TaxTMI 
TaxTMI 
1993 (8) TMI 98
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....ture on 27th Oct., 1980 and on maturity the holders of the bonds were to get gold in lieu of the bonds. The purchases were made through a number of brokers and whereas C. Manjesh used the funds of Jayalaxmi Trust to the extent of about Rs. 4 lakhs for making the purchases, the other three assessees, on the other hand, used both the funds of the said trust (by way of loans) and also borrowed from banks and thus made the purchases of the Gold Bonds. It is an admitted fact that thereby they undertook the liability to pay interest to the bank at the market rate and also to the trust. Three of the assessees, excepting C. Manjesh sold away the major portion of the Gold Bonds a few days/weeks before the maturity date of the Gold Bonds and made handsome profit. The balance out of the Gold Bonds purchased by them was converted by them into gold which was also sold by them ultimately, within a short-time from the date of maturity. C. Manjesh, on the other hand, sold away his entire holding of Gold Bonds before the maturity of the same. It was admitted by the representative of all the assessees, during the course of the hearing of these appeals before us that actually the father of the assess....
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.... had been purchased from out of the funds of the trust and, therefore, they should have been treated at par with the other income of the trust and taxable income, if any, thereof should have been brought to tax only in the hands of the trustees as the choice had been exercised by the ITO and there was no option left in him to bring to tax the said income in the hands of the beneficiaries. 5.1 This particular ground is clearly related to the earlier one. As cited by us in the preceding paragraph, the Department actually chose to assess the share of income of the beneficiaries from the trust directly in their hands. So far as the issue relating to the purchase of the Gold Bonds from out of the funds of the trust is concerned, it is required to be stated that the beneficiaries simply borrowed funds from the trust on payment of interest and hence whatever profit accrues to them out of the borrowed funds, are clearly assessable in their hands only and not in the hands of the trustees. Three out of the four assessees again utilised bank loans also, in addition to the trust funds, for indulging in purchase of the Gold Bonds. 6. The next ground actually belongs to the main issue namely....
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....of the Gold Bonds, from the trust as well as from banks at market rates of interest, that the purchases and sales were made in regular business-like manner through brokers and also the proximity in time between the dates of purchases and sales strongly suggest speculative tendency on the part of the assessees. On these considerations, he argued that the transactions should be considered as business transactions or at least transactions related to adventures in the nature of trade. About the point raised by the counsel of the assessees that the income out of the borrowed funds from the trust should have been assessed in the hands of the trust, he argued that this particular contention does not hold much away inasmuch as the assessees themselves had showed profits out of the transactions in their own returns of income as exempted income and that this particular issue was taken up for the first time only before the CIT(A). The Departmental Representative also placed strong reliance on the decision of the Tribunal, Bangalore Bench, 17th Jan., 1989 in ITA Nos. 894, 983, 456 & 502 (Bang)/85 in the case of Deepak A. Mehta & Ors.. 7. The issue before us in the present appeals is to decid....
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....vestment or wants to dispose it of within a short span of time. Although an investment may also ultimately be disposed of quickly, at the time when it is acquired, there should be some expectation or desire to hold it more or less on a long-term basis. The other characteristic of acquiring an asset as an investment is that the acquirer must expect some return out of it, either by way of dividend or yield or ultimate appreciation in the value thereof on a long-term basis. The acquirer may also want to use the asset for his personal purpose or he may have the intention of developing it into a full-fledged asset like in case of a piece of land. The third characteristic of acquiring a capital asset is that generally such acquisition is made out of the surplus fund of the acquirer. Borrowal of funds from others, incurring the liability of paying interest at market rate involves a great risk and an investor generally avoids such type of borrowal in making an investment. The other considerations in this regard should be whether the asset acquired is common to the general line of business of the acquirer or not. 9. In the instant case, although the assessees are, to some extent or other,....