Income from shares transactions – Whether Business Income or Capital Gain Income?


Income from shares transactions – Whether Business Income or Capital Gain Income?



I.T.A. No.5178/DEL/2012

Short Overview of the Case:

 Issue was with regard to the Correct head of income
 Assessee was havinGain on sale of shares
 The issue was whether the gain is a short term capital gain or business income?
As submitted that there were only 10 scrips in which the investment had been made during the year and the deliveries of all the shares purchased were taken in the depository account of the company and shares had been shown as ‘investment’ in the Balance Sheet as per Schedule VI of the Companies Act, 1956 and not as stock-in- trade
As per AO assessee is not maintaining separate books of accounts for the alleged investments and regular business and No separate bank account is maintained for diffracting the alleged investment made and for business activity

ITAT observed and held as under: 

 When the assessee itself has classified its shares into an investment portfolio, and had sold the shares in the relevant year itself after making substantial gain, then it cannot be held that the assessee was not an investor but a share trader.
 Here, the assessee’s business as clarified by the ld. counsel was not dealing in purchase and sale of shares but for providing financial consultancy and all allied and auxiliary services.
 As pointed out before us, there were many months where the assessee had undertaken no transaction and in another several months the assessee had transacted only in one script.
 Thus, such a pattern cannot be reckoned that there was a huge frequency of purchase and sale of shares.
 As stated above, the assessee has made investment and disinvestment in shares of 10 scrips which are all delivery based transactions and the main gain is only from one particular script i.e., DLF Ltd.
 If detail of date-wise transaction is taken into consideration of various scrips which are as under, then it can be seen that transactions are not huge which has been the allegation of the Assessing Officer.
 If we analyze the given chart, then it can be clearly seen that out of the above scripts, the gain/profit is mainly from one script, that is, DLF Ltd.
 Hence, it cannot be held that the transaction is in the nature of business or profession.
 Decided against revenue.

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