TaxTMI 
TaxTMI 
2015 (11) TMI 482
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....mmissioner of Income Tax (Appeals) erred in confirming the addition Capital Gains (arising out of sale of Shares, Units and Securities through Portfolio Management Services) of Rs. 34,27,306/0 as "Profit and Gains of Business or Profession". Under the facts and circumstances of the case the Learned Commissioner of Income Tax (Appeals) ought to have accepted that a sum of Rs. 3,17,699/- as Short Term Capital Gain and Rs. 32,09,607/- as Long Term Capital Gain. Under the facts and circumstances of the case the income from PMS ought to have been computed as Capital Gains. 2. On the facts & circumstances of the case, the Learned Commissioner of Income Tax (Appeals) further erred in confirming the interest Charged u/s 2....
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....ssessee had invested a portion of his capital in Portfolio Management Scheme of Kotak Securities, who were appointed as 'Portfolio Managers' PMS by the assessee. During the year, the assessee has earned following gain from the investment made through PMS:- (Rs.) i) STCG on Kotak (PMS) on shares 3,17,699.00 ii) LTCG on Kotak Securities (PMS) 31,09,607.00 Total 64,10,608.00 The assessee had also earned similar type of gain on sale of shares which was invested by himself, that is, not though PMS and had shown under the head long-term-capital-gain (LTCG) of Rs. 60,85,747/- and short-term-capital-gain (STCG) of Rs. 3,84,861/-. This income shown as capital gain has been accepted by the AO inasmuch as it has held ....
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....an Nalin Shah (supra). The relevant observation of the Tribunal in the case of Manan Nalin Shah, wherein PMS itself was Kotak Securities, were as under :- 15. We observe that the only dispute is as to whether the profit arising to the assessee through the transactions carried out for purchase and sale of shares as well as units of mutual fund through PMS is to be assessed under the head "business income" or "capital gains". We observe that in the assessment year 2003-04, assessee placed a part of fund of Rs. 50 lakhs with Kotak Securities as PMS and entered into agreement, copy placed at pages 30 & 31 of PB. In A.Y. 2003-04, there is a profit of Rs. 52,127. We observe that assessee while filing the return, has shown the said income....
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....ies in A.Y. 2003-04 and as per clause 2, PMS is authorized to purchase, acquire, obtain, take, hold, sell, transfer, substitute or change all or any of the investments made on behalf of the assessee. Further clause 3 of the agreement further authorizes to hold all or any of such investments in its name or at its discretion on behalf of the assessee. Further as per clause 6 of the agreement, it is stated that the portfolio manger will make every effort to maximize the value of investment. Clause 9 of the said agreement stipulates that Portfolio Manger will provide the assessee with quarterly statement of the investments. On perusal of the contents of the agreement, we observe that assessee has placed funds with PMS to make investment in shar....
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.... of the client against securities after obtaining written permission. They are not authorized to undertake purchase and sale of securities which are settled otherwise than by actually delivery or transfer of securities. The Portfolio Manager at their own discretion can make investments. Considering the above scheme of Portfolio Management, we are of the considered view that the investments made by the assessee through PMS is meant for maximization of wealth and not with a view to do trade in purchase and sale of shares. Further, we observe that the department has not disputed the fact that the Portfolio Manager have the sole and absolute discretion to make the investments for and on behalf of the assessee and the assessee has no role to pla....
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....se of Mafatlal Holdings Ltd (supra) is not applicable to the facts of the case of the assessee as in that case, the Board of Directors specifically passed a resolution to place Rs. 100 crores for purchase and sale of shares with an Asset Management Company as its Portfolio Manager. Therefore, the intention was to do trade in purchase and sale of shares, which is not the case of the assessee. We may also state that at the time of hearing, ld D.R. referred the decision of ITAT Mumbai in the case of Immortal Financial Services Pvt Ltd. vs DCIT, 44 SOT 88 (Mumbai). In the said case, the Tribunal confirmed the action of ld CIT(A) that profit from purchase and sale of shares is business income considering the frequency of buying and selling of sh....