Business income or capital gains–Gain arising on sale of shares– Activity of purchase and sale of shares not being main occupation.

Vidyasagar M.P. Sah v. Dy. CIT

Decision:    Against the assessee

Business income or capital gains–Gain arising on sale of shares– Activity of purchase and sale of shares not being main occupation

Facts:

Assessee had transacted in fifty three kinds of shares number of shares transacted was more than Rs. 1,00,00,000 and volume of turnover was also more than Rs. 70,00,00,000. holding period for nearly all the shares was less than six months and there were also instances of day-trading transactions. AO treated gains arising on sale of shares as business income as against short-term capital gain as shown by the assessee. Assessee|s case was that he had certain investments also which he held for long-term and his main occupation was provision of consultancy services for exploration and drilling of oil wells/rigs and not the activity of purchase and sale of shares.

Held:

Though assessee had made certain investments also which he held for long term, however, basically it was a case of the assessee doing very high volume of trade in shares and that too, holding the shares for very short period. Investors do not sell shares the same day or the next day for a loss. The fact that the assessee had non-delivery based transactions which showed that he was using his knowledge, skill and resources to deal in shares. In this factual matrix, it could not be said that assessee was not in the business of purchase and sale of shares as it was not his main occupation and gain arising on sale of shares was, therefore, correctly assessed by AO as business income.