Income chargeable under Which Head?

[Asked by Guest]

The assesse is dealing in purchase and sale of shares of various companies. Under which head he is liable to Income tax? Whether he is liable under Capital gains or under Speculative Business.The Assesse is Individual and his main activity is only purchase and sale of Shares.

[DEV KUMAR KOTHARI]

The assesse is  (a) dealing in purchase and sale of shares  (b) of various companies (c) his main activity is only purchase and sale of Shares.

Under which head he is liable to Income tax?   Whether he is liable under Capital gains or under Speculative Business?.

 

Ans.According to the facts given by you the assessee is primarily engaged in share trading, and this is his business and vocation. He is dealing in  shares of various companies. Under these circumstances he can be considered as engaged in share trading activity. Therefore, income falls under the head business income. Dependign on nature of transactions the income will be normal or speculative business income.

However, even a sharetrader can hold share on investment a/c, if the intention is to hold shares some of shares as investment that is as capital asset, then the income from sale fo such investmetns shall be 'capital gains'.

YOu can refer to various articles and judgments referred to therein on these issues.

 

 

  

AI Summary

Characterisation of share trading: trading as business yields business income; some holdings may qualify for capital gains.
When an individual's principal activity is buying and selling shares across various companies, receipts from such disposals are ordinarily business income and may be treated as normal or speculative business income depending on transaction nature; however, shares held on an investment account with intention to retain as capital assets are excluded from business stock-in-trade and their sale is chargeable as capital gains.