IPO share flipping treated as business income where repeated quick sales showed trading intent over investment intent.

Short-term gains from shares allotted in initial public offers were treated as business income because the assessee applied for multiple allotments and sold the shares within a very brief period, often within 3 to 10 days and never beyond 30 days. The recurring quick turnover, frequency of transactions, and immediate sale after allotment showed a trading motive rather than investment intent. Maintaining the shares in an investment portfolio and prior-year treatment did not override the surrounding facts. The material therefore supported characterisation of the activity as share trading, not capital investment.

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Issues: Whether the short-term gains from sale of shares allotted in initial public offers were assessable as capital gains or as business income.

Analysis: The assessee had applied for shares in several companies, received allotments, and sold the shares within a very short period, mostly within 3 to 10 days and in no case beyond 30 days. The surrounding circumstances, including the frequency of transactions and the immediate sale after allotment, showed that the dominant intention was not to hold the shares as investments but to trade in them. The maintaining of shares in the investment portfolio and the treatment adopted in earlier years did not outweigh the factual pattern of repeated, quick turnover transactions. The material on record supported the finding that the activity had the character of share trading rather than investment.

Conclusion: The short-term gains were rightly treated as business income and not as capital gains.

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