Udayan Finstock Pvt.Ltd., Baroda V. The ACIT.,Circle-4, Baroda

ITA 849/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1794 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 31-03-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 17-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: S N SOPARKAR
• Keywords: Business income; Principle of natural justice

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHM EDABAD , (BEFORE SHRI ANIL CHATURVEDI, A.M. & SHRI KUL BHARA T, J.M.) ( , !'# $ , ! %& ) ITA NO. 849/AHD/2012 (ASSESSM ENT YEAR: 2008-09) UDAYAN FINSTOCK PVT. LTD. 28, UDAY PARK SOCIETY, JETALPUR ROAD, BARODA - 390005 VS. ACIT, CIRCLE-4, BARODA PAN NO. AAACU5267G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. N. SOPARKAR, A.R. RESPONDENT BY : SMT. SONIA KUMAR, SR. D.R. DATE OF HEARING : 31-03 -2016 DATE OF PRONOUNCEMENT : 08 -04-2016 ( )/ ORDER PER ANIL CHATURVEDI, ACCOUNTANT MEMBER THIS APPEAL FILED BY ASSESSEE IS AGAINST THE ORDER OF CIT(A)-III, BARODA, DATED 03.02.2012 FOR THE ASSESSMENT YEAR 2008-09. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER: 3. THE ASSESSEE IS AN INVESTMENT COMPANY. THE ASSE SSEE FILED ITS RETURN OF INCOME FOR A.Y. 2008-09 ON 30.09.2008 DECLARING TOT AL INCOME AT RS.61,63,130/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER A SSESSMENT WAS FRAMED U/S.143(3) VIDE ORDER DATED 20.12.2010 AND THE TOTA L INCOME WAS DETERMINED AT RS.60,23,364/- BY TREATING THE INCOME FROM SALE OF SHARES AS BUSINESS INCOME AS ITA NO.849/AHD/12 A.Y. 2008-09 (UDAYAN FINSTOCK PV T. LTD. VS. AC IT) 2 AGAINST SHORT TERM CAPITAL GAINS CONSIDERED BY TH E ASSESSEE. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASSESSEE CARRIED THE MA TTER BEFORE THE LD. CIT(A) WHO VIDE ORDER DATED 03.02.2012 (IN APPEAL NO. CAB/III- 188/10-11) DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE IS NOW IN THE APPEAL BEFORE US AND HAS RAISED THE FOLLOWING G ROUNDS: 1. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFI RMING ACTION OF AO IN TREATING SHORT TERM CAPITAL GAIN ON SALE OF MUTUAL FUNDS / SHARES AS BUSINESS INCOME OF THE APPELLANT. BOTH THE LOWER AUTHORITIES FAILED TO APP RECIATE THE FACT THAT CAPITAL APPRECIATION BEING THE SOLE MOTIVE, SHARES ACQUIRED FROM OWN FUNDS WERE SOLD AFTER HOLDING FOR REASONABLE PERIOD OF TIME. THE OR DER OF ID. CIT (A) BEING PERVERSE AND AGAINST FACTS OF THE CASE DESERVES TO BE QUASHED AND THE CLAIM OF THE APPELLANT TREATING GAINS ON SALE OF MUTUAL FUND S / SHARES AS SHORT TERM CAPITAL GAINS BE ALLOWED. 2. LD. GIT (A) FURTHER ERRED IN LAW AND ON FACTS I N NOT ONLY TREATING INCOME FROM INVESTMENTS THROUGH PORTFOLIO MANAGEMENT SERVICES ( PMS) AS BUSINESS INCOME BUT ALSO IN PRESUMING THAT THE INVESTMENT ACTIVITY OF THE APPELLANT WAS WITH A MOTIVE TO EARN PROFIT AND NOT DIVIDEND. LD. CIT (A) THUS ERRED IN CONFIRMING ACTION OF AO IN TREATING SHORT TERM CAPITAL GAIN ON INVESTMENT IN SHARES BY THE APPELLANT AS BUSINESS INCOME. LD. CIT (A) OUGHT TO HAVE ALLOWED SHORT TERM GAIN ON SALE OF SHARES AS CLAIMED. 3. LD. CIT (A) HAS GROSSLY VIOLATED PRINCIPLES OF NATURAL JUSTICE IN DISMISSING THE CLAIM OF THE APPELLANT WITHOUT CONSIDERING MATERIAL AVAILABLE ON RECORD AS WELL SUBMISSIONS OF THE APPELLANT DURING ASSESSMENT PROC EEDINGS. 4. LEVY OF INTEREST U/S 234A /234B /234C & 234 D OF THE ACT IS NOT JUSTIFIED. 3.1 SUBSEQUENTLY, ASSESSEE HAS RAISED ADDITIONAL GR OUND OF APPEAL WHICH READS AS UNDER: 1. THE APPELLANT PRAYS THAT DEDUCTION OFRS.2,75,1 16/- INCURRED ON DEMAT CHARGES, PORTFOLIO MANAGEMENT CHARGES AND SECURITY TRANSACTI ON TAX BE ALLOWED WHILE COMPUTING INCOME EARNED ON BUSINESS OF TRADING IN S HARES/SECURITIES BY THE APPELLANT SINCE SHORT TERM CAPITAL GAIN THROUGH POR TFOLIO MANAGEMENT SERVICES (PMS) IS TREATED AS BUSINESS INCOME. 4. BEFORE US, AT THE OUTSET, LD. A.R. SUBMITTED THA T THOUGH THE ASSESSEE HAS RAISED VARIOUS GROUNDS, BUT THE SOLITARY ISSUE IS A S TO WHETHER THE INCOME EARNED BY ITA NO.849/AHD/12 A.Y. 2008-09 (UDAYAN FINSTOCK PV T. LTD. VS. AC IT) 3 THE ASSESSEE ON SALE OF SHARES IS TO BE CONSIDERED AS BUSINESS INCOME OR CAPITAL GAINS. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O . NOTICED THAT ASSESSEE HAS EARNED SHORT TERM CAPITAL GAIN ON MUTUAL FUND OF RS .51,03,532/- AND SHORT TERM CAPITAL GAIN ON SALE OF SHARE OF RS.6,73,080/-, THE AGGREGATE SHORT TERM GAINS WERE TO BE TUNE OF RS.57,76,622/-. THE ASSESSEE WAS ASK ED TO SHOW CAUSE AS TO WHY THE PROFITS EARNED, WHICH HAVE BEEN CONSIDERED AS CAPIT AL GAINS, NOT BE CONSIDERED AS BUSINESS INCOME. THE SUBMISSIONS OF THE ASSESSEE F OR CONSIDERING THE INCOME AS CAPITAL GAIN WAS NOT FOUND ACCEPTABLE TO THE A.O., HE THEREFORE CONSIDERED THE PROFIT EARNED AS BUSINESS INCOME OF THE ASSESSEE. 6. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO DISMISSED THE APPEAL OF THE ASSESSEE BY HOLDING AS UNDER: 4.3 I HAVE CONSIDERED THE FACTS OF THE CASE, THE O BSERVATIONS OF THE AO AND THE SUBMISSION MADE BY THE ID. COUNSEL, THE AO HAS NOT MADE ANY ANALYSIS OF THE VOLUME AND FREQUENCY OF TRANSACTIONS RELATING TO SHARES AN D SECURITIES MADE BY THE APPELLANT. HENCE DURING THE COURSE OF APPELLANT PROCEEDINGS, T HE APPELLANTS AR WAS ASKED TO FILE THE COMPLETE DETAILS OF SHARE TRANSACTIONS. SO FAR AS SHARES HELD AS INVESTMENT ON SALE OF WHICH SHORT TERM CAPITAL GAIN HAS BEEN SHOWN BY THE APPELLANT, ARE CONCERNED, ALL THESE SHARES HAS BEEN PURCHASED IN THE MONTHS OF FEBRUARY & MARCH 2007 AND HAVE BEEN SOLD STARTING FROM APRIL 2007 TO DECEMBER 2007. BESIDES THIS, THE ASSESSEE HAS USED 3 SCHEMES OF PORT FOLIO MANAGEMENT SERVICES (PMS) FOR MAKING TRANSACTIONS IN SHARES AND SECURITIES WHICH ARE AS FOLLOWS: - KOTAK INCUBATER EQUITY PORTFOLIO: - KOTAK OPPORTUNITY 2010 PMS - HSBC ASSETS MANAGEMENT PMS SCHEME 4.3.1 THE APPELLANT WAS ASKED TO SUBMIT ITS ACCOUNT S IN THE BOOKS OF THESE PMS DURING THE COURSE OF APPELLATE PROCEEDINGS, WHICH HAS BEEN SUBMITTED. SO FAR AS DETAILS RELATING TO KOTAK SECURITIES ARE CONCERNED, THE ACTIVITY IN ONE SCHEME HAS STARTED FROM 21.3.2007 AND IN THE OTHER SCHEME FROM 19.9.2007. BUT THE BRE AKUP OF EQUITIES IN WHICH THE INVESTMENTS HAVE BEEN MADE ON DIFFERENT DATES HAS N OT BEEN PROVIDED. THE DETAILS GIVE ONLY CONSOLIDATED AMOUNTS ON ACCOUNT OF PURCHASE OR SALES OF SHARES ON A PARTICULAR DAY UNDER THE HEADING 'INVESTMENT IN EQUITY'. BESIDES T HIS THE STT PAID AND THE BROKERAGES ITA NO.849/AHD/12 A.Y. 2008-09 (UDAYAN FINSTOCK PV T. LTD. VS. AC IT) 4 ETC. ARE ALSO REFLECTED IN THE DETAIL. THE TRANSACT IONS ARE NUMEROUS AND QUITE FREQUENT OVER THE ENTIRE PERIOD TILL 31.3.2007. ALMOST ON DA ILY BASIS THE SALE AND PURCHASE OF EQUITIES ARE BEING CONDUCTED IN BOTH THE SCHEMES AN D ON BOTH THE STOCK EXCHANGES I.E NSE AND BSE. IN ABSENCE OF NAMES OF SECURITIES IN W HICH 'SECURITY TRADING IS DONE, THE HOLDING PERIOD OF SECURITIES IS NOT ASCERTAINABLE. THUS, THE APPELLANT HAS FAILED TO ESTABLISH THAT THE HOLDING PERIODS OF SECURITIES AR E SUCH THAT THE PROFITS ON ACCOUNT OF THESE TRANSACTIONS SHOULD BE TREATED AS CAPITAL GAI N. 4.3.2 IN THE CASE OF HSBC ASSETS MANAGEMEN T PMS SCHEME, THE SECURITY WISE DETAILS ARE AVAILABLE. THE ACTIVITY HAS STARTED FRO M 20.3.2007. FROM THESE DETAILS IT IS SEEN THAT FREQUENT PURCHASE AND SALE OF SHARES ARE BEING DONE THROUGHOUT THE YEAR ON ALMOST DAILY BASIS. BESIDES, WHENEVER, EXTRA FUND I S AVAILABLE, THE SAME IS BEING INVESTED IN HSBC CASH FUND. WHEN SHARES ARE TO BE PURCHASED, THE MONEY IS BEING WITHDRAWN FROM THE CASH FUND AND BEING UTILIZED FOR PURCHASE OF SHARES. THIS SHOWS AN ORGANIZED ACTIVITY IN WHICH THE AVAILABLE AND IDLE FUND IS BE ING PARKED IN A CASH FUND IN ORDER TO HAVE EASY LIQUIDITY. THIS FUND IS BEING ROTATED IN PURCHASE AND SALE OF SHARES AND IN BETWEEN THESE ACTIVITIES, IS BEING KEPT AGAIN IN TH IS LIQUID FUND IN ORDER TO EARN DIVIDEND AND ALSO TO HAVE EASY LIQUIDITY. THIS ACTIVITY IS N OTHING BUT A BUSINESS ACTIVITY AS NO INGREDIENT OF INVESTMENT ACTIVITY IS SEEN IN THIS. 4.3.3 THE ONLY CONTENTION OF THE APPELLANT IS THAT SINCE THE PURCHASE AND SALE OF SHARES ARE DONE BY THE PMS, HENCE THE RESULTANT PROFIT SHO ULD BE TAXED AS SHORT TERM CAPITAL GAIN IN ITS HAND. THIS CONTENTION IS NOT ACCEPTABLE IN VIEW OF THE FACTS OF THIS CASE. IN PARA 1.6.2 OF ITS SUBMISSION, THE APPELLANT HAS ITS ELF STATED THAT PMS INVESTOR USES THE PORT FOLIO MANAGER AS A AGENT TO BUY OR SALE SHARES . THUS, ONLY BECAUSE A BUSINESS IS BEING CONDUCTED THROUGH AN AGENT, THE RESULTANT PRO FIT WILL NOT LOSE ITS CHARACTER OF BUSINESS PROFIT. IN SUCH CIRCUMSTANCES, WHAT IS TO BE SEEN IS THE NATURE OF ACTIVITY BEING CONDUCTED BY THE AGENT. IF THE ACTIVITIES OF THE AG ENT CAN BE CLASSIFIED AS INVESTMENT ACTIVITY THEN THE PROFIT WILL BE IN THE NATURE OF C APITAL GAIN. BUT, IF THE NATURE OF ACTIVITY OF THE AGENT IS OF A BUSINESS OR TRADE, THEN THE RE SULTANT PROFIT HAS TO BE TREATED BUSINESS INCOME. IN THE CASE OF THE APPELLANT THE TRANSACTIO NS BEING CONDUCTED BY PMS ARE IN THE NATURE OF BUSINESS, HENCE THE AO HAS RIGHTLY TAXED THE RESULTANT PROFIT AS BUSINESS INCOME. 4.3.4 THE APPELLANT HAS PLACED RELIANCE ON THE DECI SIONS OF PUNE AND MUMBAI BENCH OF ITAT TO CLAIM THAT THE GAIN RESULTING FROM PMS MUST BE TAXED AS SHORT TERM CAPITAL GAIN ONLY. BUT THE LATEST DECISIONS OF OTHER BENCHES OF ITAT HAVE DEFERRED FROM THE DECISIONS RELIED UPON BY THE APPELLANT. IT MAY BE MENTIONED H ERE THAT IN THE DECISION IN [2010] 40 SOT 566 (AHD.), SAR INVESTMENT (P.) LTD. V. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-8, AHMEDABAD, THE JURISDICTIONAL BENCH OF IT AT HAD REFUSED TO ACCEPT THE ARGUMENT THAT SIMPLY BECAUSE THE ACTIVITY OF SHARE TRADING IS BEING DONE THROUGH PMS OF KOTAK MAHINDRA, HENCE THE RESULTANT INCOME SHOULD B E TREATED AS CAPITAL GAIN. FURTHER, IN FOLLOWING DECISIONS, FACTS OF WHICH ARE IDENTICA L TO THE PRESENT CASE, THE PROFITS EARNED ON ACCOUNT OF TRANSACTIONS DONE THROUGH PMS, HAVE B EEN HELD TO BE BUSINESS INCOME: I) [2012] 18 TAXMANN.COM 20 (DELHI.), IN THE ITAT DELH I BENCH F, RADIALS INTERNATIONAL V. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE 27(1), NEW DELHI. IN THIS DECISION IT HAS BEEN HELD AS FOLLOWS: ITA NO.849/AHD/12 A.Y. 2008-09 (UDAYAN FINSTOCK PV T. LTD. VS. AC IT) 5 --------------------------------------------------- --------------------------------------------------- ----- --------------------------------------------------- ---------------------------------------- II) [2012] 17 TAXMANN.COM 50 (MUM.), IN THE ITAT MUMBAI BENCH B, MAFATLAL FABRICS (P.) LTD. V. DEPUTY COMMISSIONER O F INCOME-TAX, CIRCLE 1(2). --------------------------------------------------- --------------------------------------------------- ----- --------------------------------------------------- ---------------------------------------- 4.3.5 IN THE PRESENT APPEAL, THE APPELLANT HAS CLAI MED TO HAVE MADE INVESTMENTS IN EARLIER YEAR IN SHARES. IT HAS FURTHER CLAIMED THAT THE MONEY RECEIVED ON SALE OF THESE SHARES WERE UTILIZED FOR TRADING IN SHARES THE PROF IT OF WHICH HAS BEEN DECLARED AS BUSINESS INCOME, AND MAKING INVESTMENT IN PMS, PROF IT FROM WHICH IS BEING CLAIMED AS INVESTMENT INCOME. THUS BY UTILIZING THE MONEY FROM THE SAME SOURCE, THE APPELLANT IS TRYING TO DIFFERENTIATE BETWEEN INCOMES EARNED FROM TRADING IN SHARES CARRIED ON BY ITSELF AND THROUGH THE AGENT IN THE FORM OF PMS. BOTH THES E ACTIVITIES HAVE STARTED AT THE SAME TIME AND ALSO THE NATURE OF TRANSACTIONS IN VOLUME AND FREQUENCY IS THE SAME. THE ONLY LOGIC BEING ADVANCED BY THE APPELLANT IS THAT SINCE THE TRADING THROUGH PMS IS NOT BEING DONE BY IT, HENCE THE INCOME FROM THIS IS IN THE NA TURE OF CAPITAL GAIN. AS ALREADY DISCUSSED, THIS LOGIC IS FLAWED AND IS NOT ACCEPTAB LE IN VIEW OF THE FACTS OF THIS CASE. 4.3.6 THE FACTS OF THE DECISIONS MENTIONED ABOVE AR E SIMILAR TO THE FACTS OF THE APPELLANT'S CASE. HENCE, RELYING UPON THESE DECISIO NS IT IS HELD THAT THE INCOME EARNED BY THE APPELLANT FROM PMS ACTIVITIES IS BUSINESS INCOM E. 4.3.7 SO FAR AS SHORT TERM CAPITAL GAIN FROM SHARE TRANSACTIONS ARE CONCERNED, IT IS SEEN THAT THE PURCHASE OF SHARES TOOK PLACE AT AROUND TH E SAME IN TIME FY 2006-07, AT WHICH THE PMS ACTIVITIES IN HSBC ASSETS MANAGEMENT WERE S TARTED BY THE APPELLANT. THESE SHARES HAVE BEEN PURCHASED DURING THE MONTHS OF FEB RUARY AND MARCH 2007 AND SOLD STARTING FROM APRIL 2007. MOREOVER, THE SHARES PURC HASED DURING THE FINANCIAL YEAR 2007-08 AND SOLD HAVE BEEN TREATED AS STOCK IN TRAD E BY THE APPELLANT AND THE RESULTANT INCOME HAS BEEN OFFERED AS BUSINESS INCOME. UNDE R SUCH CIRCUMSTANCES, IT IS CLEAR THAT THESE SHARES WERE ALSO PURCHASED WITH PROFIT MOTIVE ONLY AND NOT TO EARN DIVIDEND INCOME BY MAKING INVESTMENTS. HENCE, THE SHORT TER M CAPITAL GAIN SHOWN BY THE APPELLANT FROM SHARE TRADING IS ALSO HELD TO BE BUS INESS INCOME ONLY AND ACTION OF AO IS UPHELD. 7. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE I S NOW IN APPEAL BEFORE US. 8. BEFORE US, LD. A.R. REITERATED THE SUBMISSIONS M ADE BEFORE LOWER AUTHORITIES AND FURTHER SUBMITTED THAT LD. CIT(A) H AD MAINLY RELIED ON THE DECISION OF DELHI BENCH OF TRIBUNAL IN THE CASE OF RADIALS I NTERNATIONAL VS. ACIT (SUPRA) WHILE DECIDING THE ISSUE AGAINST THE ASSESSEE. HE SUBMITTED THAT THE AFORESAID DECISION OF HONBLE TRIBUNAL WHICH HAS BEEN RELIED UPON BY LD. CIT(A) HAS BEEN ITA NO.849/AHD/12 A.Y. 2008-09 (UDAYAN FINSTOCK PV T. LTD. VS. AC IT) 6 REVERSED BY THE HONBLE DELHI HIGH COURT AND IT IS REPORTED IN [2014] 367 ITR 1 (DEL). HE FURTHER SUBMITTED THAT ON SIMILAR ISSUE, HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. KAPUR INVESTMENTS (P.) LTD. (2015) 61 TAXMANN.COM 91 (KARNATAKA) HAS ALSO FOLLOWED THE AFORESAID DECISIO N OF HONBLE DELHI HIGH COURT. HE, THEREFORE, SUBMITTED THAT IN VIEW OF THE AFORES AID DECISIONS OF HONBLE HIGH COURTS, THE INVESTMENT MADE BY THE ASSESSEE THROUGH PORTFOLIO MANAGEMENT SERVICES (PMS) CANNOT BE TERMED AS BUSINESS OF THE ASSESSEE. LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDERS OF A.O. AND LD. CIT (A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS ABOUT THE TREATMEN T OF PROFITS EARNED ON SALE OF SHARES. WE FIND THAT LD. CIT(A) HAS HELD THAT THE PROFITS EARNED BY ASSESSEE THROUGH PMS SCHEME TO BE BUSINESS INCOME AND FOR TH IS HE MAINLY RELIED ON THE DECISION OF TRIBUNAL IN THE CASE OF RADIALS INTERNA TIONAL (SUPRA). WE FIND THAT THE ABOVE DECISION HAS BEEN REVERSED BY HONBLE DELHI H IGH COURT IN THE CASE OF RADIALS INTERNATIONAL (SUPRA). WE FURTHER FIND THA T THE AFORESAID DECISION OF HONBLE DELHI HIGH COURT HAS BEEN RELIED UPON BY TH E HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS. KAPUR INVESTMENTS (P.) LTD . (SUPRA) WHEREIN THE HONBLE HIGH COURT HAS HELD THAT INVESTMENT THROUGH PORTFOL IO MANAGEMENT SERVICES (PMS) CANNOT BE TERMED AS BUSINESS OF THE ASSESSEE. THE RELEVANT OBSERVATIONS OF HONBLE KARNATAKA HIGH COURT ARE AS UNDER: 10. AS REGARDS THE FIRST QUESTION THAT MERELY BECAUSE O F EMPLOYMENT OF PORTFOLIO MANAGEMENT SERVICE FOR INVESTMENT IN SHARES, THE SA ME WOULD BECOME BUSINESS INCOME, WE ARE OF THE OPINION THAT THE SAID ISSUE HAS BEEN DEALT WITH AT LENGTH BY THE DELHI HIGH COURT IN THE CASE OF RADIALS INTERNATIONAL (SUPRA), WHEREIN, IN SIMILAR FACTS, THE QUESTION HAS BEEN ANSWERED IN FAVOUR OF THE ASSESSEE AND AGA INST THE REVENUE. DETAILED REASONS FOR THE SAME HAVE BEEN GIVEN IN THE SAID JUDGMENT W ITH WHICH WE CONCUR. EVEN OTHERWISE, IT IS ADMITTEDLY NOT A CASE WHERE THE AS SESSEE HAD ENGAGED ITS OWN PERSONS OR HAD A SEPARATE BUSINESS INFRASTRUCTURE TO CARRY OUT ITS SHARE TRANSACTIONS FOR THE PURPOSE OF BUSINESS. IT IS MERELY A CASE WHERE THE ASSESSEE HAS INVESTED FUNDS THROUGH THE PORTFOLIO MANAGEMENT SERVICE. ITA NO.849/AHD/12 A.Y. 2008-09 (UDAYAN FINSTOCK PV T. LTD. VS. AC IT) 7 11. IN OUR OPINION, INVESTMENT THROUGH PORTFOLIO MANAGE MENT SERVICE, WHICH MAY DEAL WITH THE SHARES OF THE ASSESSEE SO AS TO DERIVE MAX IMUM PROFITS CANNOT BE TERMED AS BUSINESS OF THE ASSESSEE BUT WOULD ONLY BE A CASE O F A MORE CAREFUL AND PRUDENT MODE OF INVESTMENT, WHICH HAS BEEN DONE BY THE ASSESSEE. FU NDS WHICH LIE WITH THE ASSESSEE CAN ALWAYS BE INVESTED (FOR EARNING HIGHER RETURNS) IN THE SHARES EITHER DIRECTLY OR THROUGH PROFESSIONALLY MANAGED PORTFOLIO MANAGEMENT SCHEME AND BY DOING SO, IT WOULD NOT MEAN THAT THE ASSESSEE IS CARRYING ON THE BUSINESS OF INVESTMENT IN SHARES. PROFITS FROM SUCH INVESTMENT, EITHER DIRECTLY OR THROUGH PROFESS IONALLY MANAGED FIRM, WOULD STILL REMAIN AS PROFITS TO BE TAXED AS CAPITAL GAINS AS T HE SAME WILL NOT CHANGE THE NATURE OF INVESTMENT, WHICH IS IN SHARES, AND THE LAW PERMITS IT TO BE TAXED AS CAPITAL GAINS AND NOT AS BUSINESS INCOME. 9.1 BEFORE US, REVENUE HAS NOT PLACED ANY CONTRARY BINDING DECISION IN ITS SUPPORT NOR COULD POINT OUT ANY DISTINGUISHING FEAT URE IN THOSE CASES AND THE IMPUGNED CASE. IN VIEW OF THE AFORESAID FACTS AND RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS OF HONBLE HIGH COURTS, WE ARE OF THE VIEW THAT THE PROFIT EARNED BY THE ASSESSEE ON SALE OF SHARES IS TO BE T REATED AS CAPITAL GAINS AND NOT AS BUSINESS INCOME. THUS, THIS GROUND OF ASSESSEE IS ALLOWED. 10. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 08 - 04 - 2016 . SD/- SD/- (KUL BHARAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 08/04/2016 TRUE COPY S K SINHA COPY OF THE ORDER FORWARDED TO:- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD