Share-sale gains depend on investment intent, while a claimed gift needs proof of donor capacity and source of funds.

Share-sale surplus is characterised by the assessee's intention and surrounding circumstances: where shares are held for a substantial period, routed through the stock exchange, and treated as investment rather than stock-in-trade, the profit is taxable as capital gains. A claimed gift, however, must be proved by the donor's identity, creditworthiness, and source of funds; where those elements are not satisfactorily established, the receipt may be treated as unexplained income. Interest follows the tax consequence of the assessed income, so the consequential levy is sustained where the underlying addition survives.

---

---

Issues: (i) Whether profit from sale of shares of Mawana Sugars Ltd. was assessable as business income or as capital gains. (ii) Whether the amount of Rs. 7.92 crores received from the assessee's mother was a genuine gift or an unexplained investment liable to tax. (iii) Whether interest under section 234B was leviable.

Issue (i): Whether profit from sale of shares of Mawana Sugars Ltd. was assessable as business income or as capital gains.

Analysis: The assessee held the shares for a substantial period, the transactions were through stock exchange, and the record did not establish frequent or regular trading in shares of the same company. The surrounding circumstances, the assessee's conduct, and the treatment of the shares as investment supported the view that the dominant intention was to hold them as capital assets rather than stock-in-trade. The circulars of the Board and the judicial principle that the character of share transactions depends on intention and surrounding facts supported this conclusion.

Conclusion: The profit on sale of shares was rightly assessable as capital gains and not as business income, in favour of the assessee.

Issue (ii): Whether the amount of Rs. 7.92 crores received from the assessee's mother was a genuine gift or an unexplained investment liable to tax.

Analysis: The assessee failed to establish the donor's creditworthiness and the real source of the remittance. The documents produced did not satisfactorily prove that the amount originated from the donor's own funds, and the bank advice did not disclose the remitter with sufficient clarity. On the facts, the explanation of gift was not proved to the satisfaction of the tax authorities, and the burden of proof remained undischarged by the assessee.

Conclusion: The addition of Rs. 7.92 crores was correctly sustained as unexplained income, against the assessee.

Issue (iii): Whether interest under section 234B was leviable.

Analysis: The levy followed the tax consequence of the assessed income.

Conclusion: The levy of interest was upheld, against the assessee.

Final Conclusion: The assessee succeeded on the character of share-sale surplus, but failed on the gift addition and the consequential interest, and both appeals were ultimately dismissed.

Ratio Decidendi: The character of share-sale surplus is determined by the assessee's intention and surrounding circumstances, while a claimed gift must be supported by proof of the donor's identity, creditworthiness, and source of funds.

---