At present, there is no specific provision which provides for taxation of PMS income & so it is taxed under the normal provision. Taxation in such cases is a matter of debate, divergent & conflicting views. In general, the principles governing the taxation in case of direct investments will govern the taxation of PMS as well.
Courts have held that transactions carried out by the PMS Manager are in the nature of transactions for maximization of wealth, it could not be said that the main object of holding the portfolio was to make profit by sale of shares during the course of its investment activities.
With this view, profit from PMS can be characterized as “Capital Gain” income.
One can place reliance on the following cases:
- Salil Shah Family P. Trust vs. ACIT [2013] 36 Taxman n 543 (Mumbai ITAT.)