Separate investment and trading portfolios support capital gains treatment for share transactions, not business income.

Where an assessee maintains distinct investment and trading portfolios, gains from shares held in the investment portfolio are taxable as capital gains and not as business income. The CBDT circular recognised that separate portfolios may be maintained and may give rise to income under different heads. On the facts, separate investment and trading accounts, demat and bank accounts, together with the revenue's accepted past treatment, supported the finding that the disputed shares belonged to the investment portfolio. The Tribunal's view was upheld and the revenue's challenge failed.

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Issues: Whether shares held in an investment portfolio could yield capital gains, notwithstanding the assessee also maintaining a separate trading portfolio, and whether the Assessing Officer was justified in treating such gains as business income.

Analysis: The circular of the CBDT recognised that a taxpayer may maintain two portfolios, one for investment and another for trading, and that income from the two portfolios may fall under different heads. On the facts, the assessee had maintained separate investment and trading accounts, separate demat and bank accounts, and the accepted past practice showed that the revenue had earlier treated the two activities distinctly. The gains in question were found to have arisen from the investment portfolio and not from the trading portfolio.

Conclusion: The gains were rightly assessable as capital gains and not as business income; no interference with the Tribunal's view was warranted.

Final Conclusion: The revenue's challenge failed because the factual finding that the disputed shares belonged to the investment portfolio was upheld, leaving no substantial question of law for consideration.

Ratio Decidendi: Where an assessee maintains distinct investment and trading portfolios and the disputed transactions are found to arise from the investment portfolio, the resulting gains are taxable as capital gains and not as business income.

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