Rule of consistency upheld for share investments, with sale proceeds taxed as short-term capital gains rather than business income.

Shares were treated as investment assets rather than trading stock because the assessee consistently reflected them in the balance sheet as investments and not as stock-in-trade. The facts were found to be the same as in the immediately preceding assessment year, where the same treatment had been accepted, and the Revenue brought no distinguishing feature on record. Applying the rule of consistency, the holdings were accepted as investment in nature. The gains on sale of shares were therefore assessable as short-term capital gains and not as business income.

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Issues: Whether short-term gains arising from sale of shares were to be assessed as short-term capital gains or as business income.

Analysis: The assessee had consistently shown shares as investments in the balance sheet and not as stock-in-trade. The facts were found to be similar to the immediately preceding assessment year, in which the same treatment had been upheld. No distinguishing feature was brought on record by the Revenue. In these circumstances, the rule of consistency was applied and the nature of the holdings was accepted as investment rather than trading stock.

Conclusion: The gains from sale of shares were correctly assessed as short-term capital gains and not as business income, in favour of the assessee.

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