Yusmarg Investment & Trading Pvt. Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 310/PUN/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9528 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 25-03-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAMRAT RAHI
• Keywords: Business income
• Section: 14A; 6; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 310 /PUN/201 5 / ASSESSMENT YEAR : 20 08 - 09 YUSMARG INVESTMENT & TRADING PVT. LTD., 1 ST FLOOR, B & C WING, SHANGRILLA GARDEN, PUNE 411001 PAN : AAACY0621N ....... / APPELLANT / V S. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 7 , PUNE / RESPONDENT . / ITA NO . 361/PUN/2015 / ASSESSMENT YEAR : 2008 - 09 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 12, PUNE ....... / APPELLANT /VS. YUSMARG INVESTMENT & TRADING CO. PVT. LTD., 1 ST FLOOR, B & C WING, SHANGRILLA GARDEN, BUND GARDEN ROAD, PUNE 411001 PAN : AAACY0621N / RESPONDENT ASSESSEE BY : S HRI C.H. NANIWADEKAR REVENUE BY : S HRI SA M RAT RAHI / DATE OF HEARING : 0 9 - 05 - 2017 / DATE OF PRONOUNCEMENT : 12 - 0 5 - 2017 2 ITA NO S. 310 & 361/PUN/2015, A.Y. 2008 - 09 / ORDER PER VIKAS AWASTHY, JM : TH ESE CROSS APPEALS BY THE ASSESSEE AND THE DEPARTMENT ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 5, PUNE DATED 16 - 01 - 2015 FOR THE ASSESSMENT YEAR 2008 - 09. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORDS ARE: THE ASSESSEE IS ENGAGED IN IN VESTMENT AND TRADING OF SHARES AND MUTUAL FUNDS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008 - 09 ON 29 - 09 - 2008 DECLARING TOTAL INCOME OF RS.1,19,09,750/ - . DURING THE COURSE OF SCRUTINY ASSESSMENT , THE ASSESSING OFFICER INTER ALIA MADE ADDITIONS/DISALLOWANCES ON ACCOUNT OF : I . DISALLOWANCE U/S. 14A RS.9,97,425/ - . II . INCOME FROM PORTFOLIO MANAGEMENT SERVICES (PMS) DECLARED AS CAPITAL GAINS TREATED AS BUSINESS INCOME RS.1,62,13,057/ - . AGGRIEVED BY THE ASSESSMENT ORDER DATED 31 - 12 - 2010, THE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE FINDINGS OF ASSESSING OFFICER QUA DISALLOWANCE U/S. 14A O F THE INCOME TAX AC T, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) . IN RESPECT OF TREATING OF CAPITAL GAINS FROM PMS ACTIVITIES AS B USINESS I NCOME , T HE FIRST APPELLATE AUTHORITY BY PLACING RELIANCE ON THE DECISION OF TRIBUNAL IN THE CASE OF KRA HOLDING & TRADING P. LTD. VS . DY. COMMISSIONER OF INCOME TAX IN ITA NO. 500/PN/2008 FOR ASSESSMENT YEAR 2004 - 05 DECIDED ON 31 - 05 - 2011 AND IN THE CASE OF SHRI APOORVA PATNI VS. ADDL. COMMISSIONER OF INCOME TAX IN ITA NO. 3 ITA NO S. 310 & 361/PUN/2015, A.Y. 2008 - 09 239/PN/2011 FOR ASSESSMENT YEAR 2006 - 07 DECIDED ON 21 - 06 - 2012 AC CEPTED THE CONTENTIONS OF ASSESSEE. NOW, THE ASSESSEE IN APPEAL HAS ASSAILED THE CONFIRMING OF DISALLOWANCE U/S. 14A OF THE ACT AND THE DEPARTMENT IN ITS APPEAL HAS IMPUGNED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN ALLOWING INCOME EARNED FR OM PMS AS CAPITAL GAINS. 3. SHRI C.H. NANIWADEKAR APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED AT THE OUTSET THAT THE ASSESSEE IN APPEAL HAS RAISED SOLITARY ISSUE UPHOLDING DISALLOWANCE OF RS.9,97,425/ - U/S. 14A OF THE ACT. THE ASSESSEE DOES NOT WANT TO PRESS THE GROUND RAISED IN THE APPEAL. IN RESPECT OF GROUNDS RAISED IN APPEAL BY THE DEPARTMENT , THE LD. AR SUBMITTED THAT THE ISSUE RAISED IN THE APPEAL IS SQUARELY COVERED BY THE DECISION OF CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF KRA HOLDING & TRADING P. LTD. VS. DY. COMMISSIONER OF INCOME TAX (SUPRA) AND IN THE CASE OF SHRI APOORVA PATNI VS. ADDL. COMMISSIONER OF INCOME TAX (SUPRA). THE COMMISSIONER OF INCOME TAX (APPEALS) HAS DECIDED THE ISSUE BY FOLLOWING THE ORDERS OF TRIBUNAL IN THE AFORESAID CASES. 4. ON THE OTHER HAND SHRI SAMRAT RAHI REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF ASSESSING OFFICER IN TREATING THE INCOME EARNED FROM PMS AS B USINESS I NCOME . THE LD. DR SUBMITTED THAT FREQUENCY OF TRANSACTIONS CARRIED OUT BY THE PMS ON BEHALF OF THE ASSESSEE CLEARLY INDICATE THAT SOLE MOTIVE BEHIND THE SALE TRANSACTION S WAS TO EARN PROFIT BY QUICK TRADING. THEREFORE, THE PROFIT EARNED FROM SALE OF SHARES WAS RIGHTLY ASSESSED AS BUSINESS INCOME BY THE ASSESSING OFFICER. 4 ITA NO S. 310 & 361/PUN/2015, A.Y. 2008 - 09 5. W E HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW . WE HAVE ALSO CONSIDERED THE DECISIONS ON WHICH THE LD. AR HAS PLACED RELIANCE IN SUPPORT OF HIS CONTENTIONS. 6. THE LD. AR OF THE ASSESSEE HAS STATED AT THE BAR THAT ON INSTRUCTION FROM THE ASSESSEE HE IS NOT PRESSING THE SOLITARY GROUND RAISED IN THE APPEAL WITH RESPECT TO DISALLOWANCE U/S. 14A OF THE ACT. IN VIEW OF THE STATEMENT MADE BY THE LD. AR OF THE ASSESSEE , THE GROUND RAISED IN THE APPEAL BY THE ASSESSEE IS DISMISSED AS NOT PRE SSED. THE APPEAL OF THE ASSESSEE IS DISMISSED , ACCORDINGLY . 7. THE DEPARTMENT IN ITS APPEAL HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN ALLOWING INCOME ON PMS AS CAPITAL GAINS. THE ASSESSING OFFICER TREATED THE SHORT /LONG TERM CAPITAL GAIN RETURNED BY THE ASSESSEE FROM TRADING IN SHARES AND MUTUAL FUNDS THROUGH PORTFOLIO MANAGEMENT SERVICE AS BUSINESS INCOME . THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE HAS IN VESTED LUMP SUM AMOUNT THROUGH PMS . THE DISCRETION TO PURCHASE/SALE SHARES HAS BEEN EXERCISED BY THE PORTFOLIO MANAGER . WE OBSERVE THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ACCEPTED THE CONTENTIONS OF ASSESSEE BY FOLLOWING THE ORDER OF TRIBUNAL IN THE CASE OF KRA HOLDING & TRADING P. LTD. VS. D Y. COMMISSIONER OF INCOME TAX (SUPRA) AND IN THE CASE OF ARA TRADING & INVESTMENTS P. LTD. VS. DY. COMMISSIONER OF INCOME TAX IN ITA NO. 499/PN/2008 FOR ASSESSMENT YEAR 2004 - 05 DECIDED ON 31 - 05 - 2011. THE ASSESSEE HAD AVAILED DISCRETIONARY PORTFOLIO MANAGE MENT SERVICES TO MANAGE ITS INVESTMENT ACTIVITIES. UNDER SUCH CIRCUMSTANCES THE DISCRETION TO INVEST IN SPECIFIC STOCK, THE QUANTUM 5 ITA NO S. 310 & 361/PUN/2015, A.Y. 2008 - 09 OF INVESTMENT, TIME OF INVESTMENT /DISINVESTMENT IS ENTIRELY OF PORTFOLIO MANAGER. 8. WE FIND THAT SIMILAR ISSUE HAD COM E UP BEFORE THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI APOORVA PATNI VS. ADDL. COMMISSIONER OF INCOME TAX (SUPRA). THE TRIBUNAL IN THE SAID CASE AFTER CONSIDERING THE DECISIONS RENDERED IN THE CASES OF KRA HOLDING & TRADING P. LTD. VS. DY. COMMISSIONER OF INCOME TAX (SUPRA) AND ARA TRADING & INVESTMENTS P. LTD. VS. DY. COMMISSIONER OF INCOME TAX (SUPRA) HELD THAT THE PROFIT ARISING ON INVESTMENT CARRIED OUT BY THE ASSESSEE THROUGH PMS DOES NOT RESULT IN GAIN ASSESSABLE UNDER THE HEAD BUSINES S INCOME. THE RELEVANT EXTRACT OF THE FINDINGS OF TRIBUNAL ARE AS UNDER : 10. IN ANY CASE, IN SO FAR AS THE VERY NATURE OF DISCRETIONARY PORTFOLIO MANAGEMENT SCHEME IS CONCERNED, THE SAME HAS ALREADY BEEN CONSIDERED BY OUR CO - ORDINATE BENCH IN THE CASE O F ARA TRADING & INVESTMENTS (P.) LTD. (SUPRA) AND KRA HOLDING & TRADING (P.) LTD (SUPRA). ACCORDING TO THE TRIBUNAL, THE SCHEME IS FOR AN ACTIVITY OF WEALTH MAXIMIZATION RATHER THAN A PROFIT MAXIMIZATION AND ACCORDINGLY, IT HAS BEEN HELD THAT GAIN FROM SUC H ACTIVITY WAS LIABLE TO BE CONSIDERED AS DERIVED FROM AN ACTIVITY OF INVESTMENTS AND NOT TRADING. THEREFORE, ON THIS ASPECT OF THE CONTROVERSY, WE FIND THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) MADE NO MISTAKE IN FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF ARA TRADING & INVESTMENTS (P.) LTD. (SUPRA) AND KRA HOLDING & TRADING (P.) LTD (SUPRA) AND IN HOLDING THAT THE ASSESSEE WAS INDEED ENGAGED IN AN INVESTMENT ACTIVITY WHILE APPOINTING THE PMS PROVIDER WITH REGARD TO THE STATED TRANSACTIONS. 11 . IN SO FAR AS OTHER OBJECTIONS OF THE ASSESSING OFFICER THAT THERE WAS VOLUME AND FREQUENCY OF TRANSACTIONS WAS LARGE SO AS TO CONSTITUTE BUSINESS ACTIVITY, WE FIND THAT THE FACTUAL MATRIX HAS BEEN APPROPRIATELY ANALYZED BY THE COMMISSIONER OF INCOME - TAX (APPEALS) IN PARA 4.20 OF THE IMPUGNED ORDER, WHICH IS AS UNDER: 'SO FAR AS VOLUME AND FREQUENCY OF TRANSACTIONS ARE CONCERNED, IT HAS BEEN EXPLAINED THAT ACTUALLY THE NUMBER OF SCRIP TRADED WAS NOT VERY LARGE BEING 62 ACROSS ALL THE 3 PMSS, ENGAGED DURI NG THE YEAR, WHICH WAS NOT MUCH CONSIDERING THAT ABOUT 2000 COMPANIES' SHARES WERE ACTIVELY TRADED IN THE STOCK EXCHANGES. IT WAS ALSO CLARIFIED THAT THE FREQUENCIES OF TRANSACTIONS WAS NOT MUCH. SOMETIMES SEVERAL TRANSACTIONS MAY HAVE TO BE MADE IN THE SA ME SCRIP, WHICH INCREASES THE FREQUENCY. IT WAS EMPHASISED THAT THE TOTAL SALES TURNOVER IN THE INVESTMENTS MADE THROUGH PMS DURING THE YEAR WAS 19.06 CRORES INVOLVING 62 SCRIPS, WHEREAS, IN THE SHARE TRADING BUSINESS SEPARATELY SHOWN BY THE APPELLANT, THE SALES TURNOVER WAS 73.21 CRORES INVOLVING 76 SCRIPS. THIS SHOWS THAT IN THE SHARE TRADING BUSINESS ACTIVITY, THE TURNOVER WAS ALMOST 4 TIMES HIGHER EVEN THOUGH THE NUMBER OF SCRIPS WERE ONLY MARGINALLY HIGH. IT WAS EMPHASIZED THAT IN THE TRADING ACTIVITY EVEN THOUGH THE SHARES INVOLVED WERE PROPORTIONATELY MUCH LESS AS COMPARED TO THE TURNOVER, SINCE THE INTENTION WAS TO CARRY ON BUSINESS ACTIVITY, THE SAME WAS SHOWN UNDER THE HEAD BUSINESS INCOME'. IT ALSO 6 ITA NO S. 310 & 361/PUN/2015, A.Y. 2008 - 09 INCLUDED SPECULATIVE TRANSACTION AND DAY TRADING, WHEREAS NO SUCH TRANSACTIONS WERE ENTERED INTO BY THE PMS. THE APPELLANT HAS ALSO EMPHASIZED THAT I WAS PRUDENT INVESTMENT ACTIVITY OF THE PMS TO BUY A TARGET QUANTITY OF A PARTICULAR SCRIP IN SMALL LOTS FOR AVERAGING PURPOSE; AND IT SHOULD NOT BE TREATED AS FREQUENT AND REPETITIVE TRANSACTIONS. THE APPELLANT THEN GOES ON TO CITE THE DECISION OF THE ITAT, MUMBAI BENCH IN THE CASE OF JANAK S. RANGWALA, 11 SOT 627 IN WHICH IT WAS OBSERVED THAT MERE VOLUME AND MAGNITUDE OF TRANSACTION WILL NOT ALTER THE NATUR E OF TRANSACTION IF THE INTENTION WAS TO HOLD THE SHARES AS INVESTMENT AND NOT AS STOCK IN TRADE. SIMILAR EXPLANATION HAS BEEN GIVEN ONCE AGAIN BY THE LETTER DT 14.6.2010 BY THE APPELLANT IN RESPONSE TO THE AO'S REPORT.' WE HAVE EXAMINED THE POSITION, IN PARTICULAR THE ANALYSIS MADE OUT BY THE COMMISSIONER OF INCOME - TAX (APPEALS) IN THE EXTRACTED PORTION WITH REFERENCE TO THE STATEMENT AND TRANSACTIONS WHICH HAVE BEEN PLACED N THE PAPER BOOK FILED BEFORE US. IN OUR CONSIDERED OPINION, THE INFERENCE DRAWN OUT BY THE COMMISSIONER OF INCOME - TAX (APPEALS) CLEARLY ESTABLISHES THAT THE VOLUME AND FREQUENCY OF TRANSACTIONS SOUGHT TO BE MADE OUT BY THE ASSESSING OFFICER WITH REGARD TO THE IMPUGNED ACTIVITY STANDS ON AN ENTIRELY DIFFERENT FOOTING AND IS QUITE DISTI NCT FROM THE ACTIVITY OF TRADING IN SHARES CARRIED OUT BY THE ASSESSEE. IN FACT, IT IS NOTABLE THAT IN THE SHARE TRADING BUSINESS CARRIED ON BY THE ASSESSEE, HE HAS CARRIED OUT CERTAIN SPECULATIVE AND TRADING ACTIVITIES AND THAT IN THE CASE OF A PMS PROVID ER, SUCH ACTIVITIES ARE PROHIBITED IN LAW. HAVING REGARD TO THE AFORESAID DISCUSSION BY THE COMMISSIONER OF INCOME - TAX (APPEALS), WHICH IS BORNE OUT OF THE RECORD, WE, THEREFORE, FIND NO REASONS TO UPHOLD THE PLEA OF THE ASSESSING OFFICER ON THE BASIS OF T HE VOLUME AND FREQUENCY OF TRANSACTIONS. 12. THE ASSESSING OFFICER HAS ALSO POINTED OUT THAT EARNING OF DIVIDENDS WAS NOT AT ALL THE MOTIVE OF SUCH TRANSACTIONS, BECAUSE THE SHARES HAVE BEEN SOLD JUST BEFORE THE SAME BECAME EX - DIVIDEND ON THE STOCK EXCHANGES. IN THIS REGARD, WE FIND THAT THE COMM ISSIONER OF INCOME - TAX (APPEALS) HAS FACTUALLY FOUND THE SAME TO BE CONTRARY TO MATERIAL ON RECORD AS PER THE DISCUSSION IN PARA 4.15 OF THE ORDER, WHICH IS AS UNDER: '4.15 FOR THE PROPOSITION THAT EARNING OF DIVIDEND WAS NOT THE MOTIVE, THE AO HAS CITED INSTANCES WHEN THE APPELLANT HAS SOLD SOME SHARES JUST BEFORE THE DATES OF THE SHARES BECOMING EX - DIVIDEND ON THE STOCK EXCHANGES. HOWEVER, A PERUSAL OF THE CHART GIVEN IN THE ASSESSMENT ORDER SHOWED THAT THE INFORMATION REGARDING DATE OF DECLARATION OF DIVIDEND HAS NOT BEEN GIVEN. FOR EXAMPLE, IN THE CASE OF SCRIP OF AMTEK AUTO, THE SALE WAS MADE ON 19.9.2005 WHEREAS THE EX - DIVIDEND DATE WAS 22.12.2005; I.E. THE SALE WA S MADE MORE THAN 3 MONTHS BEFORE THE SHARES BECAME EXDIVIDEND. IT DOES NOT NECESSARILY FOLLOW THAT THE DIVIDEND WAS ALREADY DECLARED IN THIS CASE AND STILL THE APPELLANT SOLD THE SAME BEFORE THE SHARES BECOMING EX - DIVIDEND. SIMILARLY, IN THE CASE OF ACC, T WO PARTICULAR SALE DATES MENTIONED WHEN THE SCRIP WAS TRANSACTED BY DSPML, WERE 24.3.2005 AND 16.11.05, WHEREAS THE EX - DIVIDEND DATE HAS BEEN MENTIONED AS 29.3.2006. IT CANNOT THEREFORE BE SAID THAT THE APPELLANT HAD KNOWINGLY SOLD THE SHARES AFTER DECLARA TION OF THE DIVIDEND BEFORE IT BECAME EX - DIVIDEND. AGAIN IN RESPECT OF SHARES OF JET AIRWAYS, THE EXDIVIDEND DATE HAS BEEN MENTIONED AS 14.9.2005 BY THE AO, AND THE DATE OF SALE HAS BEEN MENTIONED AS 17.10.2005 AND 23.1.2006 IN THE CASE OF TWO DIFFERENT PM S'S. THIS INSTANCE POINTS OUT TO A WRONG CONCLUSION BY THE AO AS HERE THE SHARES HAVE BEEN SOLD AFTER THOSE HAVE BECOME EX - DIVIDEND. COMING TO TWO MORE INSTANCES POINTED OUT BY THE AO IN THIS CHART, SHARES OF NALCO HAVE BEEN SOLD ON 30.3.2006 WHICH WAS AFT ER THE EX - DIVIDEND DATE OF 23.9.2005; AND THE SALE OF ONGC SHARES BY DSPML WAS MADE ON 30.12.2005, WHICH ALSO IS AFTER THE EX - DIVIDEND DATE OF 1.9.2005. IT IS, THEREFORE, CLEAR THAT THE INSTANCES POINTED OUT BY THE AO DID NOT SUPPORT THIS ARGUMENT, EXCEPT IN THE CASE OF TWO OR THREE INSTANCES, WHERE THE SALE HAS BEEN MADE JUST BEFORE THE SHARES BECOMING EX - DIVIDEND; AND THERE WAS A POSSIBILITY THAT THE DIVIDEND WOULD HAVE BEEN DECLARED AND KNOWN TO THE PMS. HOWEVER, SUCH INSTANCES ARE FEW AND FAR BETWEEN; A ND IT CANNOT LEAD TO A CONCLUSION OF INDULGING IN A BUSINESS ACTIVITY. MOREOVER, AS HAS BEEN EXPLAINED ELSEWHERE BY THE APPELLANT, SUCH DAY TO DAY DECISIONS REGARDING 7 ITA NO S. 310 & 361/PUN/2015, A.Y. 2008 - 09 PURCHASE AND SALE OF PARTICULAR SCRIPS ARE NOT THAT OF THE APPELLANT, BUT OF THE PORTFOLI O MANAGER SINCE THE APPELLANT'S CASE WAS THAT OF ENGAGEMENT OF DISCRETIONARY PORTFOLIO MANAGEMENT SERVICES. IT WAS EXPLAINED THAT AS PER SEBI REGULATIONS, THERE WERE TWO TYPES OF PMSS I.E. DISCRETIONARY AND NON - DISCRETIONARY. IT WAS EXPLAINED THAT IN CASE OF DISCRETIONARY PMS AS AVAILED BY THE APPELLANT, HE APPELLANT DID NOT HAVE CONTROL ON THE DAY TO DAY ACTIVITIES AND DID NOT GIVE ANY DIRECTIONS, EXCEPT FOR THE BROAD GUIDELINE FOR NOT PURCHASING THE SHARES OF PATNI COMPUTERS SYSTEMS LTD. SINCE IT WAS PROM OTED BY THE APPELLANT AND HIS FAMILY MEMBERS. IT WAS ALSO EXPLAINED DURING THE APPELLATE PROCEEDINGS THAT IN ACCORDANCE WITH THE ACCOUNTING STANDARD AND CBDT CIRCULAR, DIVIDEND EARNING WAS NOT THE ONLY CRITERION AND IN ANY CASE SUBSTANTIAL AMOUNT OF DIVIDE ND OF RS 16,31,796/ - WAS ALSO EARNED DURING THE YEAR IN THE INVESTMENTS THROUGH THE PMS. THUS, THIS POINT IS ADEQUATELY EXPLAINED.' ON THIS ASPECT ALSO, WE FIND NO MATERIAL TO DIFFER WITH THE FINDINGS OF THE COMMISSIONER OF INCOME - TAX (APPEALS), WHICH WE HEREBY AFFIRM. 13. ANOTHER ASPECT MADE OUT BY THE ASSESSING OFFICER WAS TO THE EFFECT THAT BY ITS VERY NATURE, SALES AND PURCHASES CARRIED OUT BY THE PMS PROVIDER WAS OF SHORT - TERM NATURE AND, THEREFORE, IT WAS TO BE REGARDED AS A BUSINESS ACTIVITY. FAC TUALLY SPEAKING, ON THIS ASPECT THE COMMISSIONER OF INCOME - TAX (APPEALS) HAS DEALT WITH THE SAME IN PARA 4.17 OF HIS ORDER, WHICH IS AS UNDER: '4.17 THE AO ALSO POINTED OUT TO SOME INSTANCES WHEN SHARES OF THE SAME COMPANY HAVE BEEN REPURCHASED SOMETIMES AFTER THE SALE. IN THIS CONNECTION, IT IS EXPLAINED THAT SUCH INSTANCES WERE NOT MUCH AND THERE WERE REASONS FOR CHURNING OF THE INVESTMENTS BY THE PORTFOLIO MANAGER AT DIFFERENT INSTANCES DURING THE YEAR. IT IS RELEVANT TO NOTICE THAT THE APPELLANT ALSO POINTED OUT THAT THERE WERE MANY SHARES HELD FOR A LONG TIME, EVEN UPTO 18 MONTHS, BY THE PMS, AND SUBSTANTIAL AMOUNT OF LONG TERM CAPITAL GAIN OF RS 83,09,187/ - WAS ALSO SHOWN. IN FACT, THE AO HAS TREATED EVEN THIS LTCG OF RS 83,09,187/ - AS BUSINESS INCOM E, WHICH CANNOT BE JUSTIFIED. ON THE OTHER HAND, DEPENDING ON THE MARKET CONDITIONS, VIS - A - VIS THE ANALYSIS OF THE FUNDAMENTALS OF PARTICULAR SCRIP, DECISION MAY HAVE TO BE TAKEN TO EXIT AT A PARTICULAR POINT OF TIME, AND TO RE - ENTER AFTER A FEW MONTHS ON CHANGE OF FUNDAMENTALS. THIS DOES NOT MEAN THAT IT WAS IN THE NATURE OF REPEATED TRADING ACTIVITIES IN THE SAME COMMODITY; IN WHICH CASE THERE COULD BE MULTIPLE REPETITIONS WITHIN A FEW DAYS; OR EVEN DURING THE SAME DAY.' 14. IN THIS CONTEXT, WE FIND THA T THE ASSESSING OFFICER HAS TREATED EVEN THE GAIN ON INVESTMENTS HELD FOR MORE THAN 12 MONTHS ALSO AS BUSINESS INCOME. QUITE CLEARLY AS PER THE STATEMENT IN RESPECT OF GAINS AND INVESTMENT IN SHARES THROUGH PMS PROVIDER PLACED AT PAGE 73 OF THE PAPER BOOK, THE HOLDING PERIOD GOES UPTO EVEN 18 MONTHS BEFORE THE INVESTMENT WAS LIQUIDATED. BE THAT AS IT MAY, THE FACTOR OF PERIOD OF HOLDING CANNOT BE ASCRIBED TO THE ASSESSEE, INASMUCH AS IT HAS NO CONTROL ON SUCH DECISION MAKING IN A DISCRETIONARY PMS ARRANGEME NT, BECAUSE SUCH DECISIONS ARE TAKEN BY THE PMS PROVIDER AS WE HAVE OBSERVED EARLIER. IN ANY CASE, IN SO FAR AS THE PRESENT CASE IS CONCERNED, THE INVESTMENT OBJECTIVE OF THE ASSESSEE MANDATED TO THE PMS PROVIDER WAS TO ACHIEVE GROWTH PROSPECTS AND THE ACT UALITY OF TRANSACTIONS CARRIED OUT BY THE PMS PROVIDER IN ORDER TO ACHIEVE THE STATED INVESTMENT OBJECTIVE OF THE ASSESSEE CANNOT BE MADE A BASIS TO CHARGE THE ASSESSEE OF HAVING A DIFFERENT OBJECTIVE. CONSIDERING THE AFORESAID MATTERS, WE, THEREFORE, ARE OF THE VIEW THAT THE OBJECTIONS MADE OUT BY THE ASSESSING OFFICER HAVE BEEN ADEQUATELY ADDRESSED BY THE COMMISSIONER OF INCOME - TAX (APPEALS) IN COMING TO HIS FINDINGS THAT THE INVESTMENTS CARRIED OUT BY THE ASSESSEE THROUGH THE PMS PROVIDER DO NOT RESULT I N A GAIN ASSESSABLE AS BUSINESS INCOME. 15. IN VIEW OF THE AFORESAID DISCUSSION, AND HAVING REGARD TO THE REASONINGS EXTENDED BY THE COMMISSIONER OF INCOME - TAX (APPEALS) WITH WHICH WE HEREBY AFFIRM, WE FIND THAT THE GRIEVANCE OF THE REVENUE IN THIS APPEA L IS 8 ITA NO S. 310 & 361/PUN/2015, A.Y. 2008 - 09 MISDIRECTED AND ACCORDINGLY THE CONCLUSION ARRIVED AT BY THE COMMISSIONER OF INCOME - TAX (APPEALS) ON THIS ASPECT IS HEREBY AFFIRMED. THUS, ON THIS GROUND, REVENUE FAILS. 9. THE LD. DR HAS NEITHER BEEN ABLE TO DISTINGUISH THE ABOVE DECISION OF THE TR IBUNAL, NOR HAS HE BROUGHT ON RECORD ANY CONTRARY DECISION. THUS, IN VIEW OF THE FACTS OF THE CASE AND THE DECISIONS OF CO - ORDINATE BENCH , WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE DEPARTMENT. ACCORDINGLY, THE SAME IS DISMISSED. 10. IN THE RESULT, T HE APPEAL OF THE ASSESSEE , AS WELL AS THAT OF THE DEPARTMENT ARE DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 12 TH DAY OF MAY, 201 7 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 12 TH MAY, 2017 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 5, PUNE 4. / THE CIT - 4, PUNE 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / ASSISTANT REGISTRAR , , / ITAT, PUNE