{"id":3277,"date":"2011-06-02T13:36:55","date_gmt":"2011-06-02T08:06:55","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?p=3277"},"modified":"2011-06-02T13:36:55","modified_gmt":"2011-06-02T08:06:55","slug":"ara-trading-investments-pvt-ltd-vs-dcit-itat-pune-shares-pms-transaction-gains-are-stcg-and-not-business-profits","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/ara-trading-investments-pvt-ltd-vs-dcit-itat-pune-shares-pms-transaction-gains-are-stcg-and-not-business-profits\/","title":{"rendered":"ARA Trading & Investments Pvt Ltd vs. DCIT (ITAT Pune)"},"content":{"rendered":"\n\n
Click here to download the judgement (ARA_trading_PMS_shares_STCG.pdf) <\/strong> <\/a><\/p><\/td>\n<\/tr>\n<\/table>\n


\nShares PMS transaction gains are STCG and not business profits
\n<\/strong><\/p>\n

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)<\/strong> with ENAM AMC. The AO & CIT (A) assessed the entire gain as business income<\/em> on the ground that (a) there were a large number of transactions<\/em>, (b) the assessee had dealt with 5 brokers <\/em>with 95% of the transactions being with ENAM AMC, (c) there was large volume of purchase and sales in 96 scrips<\/em>, (d) the only receipts were from share transactions<\/em> and expenses on bank charges, etc were charged there from. On appeal to the Tribunal, HELD allowing the appeal:<\/p>\n

(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<\/em><\/strong>;<\/p>\n

(ii) On facts, as the assessee had engaged a portfolio manager to look after its\u2019 investments and all decisions to buy and sell were taken by the portfolio manager<\/strong> and not by the asessee, the assessee cannot be called a “dealer”<\/strong>;<\/p>\n

(iii) The object of the PMS<\/strong> was to maximize the value of the portfolio. It was \u201cwealth maximization<\/strong>\u201d and not \u201cprofit maximization<\/strong>\u201d;<\/p>\n

(iv) In the balance sheet<\/strong>, the shares were valued at cost<\/strong> and not at lower of cost or market value;<\/p>\n

\nFor more on shares PMS see ITO vs. Radha Birju Patel <\/a><\/strong>(ITAT Mumbai)\n<\/div>\n","protected":false},"excerpt":{"rendered":"

On facts, as the assessee had engaged a portfolio manager to look after its\u2019 investments and all decisions to buy and sell were taken by the portfolio manager<\/strong> and not by the asessee, the assessee cannot be called a “dealer”<\/strong><\/p>\n

Read more ›<\/a><\/div>\n

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