SHRI HARSH S. SHAH,,AHMEDABAD vs. THE DY.CIT, CIRCLE-10,, AHMEDABAD

The assessee has raised the following grounds of appeal:-

On the facts and circumstances of the case and in law the learned CIT(A) erred in holding that use of Portfolio Management Service of HDFC for share transactions is to earn the business income.”

In this case, return of income declaring income of Rs. 24,77,375/- was filed on 26th July, 2010. Subsequently, the case was selected under scrutiny by issuing of notice u/s. 143(2) of the act on 27th July, 2011. The assessee was engaged in the activity of purchase and sale of land and trading of shares and securities. During the course of assessment proceedings, the assessing officer noticed that assessee’s business income consists of Rs. 1,06,327/- as income from speculation and Rs. 6,16,1291/- as income from Frangipani art and further the assessee has earned income of Rs. 84,81,597/- from the sale and purchase of shares. The assessing officer observed that assessee had shown the same under the short term capital gain and set off the brought forward loss of Rs. 71,35,047/-. The assessing officer further observed that the income arose from share transactions should have been considered under the business held instead of capital gain. There were 2287 transactions undertaken by the assessee during the financial year relevant to the assessment year and the amount involved was Rs. 639162754/- on which the assessee had shown capital gain of Rs. 84,81,597/-. He further observed that assessee was carrying out business of purchase and sale of shares and mutual funds and the I.T.A No. 991/Ahd/2014 A.Y. 2010-11 Page No 3 Therefore,the assessing officer has assessed the short term capital gain of Rs. 8481597/- as income from business out of share trading activity.

Aggrieved against the decision of the assessing officer, the assessee preferred appeal before the ld. CIT(A) who has sustained the addition made by the assessing officer by observing as under:- “3.2 I have carefully considered the facts of the case and the submissions made by the appellant. In this regard, it is seen that Hon'ble juri ictional Tribunal in the case of Dr Ajay Ranka (ITA No 3302/Ahd/2009) and Seema Ranka (ITA No 3301/And/2009) have held that transactions under the PMS Scheme are to be treated as business transactions. In these cited orders, Hon'ble Tribunal have followed their decision in ITA No 4517/Ahd/2007 wherein it was held that transactions under the PMS Scheme are to be treated as business transactions. Further, Hon'ble ITAT Delhi in the case of M/s. Radial International ITA No 1368/Delhi/2010 for A Y_2006-07 have held that PMS transactions are to be treated as business income. Similarly, Hon;ble ITAT, Hyderabad in the case of Anilkumar Jain ITA No 163 & 164/Hyd/2011 for A Y 2007-08 & Hon'ble ITAT, Indore in the case of Shri Anurag Vijay Vargaya ITA No 122/lnd/2010 for AY 2006-07 have concluded that PMS transactions are business transactions of the appellant and. income thereupon is a business income. The facts of the case present in the appeal have been compared with the facts of the case as available in the impugned decisions of Hon;ble Tribunals and it has been found that the same are more or less identical. Perusal of the decisions of the Hon'ble Tribunals indicate that all the Hon'ble Tribunals

During the course of appellate proceedings before us, the ld. counsel has furnished the paper book containing written submission, statement of total income, balance sheet and judicial pronouncements etc. He contended that he ld. CIT(A) has erred in holding the purchase and sale of shares as business activity and treating the gain earned as business income in trading of share. On the other hand ld. departmental representative has supported the order of the ld. CIT(A).

We have heard both the sides and pursed the material on record carefully. We noticed that the assessing officer has assessed the short term capital gain shown by the assessee as business income and held that assessee was not entitled for set off of brought forward loss on the ground that the transaction of purchase and sale of shares and securities were carried out through the portfolio management services (PMS). We observed from the balance sheet of the assessee that during the year under consideration the assessee has shown the purchase and sale of shares and securities as investment under the head HDFC Asset Management. We have I.T.A No. 991/Ahd/2014 A.Y. 2010-11 Page No 5 ACIT v. Sachin R. Tendulkar in ITA No. 3217/Mum/2014 (ii) CIT v. Kapoor Investment Pvt. Ltd. (2015) 234 taxmann. 149(Karnatka) (iii) Udayan Finstock Pvt. Ltd. v ITAT D Bench Ahmedabad ITA No. 849/Ahd/2012 (iv) ACIT v. Darshan Naranbhai Patel ITA No. 2374/Ahd/2012 (v) Dr. Jaikumar Chmanlal Shah v DCIT (2016) 47 CCH 186/Ahd/Trib.

In the result, the appeal of the assessee is allowed.