Share transactions treated as capital gains where separate investment portfolios and delivery-based dealings showed investment intent.

Shares kept in a separate investment portfolio and reflected as investments in the balance sheet were treated as investment assets rather than trading stock. Because the transactions were largely delivery-based and the gains arose from shares held for more than five months, with long-term gains from holdings exceeding one year, the volume or frequency of transactions was not decisive by itself. The character of the income was determined by the intention at acquisition and the consistent treatment of the holdings. On that basis, the share profits were accepted as short-term capital gains and long-term capital gains, not business income.

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Issues: Whether the profit from share transactions was assessable as business income or as short-term capital gains and long-term capital gains.

Analysis: The assessee had shown shares as investments in the balance sheet, maintained separate investment and trading portfolios, and the majority of the transactions were delivery-based. A substantial portion of the gains arose from shares held for more than five months, and the long-term gains arose from shares held for more than one year. The mere volume or frequency of transactions was held not to be ant by itself. Applying the principle that the nature of income depends on the intention at the time of purchase and on the consistency of the treatment of the holdings, the delivery-based transactions were treated as investment transactions.

Conclusion: The claim that the share profits were taxable as short-term capital gains and long-term capital gains was accepted, and not as business income.

Ratio Decidendi: Where shares are held in separate investment portfolios and the transactions are delivery-based, the character of the income is determined by the intention at acquisition and the overall treatment of the holdings, not merely by the volume or frequency of purchases and sales.

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