Law: Income Tax Act, 1922

Section: 2,2(4),10

[Income Tax Act, 1922 (XI of 1922)].........Sections 2(4), 10-Adventure in the nature of trade-Purchase and sale of shares-Absence of evidence of assessee's intention to make profits at the time of purchase of shares- Mere sale and purchase of shares whether sufficient to constitute adventure in the nature of trade-Held no-Shares purchased against ready delivery and sold in ready delivery in one lot and in a single transaction in cash- Dividend income from shares offered for assessment-Sale of shares whether merely a change of investment-Held yes-Surplus arising out of sale of shares whether revenue income and liable to tax-Held no. In the absence of evidence of the assessee's intention to make profits at the time of purchase of the shares, the mere purchase and sale of shares by themselves would not be sufficient to constitute an adventure in the nature of trade. No evidence of any such intention other than the purchase and sale of shares was produced by the department to show the change of conduct of the respondent. The burden was on the department to show that the motive of the respondent was to make profits which the department had failed to discharge. (Page 13)/1. In the instant case the shares were purchased against ready delivery and were also sold in ready delivery in one lot in a single transaction in cash. Dividend income from the shares which were held, for sometime, were also offered for assessment. There is no material to controvert the statement of the respondent that the sale of shares in question was merely a change of investment under the apprehension that prices may go down in future, which in fact they did. For the foregoing reasons , the respective surpluses arising from the sale of shares were not revenue income of the respondent and were not liable to income-tax. Cases referred to: Industrial Management Ltd. Karachi v. Commissioner of Income Tax, Karachi (1978) 5 Taxation 38 ; Edwards (Inspector of Taxes) v. Bairstow and Harrison (36 T. C. 207) and Lalit Pam Mangi Ram of Cawnpore v. Commissioner of Income Tax (1950) 18 I. T. R. 286. ORDER [The judgment of the Court was delivered by I. MAHMUD J.]-The following question of law has been…

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