EQUITY INTELLIGENCE INDIA PRIVATE LIMITED Vs. DEPUTY COMMISSIONER OF INCOME TAX CORPORATE CIR 1(1), KOCHI

JUDGEMENT

(1.) The petitioner, a Company registered under the Companies Act, is a "Portfolio Manager" as defined under the Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993. The petitioner Company invests surplus funds from its principal business of Portfolio Management in equities of Indian Companies, apart from parking the funds in bank accounts. The 1st respondent issued a notice under Sec. 143(2) of the Income Tax Act, 1961 (for short, 'the Act') asking the petitioner Company to explain why profit on sale of shares should not be treated as business income. In response to the said notice, the authorised representative of the petitioner Company appeared before the 1st respondent and relying on Circular Nos.4/2007 and 6/2016 dtd. 29/2/2016 issued by the Central Board of Direct Taxes (CBDT) contended that the profit on sale of shares is capital gain. Clauses (a) and (b) of paragraph No.3 of Circular No.6/2016 (Ext. P3) are extracted hereunder:-

(2.) Relying on the said clauses, it was contended that the income sale of listed shares sold after holding them for more than 12 months amounting to Rs.3,08,67,375.00 should be assessed as long term capital gains and should not be treated as business profit.

(3.) The 1st respondent passed Ext.P2 assessment order wherein the 1st respondent took a stand that the short term capital gains of Rs.1,43,14,697.00 and long term capital gains of Rs.3,08,67,375.00 earned by the petitioner Company from the sale of listed equity shares of Indian Companies should be treated as Business Profit and not Capital Gain.