Law: Income Tax Act, 1922

Section: 10,.2(4),4(3)(vii)

(a) Income-tax Act (XI of 1922)--- S. 10 read with Ss. 2(4) & 4(3)(vii)-Taxable income--Assessee a man with substantial assets, his shareholding in public limited companies representing a very small percentage of his total assets-Assessee mak­ing his living by carrying on business and share transaction playing a-very small part in his activities as a whole-Contention that assessee being an affluent man no necessity arose for him to sell shares and thereby receive - a negligible profit of Rs. 1,990.10 and he therefore traded in shares-Conclusion, held, ought to have been reverse since a man of affluence would not be trading in shares with a total holding of shares valued at Rs. 6,24,181 for a gain of Rs. 1,990.10. P. I. C. I. C. v. Commissioner of Income-tax I. T. R. No. 1 of 1971; Tax Reference No. 73 of 1970; Jones v. Leeming 1930 A C 41.5 and Commissioner of Land Revenue v. Rein 34 Tax Cas. 389 ref. (b) Income-tax Act (XI of 1922)---- -- S. 10 read with Ss. 2(4) & 4(3)(vii)-Taxable income-Sale of shares effected by assessee examined in context of not only his total shareholding and purchases made but also in relation to his other income-- Not leading to conclusion of assessee having been trading in shares-­Assessee's conduct in relation to shares in past years also leading to conclusion of shares having not been traded in-Gains derived from sale of shares in question, held, not taxable in circumstances. JUDGMENT FAKHRUDDIN G. EBRAHIM, J.-The short but .important question that arises for our consideration in this Tax Reference is whether the applicant is an investor in shares or a dealer in shares. The two assessment years in question are 1959-60 and 1960-61. At the commencement of the assess­ment year 1959-60 the applicant held shares in various public limited companies of the total value of Rs. 4,26,230. During the year he purchased shares of the total value of Rs. 2,51,618. In this assessment year the assessee received income from the sale of 600 shares in five different companies resulting in gain of Rs. 1.990.10. The Income-tax Officer held that the aforesaid income of Rs. 1,990.10 was a taxable income on the ground that the purchase and sale…

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