Appeal allowed: Shares as investments = short term capital gains.

The ITAT Delhi allowed the appeal filed by the assessee, determining that profits from the sale of shares held as investments should be treated as short term capital gains, not business income. The decision aligned with the Bombay High Court ruling in a similar case, considering evidence such as board resolutions, investment register entries, and dividend receipts to establish the nature of the shares. The ITAT Delhi disagreed with the assessing officer and CIT (Appeals), emphasizing the maintenance of separate portfolios for investment and business activities.

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Issues Involved:
Assessment of profits arising on sale of shares as short term capital gain or business income.

Summary:
The assessee, a share broker registered with NSE and BSE, showed income including short term capital gains for the assessment year 2005-06. The assessing officer questioned the classification of short term capital gain as business income, considering the volume and nature of share transactions. The assessee argued that it maintained separate investment and trading portfolios, supported by board resolutions and documentary evidence. The assessing officer, however, concluded that the transactions were in the nature of business.

On appeal, the CIT (Appeals) upheld the assessing officer's decision, citing the totality of facts and circumstances and previous court decisions. The assessee further appealed, presenting evidence of board resolutions, dividend receipts, and details of shares held as investment and stock-in-trade. The assessee relied on court decisions supporting the maintenance of separate portfolios for investment and business activities.

After considering the arguments and evidence, the ITAT Delhi held in favor of the assessee. It noted the board resolutions, investment register entries, and dividend receipts to establish that the shares in question were held as investments, not stock-in-trade. The ITAT Delhi concluded that the profits from the sale of these shares should be treated as short term capital gains, not business income, aligning with the decision of the Bombay High Court in a similar case.

Therefore, the ITAT Delhi allowed the appeal filed by the assessee, deciding that the profits earned on the sale of shares held as investments are assessable under the head of short term capital gains, not business income.

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