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2015 (8) TMI 618
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....t year 1992-93 wherein the Revenue has considered the transaction of shares by appellant as "adventure in the nature of trade" instead of "income from capital gain" and have taxed appellant accordingly. 3. This Court, when admitted appeal, formulated following two substantial questions of law to adjudicate this appeal: "1. Whether the appellant has derived "capital gain" on sale of shares and not "business income" as determined by the Tribunal? 2. Whether, the Tribunal has committed itself to perversity while concluding that the income of the appellant is "business income"?" 4. For the Assessment Year 1992-93, appellant-Assessee submitted return declaring income of Rs. 2,86,798/-. The Assessee disclosed profit on share transacti....
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....t Assessee has actually invested in shares but the investment having gone some times for change of shares of one company to another and that is how there were certain transactions of sale and purchase but this fact by itself would not justify an inference that Assessee was doing business in sale and purchase of shares and earned income therefrom. It is submitted that investment in share and movement of stock by changing from one company to another is a part of prudent investment and unless volume and period of transactions are such which may justify a short term regular transaction feature, mere fact that more than one such transactions have taken place, the same will not partake nature of business, hence the view taken by Revenue is clearl....
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....icult to decide whether a given transaction is an adventure in the nature of trade or not but there are cases where line of distinct is thin. Several factors are to be taken into account to come to a definite conclusion for determining character of transaction such as; (1) nature of commodity purchased and resold; and, (2) in what quantity was it purchased and resold ? If the commodity purchased is generally subject-matter of trade, and if it is purchased in very large quantities, it would tend to eliminate the possibility of investment for personal use, possession or enjoyment. 12. The Court referred to decision in Cayzer, Irvine and Co. Ltd. Vs. Commissioner of Inland Revenue (1942) 24 Tax Cases 491, where the land was purchased and su....
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....adily be inferred. A similar inference would arise where a commodity is purchased and sub-divided, altered, treated or repaired and sold, or is converted into a different commodity and then sold. Magnitude of transaction of purchase, the nature of the commodity, subsequent dealings and the manner of disposal may be such that the transaction may be stamped with the character of a trading venture. 16. A somewhat similar issue came up in Commissioner of Income-Tax, Bombay Vs. H. Holck Larsen (1986) 160 ITR 67 (SC). The Court considered the question "whether in respect to certain transactions between the years 1957 to 1959 the Assessee was a Dealer or an investor and whether income arising from sale and purchase by Assessee is to be taxed on....
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....ole operation show that the first step - the purchase of the shares - was not taken as, or in the course of, a trading transaction. The Court referred to its earlier decision in Rannarain Sons Pvt. Ltd. Vs. Commissioner of Income Tax, Bombay (1961) 41 ITR 534 (SC) and said that in considering whether the transaction was or was not an adventure in the nature of trade, the problem must be approached in the light of intention of Assessee having regard to legal requirements which were associated with the concept of trade or business. A mere profit motive in entering into transaction was not decisive, for an accretion to capital did not become taxable income merely because an asset was acquired in the expectation that it might be sold at a profi....
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....invest his capital in shares with the intention to resell these if in future their sale bring in a higher price. Such an investment, though motivated by a possibility of enhanced value, did not necessarily render the investment a transaction in the nature of trade." 18. Having said so, the Court said that totality of all the facts have to be borne in mind and the correct legal principle have to be applied. This question is clearly a mixed question of law and fact, therefore, reasons assigned by Tribunal have to be looked into. 19. The Tribunal has recorded a finding that in the present case, Assessee's main source of income is from share transaction. His income from interest is only Rs. 4158/-. Further during the year of assessmen....