Portfolio management share gains treated as capital gains where facts did not show a trading motive.

Short-term gains from share transactions routed through a discretionary portfolio management scheme were treated as capital gains where the assessee had invested surplus funds, disclosed the holdings as investments, and the overall facts did not show the usual incidents of share trading. The portfolio manager executed the transactions, but volume, frequency, and computer-based trade entries, taken alone, were insufficient to establish a trading motive. On the totality of circumstances, the gains could not be characterised as business income merely because of the form or number of transactions.

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Issues: Whether the short-term gain arising from share transactions routed through a Portfolio Management Scheme was assessable as business income or as capital gains.

Analysis: The assessee had invested surplus funds in shares and securities through a discretionary portfolio manager and disclosed the holdings as investments. The transactions were carried out by the portfolio manager, and the overall facts did not show the usual incidents of trading in shares. The volume and frequency of transactions, viewed in the context of computer-based trade entries and the nature of the scheme, did not establish a trading motive. On the totality of circumstances, the gains could not be characterized as business income merely because of the transactions' form or number.

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

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