Share sale loss character depends on total facts: trading stock may yield revenue loss, while long-held investment shares may be capital.

Whether loss on sale of shares is capital or trading loss depends on the totality of circumstances, including the assessee's treatment of the shares, the manner of purchase and sale, the period of holding, and the surrounding sale conditions. On the facts noted, loss on sale of S.K.G. Sugar Co. preference shares was treated as a trading loss because the shares were dealt with as stock-in-trade and sold through a broker at market price. By contrast, loss on Bengal Jute Co. preference shares was treated as capital in nature because prolonged holding and the nature of the transaction indicated an investment asset.

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Issues: (i) Whether the loss of Rs. 26,565 on sale of preference shares of S.K.G. Sugar Co. Ltd. was capital loss or a trading loss; (ii) Whether the loss of Rs. 9,470 on sale of preference shares of Bengal Jute Co. Ltd. was capital loss or a trading loss.

Issue (i): Whether the loss of Rs. 26,565 on sale of preference shares of S.K.G. Sugar Co. Ltd. was capital loss or a trading loss.

Analysis: The assessee was a dealer in shares and the shares had been treated as stock-in-trade. They were purchased and sold through a broker, and the sale was at the market price. The length of holding, though relevant, was not ative by itself, and the surrounding circumstances did not justify treating these shares as investment assets.

Conclusion: The loss of Rs. 26,565 was not capital in nature and was allowable as a trading loss, in favour of the assessee.

Issue (ii): Whether the loss of Rs. 9,470 on sale of preference shares of Bengal Jute Co. Ltd. was capital loss or a trading loss.

Analysis: These shares were preference shares held for over 16 years. The prolonged holding period and the nature of the sale transaction supported the inference that they had been locked up as investment rather than dealt with as circulating stock.

Conclusion: The loss of Rs. 9,470 was capital in nature, in favour of the revenue.

Final Conclusion: The reference was answered partly for the assessee and partly for the revenue, with the character of the loss depending on the particular scrip and surrounding facts.

Ratio Decidendi: Whether a share transaction gives rise to capital or revenue loss is a mixed question of law and fact to be decided from the totality of circumstances, including the assessee's treatment of the shares, the manner of dealing, the period of holding, and the sale conditions.

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