to download the file. You will need a PDF reader to view the files. You can download one for free from
|
Shares PMS transaction gains are STCG and not business profits
The assessee, engaged in investment in financial instruments, offered short-term capital gains (“STCG”) of Rs. 1.04 crores and LTCG of Rs. 12.57 lakhs. The bulk of the gains arose from a Portfolio Management Scheme (PMS) with ENAM AMC. The AO & CIT (A) assessed the entire gain as business income on the ground that (a) there were a large number of transactions, (b) the assessee had dealt with 5 brokers with 95% of the transactions being with ENAM AMC, (c) there was large volume of purchase and sales in 96 scrips, (d) the only receipts were from share transactions and expenses on bank charges, etc were charged there from. On appeal to the Tribunal, HELD allowing the appeal:
(i) Given the definitions of the term “business” and “capital asset” in s. 2(13) & 2(14), shares, if held for more than 12 months, will be a long-term capital asset, inspite of continued and systematic dealings;
(ii) On facts, as the assessee had engaged a portfolio manager to look after its’ investments and all decisions to buy and sell were taken by the portfolio manager and not by the asessee, the assessee cannot be called a “dealer”;
(iii) The object of the PMS was to maximize the value of the portfolio. It was “wealth maximization” and not “profit maximization”;
(iv) In the balance sheet, the shares were valued at cost and not at lower of cost or market value;
Related Judgements
- ITO vs. Radha Birju Patel (ITAT Mumbai)
Transactions carried out via Portfolio Management Scheme are clearly in the nature of transactions meant for maximization of wealth rather encashing the profits on appreciation in value of shares. The very nature of Portfolio Management Scheme is such that the investments made by the assessee are protected and enhanced…
- Minda Investments vs. DCIT (ITAT Delhi)
The assessee has urged that no expenditure has been identified to have been incurred to exempt income. Neither the AO nor the CIT (A) has rebutted this submission. The AO has made an adhoc estimate which is not sustainable in the light of Hero Cycles. Accordingly, in view of…
- Gagan Trading Co. Ltd vs. DCIT (ITAT Mumbai)
U/s 72(1)(i), the brought forward business loss can be set-off against “the profits and gains of any business or profession carried on” by the assessee. S. 72 (1)(i) does not use the word “assessable under the ‘head’ profits & gains of business”. So, the question is whether the securities…
