Trustees as share dealers: occasional investment sales did not prove trading intent, so surplus was capital in nature.

Trustees authorised by a will to realise properties and vary investments were not treated as dealers in shares where the evidence showed only occasional sales and limited portfolio adjustments. The Bombay High Court held that sale of some shares within about three years of purchase, without more, did not establish trading activity or an intention to earn business profit. The beneficiary's own share dealings were also found inconclusive. The surplus was therefore capital in nature and not taxable as business income, with the reference answered in favour of the assessee and no error of law found in the Tribunal's conclusion.

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Issues: Whether, on the facts and in the circumstances of the case, the trustees could be treated as dealers in shares for the assessment year 1955-56.

Analysis: The trustees had been empowered by the will to realise the properties and vary the investments in the interests of the trust. The material showed only occasional variations in a few blocks of shares, and the mere fact that some shares were sold within about three years of purchase was not enough to establish trading activity. The circumstances relied upon by the revenue, including the beneficiary's own share dealings, were considered inconclusive and did not compel an inference that the trustees purchased or sold shares with an intention to make profit by way of business.

Conclusion: The trustees could not be treated as dealers in shares, and the surplus was not taxable as business income.

Final Conclusion: The reference was answered against the revenue on the ground that the Tribunal's finding involved no error of law and the surplus was capital gain rather than trading profit.

Ratio Decidendi: Whether share transactions by trustees amount to trading depends on the facts and surrounding circumstances, and mere frequency or periodic realisation of investments does not by itself establish dealing in shares or an intention to earn business profit.

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