Share transaction loss depends on intention and surrounding facts, with supported trading findings treated as deductible.

Whether a loss on share transactions is trading or capital in nature depends on the assessee's intention, as shown by surrounding facts and conduct. On the stated facts, borrowed funds, the pattern of purchases and sales, and the overall course of dealing were treated as indicators of share trading rather than investment or acquisition of a capital asset to preserve control. The Tribunal's finding was supported by material on record, and the High Court noted that such a mixed question would not be disturbed unless perverse or unsupported by evidence. Transfer charges were treated on the same footing as the share dealings and characterised as revenue expenditure.

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Issues: Whether the assessee's losses on the Khardah Co. Ltd. shares were trading losses allowable in computing business income, and whether the share transfer charges were revenue expenditure.

Analysis: The dominant inquiry was the assessee's intention in acquiring and dealing with the shares, to be gathered from the surrounding circumstances and conduct. The Tribunal found that the transactions were part of share dealing and not a mere investment or acquisition of a capital asset to preserve control, and that the finding was supported by material on record. The acquisition by borrowed funds, the pattern of purchases and sales, and the overall conduct of the assessee were treated as consistent with trading activity. The court held that the Tribunal had applied the correct legal principle and that its conclusion was not perverse or unsupported by evidence. The claim to transfer charges was not separately pressed and stood with the same characterisation of the share transactions.

Conclusion: The losses were held to be business losses, and the transfer charges were allowable as revenue expenditure; both questions were answered against the Revenue and in favour of the assessee.

Final Conclusion: The reference was decided by upholding the Tribunal's view that the share transactions were entered into as part of a trading activity, so the resultant losses and incidental transfer charges were deductible.

Ratio Decidendi: Whether a loss on share transactions is trading or capital in nature depends on the assessee's intention as evidenced by the surrounding facts, and the High Court will not interfere with a Tribunal's supported finding on that mixed question unless it is perverse or evidence.

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