NALINI NAVIN BHAGWATI, MUMBAI V. ITO 2(1)(1), MUMBAI

ITA 53/MUM/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7261 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 04-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Assessee Lawyers: K SHIVARAM
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.S.SYAL, AM AN D SHRI N.V.VASUDEVAN, JM ITA NO.53/MUM/2010 : ASST.YEAR 2006-2007 SMT.NALINI NAVIN BHAGWATI C/O.M/S.BHAGWATI ASSOCIATES PVT. LTD. 711/712 DALAMAL TOWERS FREE PRESS JOURNAL MARG 211 NARIMAN POINT, MUMBAI 400 021. PAN :AAOPB9277C. VS. THE INCOME TAX OFFICER WARD 2(1)(1) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.SHIVARAM RESPONDENT BY : SHRI P.C.MAURYA DATE OF HEARING : 28.07.2011 DATE OF PRONOUNCEMENT : 05.08.2011 O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE ASS ESSEE ARISES OUT OF TH E ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 02.12.2009 IN RELATION TO THE ASSESSMENT YEAR 2006-2007. 2. THE ONLY ISSUE RAISED IN THIS APPEAL THROUGH TWO GROUNDS IS THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE EX CESS AMOUNT REALIZED ON THE INVESTMENT IN SHARES MADE THROUGH KOTAK MAHINDRA PORTFOLIO MANAGEMENT SYSTEM WAS LIABLE TO BE TAXED AS BUSINESS INCOME. BRIEFLY STATED THE F ACTS OF THE CASE ARE THAT THE ASSESSEE INVESTED IN PORTFOLIO MANAGEMENT SCHEME (PMS) A SUM OF RS.71,15,371 AND OTHER INVESTMENT IN MUTUAL FUNDS. THESE INVESTMENTS WERE SHOWN IN HER CAPITAL ACCOUNT. THE ASSESSEE ALSO PAID PROFESSIONAL FEES TO KOTAK SECURITIES LIMITED (KSL) IN RESPECT OF THREE ACCOUNTS OF PMS. THE ASSESSING ITA NO.53/MUM/2010 SMT.NALINI NAVIN BHAGWATI. 2 OFFICER HELD THAT THE INVESTMENTS MADE THROUGH PMS WERE ACTUALLY BUSINESS VENTURE AS THE ASSESSEE DID NOT HAVE A NY KNOWLEDGE OF THE SCRIPS. SINCE THE ASSESSEE TOOK THE HELP OF PROFESSI ONAL PERSON LIKE KSL TO MAKE REGULAR INVESTMENTS, HE HELD THAT THE INCOME SHOWN BY THE ASSES SEE AS SHORT TERM AND LONG TERM CAPITAL GAIN WAS REQUIRED TO BE ASSESSED AS BUSINESS INCOME. THE LEARNED CIT(A) ECHOED THE ASSESSMENT ORDER ON THIS ISSUE. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE QUESTION WHETHER THE INCO ME EARNED THROUGH PMS SHOULD BE CONSIDERED AS BUSINESS INCOME OR CAPI TAL GAIN HAS RECENTLY CAME UP FOR ADJUDICATION BEFORE THE MUMBAI BENCH OF THE TRIBUNAL IN IT O VS. RADHA BIRJU PATEL. VIDE ORDER DATED 30.11.2010 IN ITA NO.5382/MUM/2009 (TO WHICH ONE OF US, NAMELY, THE LEARNED JM IS PARTY) IT HAS BEEN HELD TH AT THE TRANSACTIONS CARRIED OUT BY THE ASSESSEES PORTFOLIO MANAGERS ARE IN THE NATURE OF TR ANSACTIONS MADE FOR MAXIMIZATION OF WEALTH RATHER THAN ENCASHIN G THE PROFIT ON APPRECIATION IN VALUE OF SHARES. IT HAS FURTHER BEEN OBSERVED THAT THE VERY NATURE OF PMS IS SUCH THAT THE INVESTMENT MADE BY THE ASSESSEE IS PROTEC TED AND ENHANCED AND IT CANNOT BE SAID THAT PMS IS A SCHEME OF TRADING IN SHAR ES. RESULTANTLY THE CL AIM OF THE ASSESSEE WAS ALLOWED THEREBY HOLDING THAT THE INCO ME WAS TAXABLE UNDER THE HEAD `CAPITAL GAIN AND NOT AS BUSINESS INCOME. COPY OF THE SAID ORDER HAS BEEN PLACED ON RECORD. THE LEARNED A.R. HAS ALSO BROUGH T TO OUR NOTICE ANOTHER ORDER PASSED BY THE PUNE BENCH OF THE TRIBUNAL IN KRA HOLDI NG AND TRADING PVT. LTD. VS. DCIT DATED 31.05.2011 DECIDING SIMILAR ISSUE IN ASSESSE ES FAVOUR. COPY OF THIS ORDER HAS ALSO BEEN PLACED ON RECORD. IN THE OPPOSITION THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT DRAW OUR ATTENTION TO ANY ORDE R PASSED BY THE TRIBUNA L IN FAVOUR OF THE REVENUE ON THE POINT IN DI SPUTE. RESPECTFULLY FOLLOWING THE PRECEDENTS, WE OVERTURN THE IMPUGNED ORDER AN D HOLD THAT THE INCOME DE CLARED BY THE ASSESSEE BE ASSESSED UNDER THE HEAD `CAPITAL GAIN AND NOT AS `BUSINESS INCOME. ITA NO.53/MUM/2010 SMT.NALINI NAVIN BHAGWATI. 3 4. IN THE RESULT, TH E APPEAL IS ALLOWED. ORDER PRONOUNCED IN TH E OPEN COURT ON THIS 05 TH DAY OF AUGUST, 2011. SD/- SD/- (N.V.VASUDEVAN) (R.S.SYAL) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI : 05 TH AUGUST, 2011. DEVDAS*` COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) - IV, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.