INCOME TAX ACT, 1961

Section 14

Head of income - Business income or capital gain - Profit on sale of shares -

Assessee declared short-term capital gain on sale of shares. AO taxed the same as business income on the ground that assessee was engaged in the business of trading in shares and transactions carried out by assessee were voluminous and period of holding was meagre.Held: There is no bar for assessee to maintain two separate portfolios-one for investmenta nd one for trading. A perusal of assessee's personal balance-sheet revealed that majority of investments had been funded out of assessee's own capital. Assessee has earned dividend income of Rs. 34.45 lakhs during impugned assessment year Another pertinent fact to be noted that assessee had income from garment business to the tune of Rs. 47.30 lakhs which would prima-facie, establish that share trading was not the only activity carried out by assessee during the relevant assessment year Apart from this, assessee was also carrying on the business of finance & investment in another proprietorship concern during the relevant year. Also assessee was a conventional investor in shares and securities and gains/loss on shares was alwasy offered under the head capital gains only and the same had always been accepted by revenue in all the earlier years. Further, averate holding period is more than 100 days. Accordingly, profit on sale of shares had to be assessed as capital gain.

Supported by :CIT v. Gopal Purohit (2011) 336 ITR 287 (Bom) : 2010 TaxPub(DT) 1272 (Bom-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12 & 2012-13

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