Law:

Section:

Section 28(1) of the Income-tax Act, 1961 - Business loss - Allowable as - Whether where purchase and sale of shares is a solitary and isolated transaction, presumption is that it is not in nature of trade and burden of establishing that said transaction is in nature of trade is on assessee - Held, yes - Whether, therefore, where assessee did not lead evidence to substantiate its claim that shares sold by it had been held as stock-in-trade, Tribunal was justified in holding that loss incurred on sale of said shares was loss of capital nature - Held, yes FACTS During relevant accounting year, the assessee HUF sold certain shares in companies to its individual members including the karta and debited its profit and loss account under the head 'loss on sale of shares'. In computing the income of the family the income-tax authorities disallowed this loss as being a capital loss. The Tribunal found that the assessee was not a dealer in shares and that the said shares were acquired as an investment by the assessee-family. The assessee did not adduce any evidence to show that it sold the shares as stock-in-trade. On reference : HELD Admittedly, the shares were held since 1952 and this was the first year in which they were sold. Where the purchase and the sale of shares is a solitary and isolated transaction, the presumption is that it is not in the nature of trade and the burden of establishing that this transaction is in the nature of trade is on him who asserts so. The assessee did not lead evidence to substantiate its claims that the shares were held as stock-in-trade. It could not, therefore, be said that the Tribunal's finding that the shares were not stock-in-trade was without any basis or that the Tribunal failed to record any finding on this point. The Tribunal was justified in holding that the loss on sale of shares was loss of capital nature. Note : The case has been decided in favour of the revenue. CASES REFERRED TO Investment Ltd. v. CIT [1970] 77 ITR 533 (SC), Raj Kishen Prem Chandra Jain v. CIT [1959] 35 ITR 590(Punj.) and Seth Banarsi Das Gupta v. CIT [1971] 81 ITR 170 (All.). JUDGMENT R.M. Sahai, J.-In this reference the following two questions of law…

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