Share transaction classification turns on intention and consistency, supporting short-term capital gains over business income.

Surplus from purchase and sale of shares is characterised by the assessee's intention at acquisition and the surrounding facts, not merely by the volume of transactions. Where shares are disclosed as investments in the balance sheet, valued at cost, and derivative profits are separately recorded, the investment character is supported. CBDT Circular No. 4/2007 and Circular No. 6/2016 recognise that shares may be held either as capital assets or stock-in-trade, and the Assessing Officer should generally respect the declared treatment when facts align. Consistent acceptance in earlier years also supports the same classification absent any change in facts or law. On these facts, the surplus was assessable as short-term capital gains, not business income.

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Issues: Whether the surplus from purchase and sale of shares was taxable as short-term capital gains or as business income.

Analysis: The assessee showed the shares as investments in the balance sheet and valued them at cost, while also separately reflecting derivative profit and capital gains. The character of income from share transactions is a fact-specific question, and the controlling consideration is the assessee's intention at the time of acquisition. The Board's circulars, including Circular No. 4/2007 and Circular No. 6/2016, recognize that shares may be held either as capital assets or as stock-in-trade and that the Assessing Officer should generally not disturb the assessee's declared position where the surrounding facts support an investment character. The past assessment history also showed that similar treatment had been accepted in earlier years, and the rule of consistency supported following the settled view in the absence of a change in facts or law.

Conclusion: The surplus from sale of shares was correctly assessable as short-term capital gains and not as business income, and the Revenue's challenge failed.

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