the assessee by observing as under : 5. Before us, at the very outset, Ld. Counsel for the assessee submitted that earning of profits on purchase and sale of shares employing the services of Portfolio Management Services is taxable under the head capital gains. Further, Ld. Counsel submitted that, on similar facts, the Pune Bench of the Tribunal has decided number of cases treating the said income as capital gains only. Before us, Ld. Counsel for the assessee filed the order of Pune Bench of the Tribunal in the case of Yugmarg Investment Trading Pvt. Ltd. Vs. DCIT ITA No.310/PUN/2015, dated 12-05-2017 for the A.Y. 2008-09. Ld. Counsel for the assessee submitted that the decision is relevant for the similar proposition. The said decision was delivered relying on the decisions of Pune Bench of the Tribunal in the case of KRA Holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned, it has been explained that actually the number of scrip traded was not very large being 62 across all the 3 PMSs, engaged during the year, which was not much considering that about 2000 companies' shares were actively traded in the stock exchanges. It was also clarified that the frequencies of transactions was not much. Sometimes several transactions may have to be made in the same scrip, which increases the frequency. It was emphasised that the total sales turnover in the investments made through PMS during the year was 19.06 crores involving 62 scrips, whereas, in the share trading business separately shown by the appellant, the sales turnover was 73.21 crores involving 76 scrips. This shows that in the share trading business activity, the turnover was almost 4 times higher even though the number of scrips were only marginally high. It was emphasized that in the trading activity even though the shares involved were proportionately much less as compared to the turnover, since the intention was to carry on business activity, the same was shown under the head Business income'. It also included speculative transaction and day trading, whereas no such transactions w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates of the shares becoming ex-dividend on the stock exchanges. However, a perusal of the chart given in the assessment order showed that the information regarding date of declaration of dividend has not been given. For example, in the case of scrip of Amtek Auto, the sale was made on 19.9.2005 whereas the ex-dividend date was 22.12.2005; i.e. the sale was made more than 3 months before the shares became exdividend. It does not necessarily follow that the dividend was already declared in this case and still the appellant sold the same before the shares becoming ex-dividend. Similarly, in the case of ACC, two particular sale dates mentioned when the scrip was transacted by DSPML, were 24.3.2005 and 16.11.05, whereas the ex- dividend date has been mentioned as 29.3.2006. It cannot therefore be said that the appellant had knowingly sold the shares after declaration of the dividend before it became ex-dividend. Again in respect of shares of Jet Airways, the exdividend date has been mentioned as 14.9.2005 by the AO, and the date of sale has been mentioned as 17.10.2005 and 23.1.2006 in the case of two different PMS's. This instance points out to a wrong conclusion by the AO as here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder: 4.17 The AO also pointed out to some instances when shares of the same company have been repurchased sometimes after the sale. In this connection, it is explained that such instances were not much and there were reasons for churning of the investments by the Portfolio Manager at different instances during the year. It is relevant to notice that the appellant also pointed out that there were many shares held for a long time, even upto 18 months, by the PMS, and substantial amount of long term capital gain of ₹ 83,09,187/- was also shown. In fact, the AO has treated even this LTCG of ₹ 83,09,187/- as Business income, which cannot be justified. On the other hand, depending on the market conditions, vis-a-vis the analysis of the fundamentals of particular scrip, decision may have to be taken to exit at a particular point of time, and to re-enter after a few months on change of fundamentals. This does not mean that it was in the nature of repeated trading activities in the same commodity; in which case there could be multiple repetitions within a few days; or even during the same day. 14. In this context, we find that the Assessing Officer has treated even ..... X X X X Extracts X X X X X X X X Extracts X X X X
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