The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the profit earned from the sale of mutual fund would be taxable as capital gain and not business income under the Income Tax Act.
The assessee is engaged in the business of trading in securities, derivatives and professional income. He also derived salary. The assessee has also shown capital gain.
During the year under consideration, the assessee has shown capital gain of Rs. 26953746/- arising out of the sale of mutual funds in one AMC in four different schemes and claimed the same under the head capital gains. The Assessing Officer noted that the holding period of the mutual funds were from 72 days to 186 days and the assessee is engaged in the business of trading and investment in shares and mutual funds. He was of the opinion that the income must be taxable as business income.
On appeal, the first appellate authority held in favour of the assessee.
While dismissing the departmental appeal, the Tribunal observed that the assessee has made an investment in one AMC of DSP Balck Rock fund in four different schemes.
“The holding period of the assessee is minimum of 72 days and maximum of 186 days in the four schemes. The assessee contended before the ld CIT(A) that these are the only four transactions during the year. Magnitude of the investment coupled with the volume is also not much. The ld CIT(A) relying on the decision of the BS Raju Vs. Addll. CIT held that same is capital gain. He further held that in case of mutual fund the assessee does not have any control on the manner in which further investment have been made. Further, in case of the assessee, in earlier years the revenue has accepted the claim of the assessee as capital gain or loss. There is no change shown to us in the facts of the case this year. In this year only there is a change in the stand of the revenue. The ld CIT(A) has also followed the principle of consistency. On reading of the order of the ld CIT(A) we do not find any infirmity in holding profit of sale of mutual fund earned by the assessee as chargeable to tax under the head capital gain and not as business income,” the Tribunal said.
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