Law: Income Tax Act, 1922

Section: 10,2(4),4(3Kvls)

(a) Income-tax Act (XI of 1922)---S. 10 read with Ss. 2(4) & 4(3Kvls)---Business-Income-Profits and gains-Whether or not a transaction is in line of assessee's trade-Answer to question cannot be promised on a single criterion-Buying and selling shares speculatively in order to make gain-Held, "business" and profits therefrom a revenue receipt-Burden on Revenue to show that gain made was a revenue receipt-Purchase of shares and securities as investment and at times sold and further purchases made to argument investment--Does not amount to trading in shares notwithstanding memorandum that it may deal in shares. Whether or not a transaction or transactions are in the line of assessee's trade is not capable of an easy answer. The answer to be given cannot be promised on a single criterion. In each case regard must be had to the character and circumstance of the transaction. If what is purchased is something which is itself an ordinary investment, such as shares, a potential source of revenue, the transaction, in the absence of evidence to the contrary, will not be in the line of business. On the other hand buying and selling shares speculatively in order to make gain, the shares will become stock-in-trade and dealing in such investments, a business, making the profits a revenue receipt. Such dealing would amount to commercial disposal of shares. The latter will be profit income and the former accretion to capital. It may also be added that if the purpose is investment, the fact that in varying the investment, sale of shares results in profits will not make such profit revenue income unless it is shown that variation amounts to dealing in investments. It is a case of numerous purchases and sales and the sales being within a short time of the purchase, the conclusion may be that it was a case of trading for then the inference would be that the purchases were made with the sole object of turning it over and selling it at a profit. If on the other hand there are a few sales although a number of purchases and when sales are made at long intervals after the purchases, the con­clusion more appropriately will be investment, notwithstanding the fact that there was no…

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