Portfolio management service investments remain capital gains when shares are held as investments, not as trading stock.

Surplus from shares and mutual fund units managed through a portfolio management service is taxable as capital gains where the assets are held as investments and the taxpayer lacks trading infrastructure. Professional management and substantial transactions do not, by themselves, convert investment activity into a business. Borrowed funds do not automatically preclude capital-gains treatment, and the CBDT circular supports assessing the nature of holding and investment intention. Accordingly, the receipts were rightly assessed as capital gains rather than business income.

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Issues: Whether surplus arising from sale of shares and mutual fund units through portfolio management service was taxable as business income or as capital gains.

Analysis: The assessee had invested funds through a portfolio manager and did not itself conduct a share-trading business infrastructure. The earlier Tribunal decision in the assessee's own case and the jurisdictional High Court's judgment had already held that investment through portfolio management service does not by itself convert investment activity into business activity. The Court also noted that use of borrowed funds does not, by itself, bar capital-gains treatment, and that the CBDT circular on share transactions supported the view that the nature of the holding and intention of investment were material.

Conclusion: The surplus was rightly assessed as capital gains and not as business income.

Final Conclusion: The Revenue's challenge failed, and the assessment order treating the receipts as business income was not restored.

Ratio Decidendi: Where shares are held as investments and managed through a portfolio management service, the resulting surplus is taxable according to the character of the asset and the intention of investment, not as business income merely because transactions are substantial or professionally managed.

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