Share sale gains from investment portfolio treated as short-term capital gains, not business income, on delivery-based facts

Profit from sale of shares held as investment was assessable as short-term capital gains where the assessee invested mainly through IPOs, held shares for a reasonable period, earned dividend income, and dealt only in delivery-based transactions. A profit motive by itself was not decisive for treating the activity as business income, and the record supported the existence of separate investment and trading portfolios. On those facts, the impugned gains arose from investment transactions rather than organised share trading, so they were correctly assessed as short-term capital gains and not as business income.

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Issues: Whether the profit arising from sale of shares held as investment was to be assessed as short-term capital gains or as business income.

Analysis: The assessee had invested in shares and securities, mainly through initial public offerings, held the shares for a reasonable period, earned dividend income, and carried out only delivery-based transactions. The presence of a profit motive by itself was held not to be decisive for treating share transactions as business activity. The facts also supported the view that an assessee may maintain separate investment and trading portfolios, and the material on record showed that the impugned gains arose from investment transactions rather than organised share trading.

Conclusion: The profit on sale of the shares was correctly assessed as short-term capital gains and not as business income.

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