Share transactions treated as investment income where intention, delivery-based dealings and separate portfolios supported capital gains treatment.

Profit from share transactions was treated as capital gains from investment activity, not business income, because the determining factor was the assessee's intention at the time of acquisition and holding, assessed from surrounding facts and conduct. The Tribunal relied on delivery-based dealings, separate treatment of share transactions from other business activities, use of own funds, receipt of dividend, and maintenance of separate portfolios. It also noted that the number of scrips or transaction frequency alone was insufficient to establish trading activity, and it did not accept the lower authorities' emphasis on dividend and average holding period. The resultant income was therefore not assessable as business income.

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Issues: Whether the profit from sale and purchase of shares was assessable as business income or as capital gains arising from investment activity.

Analysis: The decisive test was the intention with which the shares were acquired and held, to be gathered from the surrounding facts and conduct. The assessee maintained separate treatment for share transactions and other business activities, and the share dealings were delivery-based. The Tribunal noted that the number of scrips and transactions, the holding periods, the receipt of dividend, the use of own funds, and the maintenance of separate portfolios supported the assessee's claim of investment. The frequency of transactions by itself was held to be insufficient to conclude trading activity, and the observations of the lower authorities on dividend and average holding period were not accepted.

Conclusion: The share transactions were held to be investment transactions and the resultant income was not assessable as business income.

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