Intention at acquisition determines capital character of share disposals; sales made to secure control produce capital gains outcome.

Characterisation of gains from share disposals depends on the intention at acquisition: where purchases were made pursuant to board resolutions and on terms indicating an objective to secure managing agency/control, subsequent resale profits are incidental to that capital objective and not trading receipts. Short holding periods do not by themselves convert capital transactions into business profits; documentary evidence (resolutions, correspondence, pricing, prior conduct) may establish primary object. Applying that principle to the disputed transactions, the facts showed acquisition aimed at managing agency and control, and the realised gains were therefore held to be capital gains in favour of the assessee.

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Issues: Whether the Tribunal correctly held that the profits of Rs. 52,075 and Rs. 29,035 arising from sale of shares in the assessment years 1953-54 and 1954-55 were capital gains and not trading (business) profits.

Analysis: The company's memorandum empowered it both to act as managing agents and to buy and deal in shares. For each disputed transaction the board of directors passed resolutions stating the objective of acquiring the managing agency of the target companies; the purchases were made pursuant to those resolutions and at prices and on terms indicative of an intention to secure control rather than to trade for business profit. Documentary evidence (board minutes and correspondence) showed that, in each case, subsequent events (inability to obtain control in one case; discovery of mismanagement and associated risk in the other) caused the company to sell the holdings. The short holding period was held not to be decisive: what matters is the intention at acquisition and the reasons for the sale. The Tribunal and Appellate Assistant Commissioner weighed the circumstances (resolutions, prices paid, prior conduct in acquiring managing agencies, correspondence, press reports) and found the primary object was acquisition of managing agency; any profit on resale was incidental to that capital-object and not trading. The court accepted that the question is a mixed question of law and fact but held the findings of intention and the consequent characterisation as capital were the only proper conclusion on the facts.

Conclusion: The profits of Rs. 52,075 and Rs. 29,035 are capital gains (in favour of the assessee).

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