In the matter of CIT Versus NIRAJ AMIDHAR SURTI [2010 -TMI - 78205 - GUJARAT HIGH COURT], it is held that,

Merely because the shares had been purchased from borrowed funds obtained on high rate of interest would not change the nature of the transaction from investment to one in the nature of an "adventure in the nature of trade".

While decided an appeal in favor of assessee by rejecting the appeal filed by revenue, Gugarat High Court has relied upon the following decisions of the apex court:

Khan Bahadur Ahmed Alladin & Sons v. Commissioner of Income Tax, Andhra Pradesh, [1967 -TMI - 5081 - SUPREME Court],  wherein it was held that:

"The question as to whether the transaction is an adventure in the nature of trade must be decided on a consideration of all the relevant facts and circumstances which are proved in a particular case. The answer to the question does not depend upon the application of any abstract rule, principle or formula but must depend upon the total impression and effect of all the relevant facts and circumstances established in the particular case."

Commissioner of Income Tax, Nagpur v. M/s Sutlej Cotton Mills Supply Agency Ltd., [1975 -TMI - 6449 - SUPREME Court], wherein it was held that:

"that a capital investment and resale do not lose their capital nature merely because the resale was foreseen and contemplated when the investment was made and the possibility of enhanced values motivated the investment."

Nature of share-sale transactions: borrowing funds does not convert an investment into trading; classification depends on total facts. Determination whether a sale of shares is of capital nature or an adventure in the nature of trade depends on the totality of proved facts and circumstances rather than any abstract rule. High-cost borrowed funds used to purchase shares do not by themselves convert an investment into trading, and a resale contemplated at the time of purchase does not automatically negate the capital character; the overall factual impression and motives evidenced by surrounding circumstances govern the classification.