ACIT 22(1), MUMBAI V. HARSHA L. TAHILRAMANI, MUMBAI

ITA 7242/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1797 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 22-09-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 05-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Business expenditure; Source of fund
• Section: 143(3)

Judgement Text

ITA NO. 7242/M/2014 HARSHA L. TAH ILRAMANI 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH H,MUM BAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.7242/MUM/2014 FOR (ASSESSMENT YEAR : 2006-07 ) ACIT-22(1) ROOM NO.322, PIRAMAL CHAMBERS, 3 RD FLOOR PAREL, MUMBAI -400012 VS. SMT. HARSHA L. TAHILRAMANI 1001, KALPANA, 11 TH ROAD, KHAR (W), MUMBAI 400052 PAN: AAOPT6988Q (APPELLANT) (RESPONDENT) APPELLANT BY : SH. G. NANTHA KUM AR (DR) ASSESSEE BY : SH. SURESH N. OTWANI & SUNIL TALREJA (ARS) DATE OF HEARING : 28.09.2016 DATE OF PRONOUNCEMENT : 06.12.2016 ORDER UNDER SECTION 254 (1) OF INCOME TAX ACT PER PAWAN SINGH JUDICIAL MEMBER; 1. THIS APPEAL FILED BY REVENUE U/S 253 OF INCOME TAX ACT (ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS) - 30 MUMBAI DATED 29 TH SEPTEMBER 2014 FOR ASSESSMENT YEAR 2006-07. 2. THE BRIEF FACTS OF THE CASE ARE THAT FOR THE YEAR U NDER CONSIDERATION THE ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED ON 30 DECEMBER 2008 ASSESSING THE INCOME OF ASSESSEE AT RS. 4,02,91,080/-AGAINST THE DECLARED INCOME OF RS.4,01,10,695/-. IN THE ASSESSMENT ORDER THE AO TR EATED THE PROFIT ON THE SALES OF SHARES AS BUSINESS INCOME IN INSTEAD OF SHORT -TERM CAPITAL GAIN. ON APPEAL BEFORE COMMISSIONER (APPEALS) THE ORDER OF A O WAS REVERSED AND THE AO WAS DIRECTED TO ASSESS THE SALE AND PURCHASE OF SHARE HELD THAT INVESTMENT UNDER THE HEAD SHORT-TERM CAPITAL GAIN. THE REVENUE FILED APPEAL BEFORE TRIBUNAL VIDE APPEAL ITA NO. 5931/M/2009 WHEREIN THE ISSUE WAS RESTORED TO ITA NO. 7242/M/2014 HARSHA L. TAH ILRAMANI 2 THE FILE OF AO TO DECIDE AFRESH VIDE ORDER DATED 10 AUGUST 2011. THE AO AND THE ASSESSMENT PROCEEDING UNDER SECTION 143(3) R.W.S. 2 54 TREATED THE ENTIRE PROFIT FROM SALES OF SHARE UNDER THE HEAD PROFIT AND GAIN FROM BUSINESS AND PROFESSION IN ITS ORDER DATED 28 MARCH 2011. ON SE COND ROUND OF APPEAL BEFORE COMMISSIONER (APPEALS) OUT OF THE TOTAL CLAIM OF ST CG OF RS. 2,01,14,491/- THE GAIN PERTAINING TO PMS ACTIVITIES OF RS. 1,31,52,24 1/- WAS TREATED AS STCG AND THE BALANCE AMOUNT OF RS. 69,62,250/- WHICH WAS OUT SIDE THE PURVIEW OF PMS ACTIVITY AND RELATES TO THE TRANSACTION OF SALE AND PURCHASE CARRIED OUT BY THE ASSESSEE HERSELF AS BUSINESS INCOME. THE LD COMMI SSIONER (APPEALS) ALSO ISSUED A NOTICE OF ENHANCEMENT VIDE NOTICE DATED 18 SEPTEMBER 2014. AFTER CONSIDERING THE CONTENTION OF ASSESSEE DISALLOWED R S. 13 LACS WHICH WAS CLAIMED ON ACCOUNT OF CONSULTANCY FEE AND ADDED TO THE INCO ME OF ASSESSEE. THUS, BEING AGGRIEVED BY THE ORDER OF COMMISSIONER (APPEALS) T HE REVENUE HAS FILED PRESENT APPEAL BEFORE US, RAISING FOLLOWING GROUNDS OF APPE AL: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED COMMISSIONER (APPEALS) ERRED IN HOLDING THE GAINS RESULTING FROM PMS ACTIVITY AS STCG WITHOUT APPRECIATING THE FACT THAT THE VOLUME AND FREQUENCY OF TRADING AND USE OF PORTFOLI O MANAGEMENT SERVICES CLEARLY INDICATE THAT THE NATURE OF GAMES WAS BUSINESS INCOME. (II) THE APPELLANT PRAYS THAT ORDER OF LD COMMISSIONER ( APPEALS) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RES TORED. (III) THE APPELLANT CLAIMS LEAVE TO AMEND OR ALTER ANY GR OUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3. WE HAVE HEARD THE LD DR FOR THE REVENUE AND THE LD AR FOR THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD DR FOR THE REVENUE ARGUED THAT ASSESSEE SOURCE OF INCOME IS FROM DEALING IN THE SH ARES. THE ASSESSEE INVOLVED IN THE SALE AND PURCHASE OF SHARES FROM LAST SEVERA L YEARS, THE ENTIRE TIME OF THE ASSESSEE IS DEVOTED IN THE STOCK MARKET OPERATIONS. THE ASSESSEE IS ENGAGED IN REGULAR AND SYSTEMATIC ACQUISITION OF SHARE TO MAXI MIZE THE PROFIT AND UTILIZE THE BORROWED CAPITAL FOR ACQUISITION OF SHARES. THE ASS ESSEE INVOLVED IN THE REPEATED TRANSACTIONS IN A SYSTEMATIC AND ORGANIZED WAY THE MOTIVE AND INTENTION OF THE ASSESSEE IS TO DO A BUSINESS. ON THE OTHER HAND THE LD AR OF THE ASSESSEE ARGUED ITA NO. 7242/M/2014 HARSHA L. TAH ILRAMANI 3 THAT ASSESSEE IS BASICALLY AND PREDOMINANTLY IN INV ESTMENT AND THE SAME TREATMENT IS GIVEN BY THE ASSESSEE IN ACCOUNTS BY D ECLARING THE COST OF SHARE IN INVESTMENT IN BALANCE-SHEET. THE ASSESSEE IS AVAILI NG THE SERVICES OF PORTFOLIO MANAGERS REGISTERED WITH SEBI AND THESE FACTS WERE BROUGHT ON RECORD SPECIFICALLY MOTILAL OSWAL SECURITIES LTD WITH WHOM THE ASSESSEE HAS AN AGREEMENT FOR PROVIDING DISCRETIONARY PORTFOLIO MAN AGEMENT SERVICES. THE ASSESSEE HAS PROVIDED THE COPY OF LEDGER ACCOUNT AN D THE DETAILS OF THE PAYMENTS OF MANAGEMENT FEES AMOUNTING TO RS. 7,57,210/- OUT OF WHICH AN AMOUNT OF RS.6,96,133/- WAS TOWARDS UN-BOOKED PROFIT ON THE P URCHASE VALUE OF THE SHARES/SECURITIES NUMBERING 10 SCRIPTS HAVING COST OF RS. 2,51,37,095/- AND ANOTHER PORTFOLIO MANAGER MR. RAVI CHADDA OF PROUDG Y INVESTMENT WHO IS ALSO REGISTERED WITH SEBI. MR. RAVI CHADDA ALSO PROVIDE D DISCRETIONARY SERVICES AND ON HIS ADVICE 21 SCRIPT WORTH RS. 2,13,56,580/- WAS KEPT IN THE STOCK WITHOUT DOING ANYTHING ON ITS AND UN-BOOKED PROFIT TO THE E XTENT OF RS. 60,60,328/- WAS SUBJECTED TO PROFESSIONAL FEES AMOUNTING TO RS. 6,3 6,032/-. THE LD AR OF THE ASSESSEE SUPPORTED THE ORDER OF COMMISSIONER (APPEA LS). 4. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND PERUSED THE ORDER OF AUTHORITIES BELOW. THE TRIBUNAL VIDE ORDER DATED 10 .08.2011 GAVE SPECIFIC DIRECTION AS CONTAINED IN PARA 6.3. THE AO WHILE FR AMING FRESH ASSESSMENT ORDER INSTEAD OF CONFINING ON THE DIRECTION OF THE TRIBUN AL EXAMINED THE CASE AS IT WAS OPEN TO EXAMINE THE WHOLE ISSUE. THE AO OBSERVED TH AT ASSESSEE IS AN INDIVIDUAL AND DURING THE YEAR UNDER CONSIDERATION ASSESSEE HA S SHOWN INCOME FROM TRADING OF DERIVATIVE SEGMENT. THE ASSESSEE ALSO SHOWN SHOR T-TERM CAPITAL GAIN OF RS. 2,01,14,491/-ON SALE OF SHARES AND LONG-TERM CAPITA L GAIN OF RS. 1,21,81,611/- THE ASSESSEE HAS ALSO SHOWN UNSECURED LOAN OF RS.2, 75,60,717/- AND BANK OVERDRAFT OF RS. 17,60,610/- THE ASSESSEES OWN CAP ITAL WAS OF RS. 81,73,712/- WHILE INVESTMENT IN SHARE WAS RS. 5,07,20,923/-. BE SIDES THAT ASSESSEE WAS HAVING UNSECURED LOAN OF RS. 54,81,686/-. THE ASSES SEES OWN CAPITAL WAS OF RS. 6,92,44.842/- AS ON 31 MARCH 2006 AND INVESTMENT IN SHARE WAS RS. 9,69,55,006/-. THE AO CONCLUDED THAT SUBSTANTIAL BO RROWED FUND HAS BEEN USED ITA NO. 7242/M/2014 HARSHA L. TAH ILRAMANI 4 FOR PURCHASE OF SHARE AND THE INVESTMENT IS MAINLY FROM THE BORROWED FUND. THE AO FURTHER ON THE BASIS OF NUMBER OF TRANSACTION, F REQUENCY, PERIOD OF HOLDING, TREATMENT AND BOOKS OF ACCOUNTS HELD THAT THE INTEN TION OF THE ASSESSEE WITH A CLEAR MOTIVE OF MAXIMIZING PROFITS GOES TO SHOW THE EXISTENCE OF INTENTION OF TRADE AS A BUSINESS ACTIVITY AND CONCLUDED THAT THA T THE INCOME FROM SALES AND PURCHASE OF SHARE WAS INCOME FROM THE HEAD PROFIT AND GAINS OF BUSINESS AND PROFESSION AND NOT CAPITAL GAINS. THE LEARNED COMM ISSIONER (APPEALS) AFTER CONSIDERING THE CONTENTION OF THE ASSESSEE HELD AS UNDER: (5.1) I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND FIND THAT THE IMPUGNED ORDER HAS BEEN PASSED ON THE DIRE CTION ISSUED BY THE ITAT WIDE ORDER DATED 10 AUGUST 2011 IN ITA NO. 593 1/MUM/09(AY2006- 07). THE SAID PARA HAS ALREADY BEEN REPRODUCED BY T HE AO IN HIS ORDER. HOWEVER, FOR THE SAKE OF CONVENIENCE AND READY REFE RENCE, IT IS RE-PRODUCED HEREUNDER: IN THE GIVEN FACTS AND CIRCUMSTANCES, IF THE PURCH ASES AND SALE OF SHARES ARE CARRIED OUT UNDER THE SCHEME OF PORTFOLIO MANAG EMENT THEN THE SAME CANNOT BE TREATED AS TRADING IN SHARE, HOWEVER IN T HE RESENT CASE THE PORTFOLIO MANGER HAS ALSO PROVIDED THE CREDIT FACIL ITY TO THE ASSESSEE AND THERE IS NOTHING STIPULATED IN THE TERMS AND CONDIT IONS OF THE AGREEMENT ABOUT THE SAID CREDIT FACILITY AVAILED BY THE ASSES SEE FROM THE PORTFOLIO MANAGER. THEREFORE, THE TRUE NATURE OF ARRANGEMENTS /TRANSACTIONS OF CREDIT FACILITY BETWEEN THE ASSESSEE AND THE PORTFO LIO MANAGER HAS TO BE VERIFIED AND EXAMINED. IT IS NECESSARY TO FIND OUT AS TO HOW AND TERMS AND CREDIT FACILITY WAS PROVIDED BY THE PORTFOLIO MANGE R AND WHETHER THE REPAYMENT WAS MADE BY THE ASSESSEE ON THE BASIS OF FIXED DURATION OR THE PORTFOLIO MANAGER HAS ADJUSTED THE SALE PROCEEDS AG AINST THE CREDIT FACILITY PROVIDED- BY IT AS WELL AS THE INTEREST CH ARGED ON THE SAME AT THE TIME OF LIQUIDATION/ SALE OF THE SHARES/STOCK HELD IN THE NAME OF THE ASSESSEE. IN CASE OF PORTFOLIO MANAGER IS USING ITS OWN FUNDS IN THE NAME OF THE ASSESSEE AND RECEIVING BACK THE MONEY ON THE SALE OF THE STOCK AND SHARES AND, OFFER ADJUSCTING/ RECEIVING ITS OWN MON EY FROM THE SALE PROCEEDS, THE BALANCE IS TRANSFERRED TO THE ACCOUNT OF THE ASSESSEE; THEN, THE SAID ARRANGEMENT CANNOT BE TERMED AS INVESTMENT THROUGH PORTFOLIO MANAGEMENT SCHEME. RATHER, THERE IS NO FUND OF THE ASSESSEE TO BE MANAGED BY PMS. ACCORDINGLY, THE MATTER IS REQUIRED A PROPER VERIFICATION AND EXAMINATION TO ASCERTAIN THE TRUE NATURE OF THE ARRANGEMENT BETWEEN THE ASSESSEE AND THE PORTFOLIO MANAGER ABOUT THE CREDIT FACILITY OF THE LEVEL OF THE AO. HENCE, THE MATTER IS SET ASIDE TO THE RECORD OF THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH AS PER LAW AND IN THE LIGHT OF OUR ABOVE OBSERVATION ONE OTHER CON SIDERING THE CONTENTION OF THE ASSESSEE.' 5.2 THE ITAT, THEREFORE, DESIRED THAT THE NATURE OF THE ARRANGEMENT/TRANSACTION OF CREDIT FACILITY BETWEEN THE APPELLANT AND THE PORTFOLIO MANAGER, HAS TO BE VERIFIED AND EXAMINED, AND, IN THE SAID REGARD, THE ABOVE TRANSACTION HAS TO BE CLASSIFIED, AS UNDE R.- ITA NO. 7242/M/2014 HARSHA L. TAH ILRAMANI 5 I. HOW AND ON WHAT TERMS THE CREDIT FACILITY WAS PROVI DED BY THE PORTFOLIO MANAGER? II. WHETHER THE REPAYMENT WAS MADE BY THE APPELLANT ON THE BASIS OF FIXED DURATION, OR III. THE PORTFOLIO MANAGER HAS ADJUSTED THE SALE PROCEED S AGAINST THE CREDIT FACILITY PROVIDED BY IT AS WELL AS THE INTEREST CHA RGED ON THE SAME AT THE TIME OF LIQUIDATION/ SALE OF THE SHARES/ STOCK HELD IN THE NAME OF THE APPELLANT. 5.3 THE TRIBUNAL, HAS THEREFORE DIRECTED THAT IF TH E PORTFOLIO MANAGER IS USING ITS OWN FUNDS IN THE NAME OF THE APPELLANT AN D RECEIVING BACK THE MONEY ON THE SALE OF THE STOCK AND SHARES AND, AFTE R ADJUSTING/RECEIVING ITS OWN MONEY FROM THE SALE PROCEEDS, THE BALANCE IS TR ANSFERRED TO THE ACCOUNT OF THE APPELLANT; THEN, THE SAID ARRANGEMENT CANNOT BE TERMED AS INVESTMENT THROUGH PORTFOLIO MANAGEMENT SCHEME. RATHER, THERE IS NO FUND OF THE APPELLANT TO BE MANAGED BY PMS. THE AO WAS, THUS, R EQUIRED TO EXAMINE THE ABOVE THREE THINGS, I.E. TERMS OF THE CREDIT FA CILITY PROVIDED BY THE PORTFOLIO MANAGER; WHETHER THE REPAYMENT WAS MADE B Y THE APPELLANT ON THE BASIS OF FIXED DURATION; OR THE PORTFOLIO MANAG ER HAS ADJUSTED SALE PROCEEDS AGAINST CREDIT FACILITY. HOWEVER, THE AO H AS NOT GIVEN ANY CLEAR FINDING ON THE ABOVE THREE DIRECTIONS OF THE ITAT. HE HAS SIMPLY DISMISSED THE CLAIM OF THE APPELLANT ON THE GROUND THAT LIABI LITIES OF RS. 3,26,59,959/- OUTSTANDING IN THE BOOKS OF THE APPELLANT, ARE ON A CCOUNT OF UNPAID BILLS AND LOAN AMOUNT TO M/S MOTIALAL OSWAL SECURITIES LTD. A ND M/S MOTILAL OSWAL INVESTMENT PVT. LTD., RESPECTIVELY; PAN NO. OF MOTI LAL OSWAL INVESTMENT PVT. LTD. INVESTMENT PVT. LTD. FURNISHED BY THE APP ELLANT IS PERTAINING TO M/S MOTILAL OSWAL FINANCIAL SERVICE LTD; M/ S MOTILAL O SWAL SECURITIES LTD HAS BEEN REPORTED ON 18.12.2008, THEREFORE, THE TRANSAC TION COULD NOT HAVE BEEN MADE IN A.Y. 2006-07; UNDER PMS TRADING OF SHARES H AS BEEN CARRIED NOT ONLY FROM THE OPENING BALANCE OF SHARES TRANSFERRED TO THE PMS BUT TRADING IN SHARES AND SECURITIES OTHER THAN THAT HAS ALSO B EEN CARRIED OUT; THE APPELLANT HAS CLAIMED CONSULTING FEES OF RS. 15,28, 338/-; THE APPELLANT'S CAPITAL WAS OF RS. 81,73,712/- WHILE INVESTMENT IN SHARES WAS RS. 5.07 CRORE, AS ON 31.03.2005; AS ON 31.03.2006, THE APPE LLANT'S OWN CAPITAL WAS OF RS. 6.92 CRORE, WHILE INVESTMENT IN SHARES WAS R S. 9.69 CRORE, WHICH SHOWS THAT SUBSTANTIAL BORROWED FUND HAS BEEN USED FOR PURCHASE OF SHARES SINCE INVESTMENTS ARE MAINLY FROM BORROWED FUNDS. T HE AO HAS ALSO RECORDED THAT 60% OF THE SHARES HAVE BEEN SOLD WITH IN THREE MONTHS OF THE PURCHASE, WHICH INCLUDED 25% OF THE SHARES SOLD WIT HIN ONE MONTH AND 10% WITHIN ONE WEEK. HE HAS, THEREFORE, CONCLUDED THAT THE SALE AND PURCHASE OF THE SHARES WAS BUSINESS ACTIVITY OF THE APPELLANT A ND INCOME ARISING THEREFROM IS TO BE ASSESSED UNDER BUSINESS HEAD. 5.4 FROM THE ABOVE DETAILS DISCUSSED BY THE AO, WH ICH ARE ON RECORD, I FIND THAT THE AO HAS MISREAD AND MISINTERPRETED THE DETA ILS FURNISHED BEFORE HIM. THE SAME BEING, AS FOLLOWS: I. THE APPELLANT HAS INCOME FROM VARIOUS SOURCES. THE MAIN INCOME BEING TRADING IN DERIVATIVES OF SHARES, AND PROFIT GENERA TED FROM THE SAID ITA NO. 7242/M/2014 HARSHA L. TAH ILRAMANI 6 ACTIVITY IS RS. 2,09,01,283/-. THUS, OUT OF INCOME OF RS. 4,01,10,695/- DECLARED BY THE APPELLANT, ALMOST 50% INCOME IS FRO M ABOVE PROFIT UNDER THE HEAD OF BUSINESS INCOME, WHERE UNDER SHE HAS DE CLARED BUSINESS INCOME OF RS. 1,91,14,569/-,I.E. AFTER CLAIMING BUS INESS AND EXPENSE. THE ABOVE SOURCES OF INCOME ARE LONG TERM CAPITAL GAIN AND THE INCOME. THE AO TREATED THE INCOME OF RS. 2,01,14,491/- DECLARED BY THE APPELLANT UNDER THE HEAD SHORT TERM CAPITAL GAIN, AS BUSINESS INCOME. THE APPELLANT HAS ALSO DECLARED INCOME FROM HOUSE PROPERTY OF RS. 8,80,794/-. BESIDES, THE SAID INCOME THE APPELLANT ALSO DECLARED INCOME OF RS. 941/- UNDER THE HEAD OTHER SOURCES. IT IS, THEREFORE, NO DENYING TH E FACT THAT THE APPELLANT'S MAIN ACTIVITY IS BUSINESS IN TRADING OF SHARES, INCLUDING DERIVATIVES OF THE SHARES. THE ISSUE BEFORE US IS R EGARDING THE AMOUNT OF RS. 2,01,14,491/-, WHICH THE AO HAS TREATED AS BUSI NESS INCOME, AS AGAINST SHORT TERM CAPITAL GAIN DECLARED BY THE APP ELLANT. II. THE APPELLANT HAS ENGAGED TWO PMS SERVICE PROVIDERS NAMELY, M/ S MOTILAL OSWAL ASSET MANAGEMENT COMPANY LTD AND SHRI RAVI CHADDA, PROPRIETOR OF M/ S PRODIGY INVESTMENT. THE APPELLAN T HAS TRANSFERRED THE SHARES HELD BY HER TO THESE PMS SERVICE PROVIDERS A ND IN LIEU OF SERVICE PROVIDED BY THEM PAID CONSULTANCY FEE. M/ S MOTILAL OSWAL ASSET MANAGEMENT COMPANY LTD, THE PMS SERVICE PROVIDER HA S NOT PURCHASED OR SOLD ANY SHARES DURING THE YEAR. MOREOVER, THERE IS NO PROFIT BOOKED BY THE SAID PMS SERVICE PROVIDER DURING THE YEAR IN THE ACCOUNT OF THE APPELLANT. THE OTHER PMS SERVICE PROVIDER, SHRI RAV I CHADDA, PROPRIETOR OF M/ S PRODIGY INVESTMENT HAS CARRIED O UT SHARE TRANSACTIONS ON BEHALF OF APPELLANT IN THE PMS ACCOUNT OF THE AP PELLANT WITH HIM. SHRI RAVI CHADDA HAS ALSO NOT GIVEN ANY LOAN TO AN NOR, HAS HE GIVEN ANY CREDIT FACILITY TO THE APPELLANT. THE TOTAL AMOUNT OF PROFIT BOOKED BY HIM FOR THE APPELLANT IS RS. 1,31,52,241/- WHICH IS FRO M THE SALE OF SHARES TRANSFERRED TO THE PMS ACCOUNT AND PURCHASE AND SAL ES OF FURTHER SHARES FROM THE SAID AMOUNT. THEREFORE, THE PMS ACTIVITY C ARRIED OUT BY SHRI RAVI CHADDA IS FROM THE AMOUNT OF SHARES TRANSFERRE D IN THE PMS ACCOUNT ONLY. 5.5 THUS, OUT OF THE SHORT TERM CAPITAL GAIN OF RS. 2,01,14,491/-, THE AMOUNT OF SHORT TERM CAPITAL GAIN PERTAINING TO PMS ACTIVI TY IS RS. 1,31,52,241/- ONLY. THE REMAINING AMOUNT OF RS. 69,62,250/- IS AR ISING OUT OF SHARES TRANSACTIONS WHICH THE APPELLANT HAS HERSELF CARRIE D OUT AND DECLARED IT UNDER SHORT TERM CAPITAL GAIN. 5.6 THE UNPAID BILLS OF RS. 1,56,99,178.18/- OF M/ S MOTILAL OSWAL SECURITIES LTD COMPRISE OF TWO AMOUNTS, VIZ. RS. 69,22,630.68/ - ON ACCOUNT OF UNPAID SETTLED BILLS AND RS. 87,76,547.50/ - RELATE TO MAR CH TRANSACTION TO BE SETTLED IN APRIL MONTH OF THE NEXT FINANCIAL YEAR. BOTH AMO UNTS ARE NOT CONCERNED WITH THE PMS ACTIVITY SINCE THE TRANSACTION CARRIED OUT THROUGH MOTILAL OSWAL SECURITIES LTD ARE RELATING T DERIVATIVES, W HICH THE APPELLANT HAS ALREADY DECLARED, AS HER BUSINESS INCOME OR, THE SH ARES TRANSACTIONS CARRIED OUT BY HER, AS SHORT TERM CAPITAL GAIN TO THE EXTEN T OF RS. 69,62,250/-. 5.7 THE APPELLANT HAS ALSO TAKEN LOAN AMOUNT OF RS. 1,69,60,780.82/- FROM M/S MOTILAL OSWAL INVESTMENTS PVT. LTD, WHICH SUBSE QUENTLY CHANGED ITS NAME TO M/ S MOTILAL OSWAL FINANCIAL SERVICE LTD, H ENCE SAME PAN OF M S MOTILAL OSWAL INVESTMENTS PVT. LTD. CONTINUES WITH M/S MOTILAL OSWAL ITA NO. 7242/M/2014 HARSHA L. TAH ILRAMANI 7 FINANCIAL SERVICES LTD. THE APPELLANT HAS UTILIZED THIS LOAN AMOUNT FOR PURCHASE OF IMMOVABLE PROPERTY, AS WELL USED FOR BU SINESS ACTIVITY IN THE TRADING OF DERIVATIVES AND OTHER SHARES. 5.8 M/S MOTILAL OSWAL SECURITIES LTD HAS BEEN EXIST ING MUCH EARLIER TO THE DATE 18.12.2008 MENTIONED BY THE AO. IN ANY CASE, T HIS IS NOT RELEVANT TO THE ISSUE IN WHICH DIRECTION HAS BEEN ISSUED BY THE ITA T SINCE PMS ACTIVITY HAS BEEN CARRIED OUT THROUGH M/ S MOTILAL OSWAL ASSET M ANAGEMENT COMPANY LTD. 5.9 THE CONSULTANCY FEES OF RS. 15,28,338/- HAS BEE N PAID TO THE PMS SERVICE PROVIDER, SHRI RAVI CHADDA, PROPRIETOR OF M / S PRODIGY INVESTMENT. 5.10 IN VIEW OF THE ABOVE DISCUSSION, I HOLD THAT T HE SHORT TERM CAPITAL GAIN AMOUNT OF RS. 1,31,52,241/- WHICH HAS RESULTED OUT OF PMS ACTIVITY IS TO BE ASSESSED UNDER THE HEAD SHORT TERM CAPITAL GAIN, AS HELD BY THE HIGH COURT OF DELHI IN THE JUDGMENT DATED 25.04.2011 IN ITA NO . 485/2012, IN THE CASE OF RADIALS INTERNATIONAL. THE GROUND OF APPEAL AS T O THE ASSESSMENT OF THE CAPITAL GAIN DECLARED BY THE APPELLANT IS, THUS, AL LOWED AND THE ABOVE TREATMENT GIVEN BY THE AO IS CANCELLED. THE BALANCE AMOUNT OF RS. 69,62,250/- IS OUTSIDE THE PURVIEW OF PMS ACTIVITY AND RELATE TO THE TRANSACTION OF PURCHASE AND SALE OF THE SHARES CARR IED OUT BY THE APPELLANT HERSELF. THE SAME IS, THEREFORE, NOT PART OF TRANSA CTIONS ON WHICH DIRECTIONS THE ITAT, WHICH ARE RELATING TO INCOME FROM PMS ACT IVITY DECLARED BY THE APPELLANT AS SHORT TERM CAPITAL GAIN HAS TO BE ASSE SSED AS BUSINESS INCOME. ACCORDINGLY, THE BALANCE AMOUNT OF RS. 69,62,250/- DECLARED BY THE APPELLANT AS SHORT TERM CAPITAL GAIN HAS TO BE ASSE SSED AS BUSINESS INCOME: AS IN THE ORIGINAL ASSESSMENT ORDER, AS WELL AS IN THE IMPUGNED ASSESSMENT ORDER AND, ACCORDINGLY, CONFIRMED. 5. WE HAVE SEEN THAT THE LD COMMISSIONER (APPEALS) CON CLUDED THAT OUT OF THE TOTAL INCOME OF RS. 4,01,10,695/- DECLARED BY ASSESSEE, A LMOST 50% OF INCOME IS TRADING IN DERIVATIVE OF SHARE AND PROFIT GENERATE D FROM THE SAID ACTIVITY. THE ASSESSEE HAS ALREADY RETURNED THE ABOVE PROFIT UNDE R THE HEAD OF BUSINESS INCOME AND HAS DECLARED THE BUSINESS INCOME OF RS . 1,91,14,569/-AND CLAIM BUSINESS EXPENSES. THE LEARNED COMMISSIONER (APPEAL S) CORRECTLY APPRECIATED THAT THE ONLY ISSUE FOR CONSIDERATION BEFORE THE AO WAS REGARDING THE INCOME OF RS. 2,01,14,491/- WHICH WAS TREATED AS BUSINESS INC OME AGAINST THE SHORT-TERM CAPITAL GAINS. OUT OF STCG OF RS. 2,01,14,491/-THE AMOUNT OF SHORT-TERM CAPITAL GAIN PERTAINING TO PMS ACTIVITY IS RS. 1,31,52,241/ -ONLY THE REMAINING AMOUNT OF RS. 69,62,250/- IS ARISING OUT OF SHARE TRANSACT ION WITH THE ASSESSEE HAS HERSELF CARRIED OUT AND DECLARED IT UNDER SHORT-TERM CAPITA L GAINS. THE LEARNED ITA NO. 7242/M/2014 HARSHA L. TAH ILRAMANI 8 COMMISSIONER (APPEALS) ALSO CONSIDERED THE ASPECT O F BORROWED CAPITAL AND THE CONSULTANCY FEES PAID TO PMS SERVICES PROVIDER. AND WHILE RELYING UPON THE DECISION OF DELHI HIGH COURT IN RADIAL INTERNATIONA L IN ITA NO. 485 OF 2012 DATED 25 TH APRIL 2011 AND GRANTED PARTIAL RELIEF TO THE ASSES SEE. WITH THE ABOVE OBSERVATION, WE DO NOT FIND ANY INFIRMITY OR ILLEGA LITY IN THE ORDER PASSED BY LD. COMMISSIONER (APPEALS). HENCE, THE APPEAL OF THE RE VENUE HAS NO MERIT AND THE SAME IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 06 TH DAY OF DECEMBER 2016. SD/- SD/- (R.C.SHARMA) (PAW AN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 06/12/2016 COPY OF THE ORDER FORWARDED TO : BY ORDER, ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE.