Genuine share transactions support capital gains treatment; suspicion alone cannot reclassify sale proceeds as business income.
Share-sale income is treated as capital gains where the transactions are genuine. The CBDT circular accepts an assessee's declared treatment of listed shares in appropriate cases and requires that treatment to be respected, but it does not protect bogus or sham dealings. Here, the Revenue relied on suspicion about price movements and trading pattern, without proving that the share transactions lacked genuineness. The income was therefore rightly assessed as capital gains and not business income, and the capital-gains treatment was sustained.
Issues: Whether income arising from sale of shares was to be assessed as capital gains or business income.
Analysis: The dispute turned on the character of the share transactions. The CBDT circular governing such cases accepts the assessee's treatment of listed shares as capital gains in appropriate cases and also recognises that the declared treatment should ordinarily be respected. The circular, however, excludes transactions where the genuineness of the share dealings themselves is questionable, such as bogus claims or sham transactions. On the facts, the Revenue's objection rested on suspicion regarding price movements and trading pattern, but not on proof that the transactions were sham or otherwise lacking genuineness.
Conclusion: The income from sale of shares was rightly treated as capital gains and not business income.
Final Conclusion: The Revenue's challenge failed, and the Tribunal's view treating the share-sale income as capital gains was left undisturbed.
Ratio Decidendi: Where share transactions are not shown to be sham or otherwise lacking genuineness, the assessee's treatment of the resultant income in accordance with the CBDT circular governing share transactions should be accepted and cannot be displaced merely on suspicion.
TaxTMI 
AI Drafter ✕
TaxTMI 
