Listed equity shares held as long-term investment are assessable as capital gains, not business income, on transfer.

Income from transfer of listed equity shares held as long-term investment was treated as long term capital gain and not business income. The Court relied on the prolonged holding period of more than 16 years, which indicated investment character rather than trading activity, and noted CBDT Circular No. 6 of 2016 read with Circular No. 4 of 2009, under which listed shares held for more than 12 months before transfer are generally to be assessed as capital gains to reduce litigation. The transfer was therefore correctly assessed as capital gains in favour of the assessee.

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Issues: Whether income from sale of equity shares held as long-term investment and traded through recognised stock exchange was assessable as business income or as long term capital gain.

Analysis: The equity shares had been held by the assessee since 1988-89 and were retained for more than 16 years before transfer, which showed them to be long-term investments. The shares were listed shares transferable through a recognised stock exchange. The Court also noticed CBDT Circular No. 6 of 2016, which, referring to Circular No. 4 of 2009, stated that listed shares held for more than 12 months immediately preceding transfer should generally be treated as giving rise to capital gains in order to reduce litigation.

Conclusion: The income from transfer of the equity shares was rightly treated as long term capital gain and not business income, in favour of the assessee.

Ratio Decidendi: Where listed equity shares are held as long-term investment for a period well beyond the prescribed holding period, the gain on their transfer is to be assessed as capital gain and not as business income.

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