Share trading or investment test: long holding patterns supported capital gains treatment over business income.

Share-sale profits were treated as capital gains, not business income, because the assessee's transactions showed investment activity rather than trading. The Commissioner (Appeals) and the Tribunal relied on the extent of shareholding, the volume and frequency of dealings, and the pattern of holding shares for substantial periods. The assessee's conduct was consistent with an investor, and the CBDT circular on distinguishing investment and trading portfolios supported that characterisation. The fact that most shares were held long term, with only a small portion resulting in short-term gain, reinforced the conclusion that the share portfolio was investment-linked.

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Issues: Whether the profit arising from sale of shares was assessable as business income or as capital gains, and whether the assessee was to be treated as an investor rather than a trader in shares.

Analysis: The Commissioner (Appeals) and the Tribunal found, on the facts, that the assessee's share transactions did not show trading activity. The relevant factors considered included the extent of shareholding, the volume and frequency of purchases and sales, and the overall pattern of holding shares for substantial periods. The assessee's conduct was consistent with investment, and the CBDT circular on treatment of investment and trading portfolios supported the distinction between capital gains and business income. The bulk of the shares had been held for a long period, while only a small portion of transactions gave rise to short-term gain.

Conclusion: The assessee was correctly treated as an investor, and the gain from sale of shares was rightly assessed as capital gains and not business income.

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