Share sale profits as capital gains where investment portfolio and holding period support a non-trading character.

Share sale profits were treated as short-term capital gains where the assessee dealt in a limited number of scrips, the holding period supported an investment character, and the facts showed a clear separation between an investment portfolio and trading activity. The analysis accepted that an assessee may maintain separate portfolios for investment and business in share transactions. On that factual pattern, the CBDT circular did not justify recharacterising the entire gain as business income, so the Revenue's challenge failed and the income remained assessable as short-term capital gain.

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Issues: Whether profit from sale and purchase of shares was taxable as short-term capital gain or as business income.

Analysis: The assessee transacted in a limited number of scrips during the year, and the holding period of the relevant shares supported an investment character. The distinction drawn between shares held as investment and shares dealt with as trading stock was accepted on the facts. It was also noted that an assessee may maintain separate portfolios for investment and business in share transactions. The CBDT circular and the factual pattern did not justify recharacterising the entire profit as business income.

Conclusion: The income was correctly assessable as short-term capital gain, not business income, and the Revenue's challenge failed.

Ratio Decidendi: Where the facts show a genuine investment portfolio with sufficient holding period and a discernible separation from trading activity, share sale profits may be assessed as capital gains even if the assessee has also engaged in share trading in other years.

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