Head of income

Good Afternoon to all,

I have an interesting doubt regarding determining an Income head.Pls read the case and help me to find out the correct procedure.

Case- Mr. A Invested Rs.10,00,000 in different securities through a Portfolio Management Service Provider called M/S B.Mr A recieved  gain from his investment and continued to purchase and sell securities through M/S B, the portfolio manager for a 5 year.On filing Income Tax Mr. A declared his Income under the head Income from business and in P&L Account he shown his capital gain as receipt from sale of investment.I required clarification for the following questions

a) Can we consider Mr. A 's activity as business under Income Tax Act?

b) is it correct to show purchase and sale of security under Income from business ?

c) If it is Capital gain, is there any problem if he show it as capital gain on sixth year since he shown the same as business income in the previous year?

Thanking you all,hope positive response from all 

Replies (1)
Mr.Vishnu, there are various tests which decide whether the income from sale of securities is business income or capital gains for ex. frequency of buy & sell, magnitude of buy & sell, period of holding, treatment in books of accounts etc. These tests have been laid out in case laws. Since in your case it is apparent that you have invested in portfolio through a PMS service provider and continued so for 5 years, in my opinion it cannot be said to be a trading portfolio rather it is a investment portfolio and any gain on investment therefrom shall be treated as capital gain and not business income.

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
Featured 03 October 2026
Accountant

A P Lodha and Associates

Jalna

B.Com

View Details
Company
15 October 2026
Senior Accountant

Continental Belting Pvt Ltd

Mumbai

B.Com

View Details
Company
06 October 2026
Assistant Manager - Audit and Compliance

Ravi K Jain & Co

Noida

Others

View Details
Company
14 October 2026
Accountant

Rize.farm

Bengaluru

B.Com

View Details
Company
23 October 2026
Sr. Accountant

SANKARAN & KRISHNAN

New Delhi

B.Com

View Details
Company
Featured ARTICLESHIP 06 October 2026
Semi Qualified

AJAY SINGH AND CO LLP

Thane

CA Final

View Details
Company
08 October 2026
SALES TELECALLER

HIRE NOVA

Lucknow

Graduate (Any)

View Details
Company
ARTICLESHIP 07 October 2026
Article Assistant

Malhotra Rajesh & Associates

New Delhi

B.Com

View Details