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The Tax Publishers Udayan Finstock (P) Ltd. v. Asstt. CIT [ITA No. 849/Ahd/2012, dt. 8-4-2016] : 2016 TaxPub(DT) 2185 (Ahd-Trib) PMS scheme whether business income or capital gains *Facts:* Assessee investment company, had sold some shares and invested the said corpus using portfolio management services. The assessing officer read the PMS investments as business income as against capital gains as reported by the assessee. Commissioner (Appeals) upheld the same. On appeal: Held in favour of the assessee that PMS earnings weas capital gains. 11. In our opinion, investment through Portfolio Management Service, which may deal with the shares of the assessee so as to derive maximum profits cannot be termed as business of the assessee but would only be a case of a more careful and prudent mode of investment, which has been done by the assessee. Funds 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 professionally managed firm, would still remain as profits to be taxed as capital gains as the 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."

The Tax Publishers

Udayan Finstock (P) Ltd. v. Asstt. CIT [ITA No. 849/Ahd/2012, dt. 8-4-2016] : 2016 TaxPub(DT) 2185 (Ahd-Trib)

PMS scheme whether business income or capital gains

Facts:

Assessee investment company, had sold some shares and invested the said corpus using portfolio management services. The assessing officer read the PMS investments as business income as against capital gains as reported by the assessee. Commissioner (Appeals) upheld the same. On appeal:

Held in favour of the assessee that PMS earnings weas capital gains.

11. In our opinion, investment through Portfolio Management Service, which may deal with the shares of the assessee so as to derive maximum profits cannot be termed as business of the assessee but would only be a case of a more careful and prudent mode of investment, which has been done by the assessee. Funds 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 professionally managed firm, would still remain as profits to be taxed as capital gains as the 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."