Distinction between shares held as stock-in-trade and shares held as investment - tests for such a distinction

Classification of shares as investment or stock-in-trade governs whether receipts are capital gains or business income for assessment.

Distinction between holdings of shares as capital asset and as stock-in-trade determines whether receipts are taxed as capital gains or as business income. Assessing officers should examine books of account (valuation and year-end classification), magnitude and pattern of purchases and sales, the ratio between purchases, sales and holding, and the taxpayer's motive. No single test is decisive; conclusions must follow the totality of circumstances. Taxpayers may maintain separate investment and trading portfolios and may have income under both heads accordingly.