TaxTMI 
TaxTMI 
2016 (4) TMI 737
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....Rs. 23,64,191/- on sale of share investment as "Income from business" and CIT(A) erred in confirming the same, which is bad in law and contrary to the facts and evidence on record. (b) The learned CIT(A) erred in observing and held that, the appellant's intention is to trade in shares. (c) The learned CIT(A) erred in observing that the intention to hold the shares as investment in not brought out and erred in stating that such transactions are asking to trading in commodities. (d) On the facts and in the circumstances of the case, the learned CIT(A) erred in observing that, the portfolio Manager does trading on behalf of the appellant and gain learned to be treated as profit from business. (e) The appellant prays that, the addition of Rs. 23,64,191/- made as "business income" be deleted and the same being "Short Term Capital Gain" earned on sale of investment be taxed accordingly. 2(a) The learned CIT(A) erred in directing to treat all gains for placing money with PMS whether declared as STCG or L TCG as income from business which is bad in law and such direction be quashed. (b) The learned CIT(A) has not issued any such notice or letter before issuing such directio....
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....on the CBDT Circular No. 4/2007 dated 15/06/2007, Hon'ble Supreme Court decision in Commissioner of Income Tax (Central), Calcutta v. Associated Industrial Development Company (P) Ltd. (82 ITR 586) and Commissioner of Income Tax, Bombay v. Holck Larsen (160 ITR 67), AAR Ruling in 288 ITR 641. Thus, the A.O. held that the transactions in shares entered into by the assessee cannot be treated as investment in shares and accordingly the resultant income/loss arising out of them cannot be treated as income/loss under the head capital gain keeping in view the substantial volume and frequency of transactions in shares, ratio between purchase and sale vis-a-vis holding of shares and motive of the assessee. The AO held that the assessee has carried the business of trading in shares and all the profits/loss on such trading activity is treated as business income of the assessee, vide assessment order dated 20-12-2010 passed by the AO u/s 143(3) of the Act. 4. Aggrieved by the assessment order dated 20-12-2010 passed by the A.O. u/s. 143(3) of the Act, the assessee filed first appeal before the CIT(A). 5. Before the CIT(A), the assessee submitted that the assessee is a senior citizen pension....
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....ng on the latter's behalf. The PMS manager has been charging commission and / or expenses to act on behalf of his principal (the assessee) and will render the profit to the principal (assessee). Since the PMS manager acts in the capacity of an agent who has traded in shares on behalf of his principal, the profits arising there from will be treated as profits from business. The CIT(A) observed that at the time of deposit of moneys with the PMS manager, the intention of the assessee (client) was to maximize profits, and it cannot be said that the intention was to hold shares as investment. The financial statements issued by the PMS are also rendered as Profit and Loss statement for the year as realized profit on equity. The profits have not arisen from the deposit made but out of the shares/securities purchased from out of such deposits, which were traded by the PMS manager on behalf of the assessee. Merely because the purchase and sales are through a de-mat account will not change the nature of the transaction. The CIT(A) accordingly directed the A.O. to treat all gains from placing moneys with PMS whether declared as Short Term Capital Gains or Long Term Capital Gains as income fro....
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....om any Portfolio-manager. It was submitted that no shares have been sold through portfolio managers during the impugned assessment year and only purchases were made during the previous year relevant to the impugned assessment year by the said portfolio manager Enam for which ledger account copy is placed in the paper book as evidence at page 53-54 . The investment in shares are accounted for and held as investment and also shown in the balance sheet as investment. The investments in shares were done most of it in 2006, the preceding year. The ld. Counsel relied upon the judgment of Hon'ble Bombay High Court in the case of CIT v. Smt. Datta Mahendra Shah [2015] 378 ITR 304 (Bom.) and the judgment of Hon'ble Delhi High Court in the case of CIT v. Devasan Investment P. Ltd. [2014] 365 ITR 452 (Delhi). 8. The ld. D.R., on the other hand, relied on the order of the CIT(A) and submitted that the assessee has earned short term capital gain of Rs. 23.64 lacs and prime motive of the assessee is to earn profit and A.O. was correct in treating the gain as income from business. 9. We have considered the rival contentions and also perused the material available on record. We have observed tha....