Law:

Section:

Section 28(i) of the Income-tax Act, 1961 - Business income - Assessable as - Assessment year 1971-72 - Assessee, carrying on business in money-lending as also in milling wheat and paddy, purchased certain shares of a limited company and sold them after two years at a profit - No dividend had been declared on those shares either before or after purchase by assessee - Whether, assessee's transaction in sale of shares being a solitary transaction over a number of years, having earned no dividend, aforesaid surplus arising from sale of said shares was not assessable as business income in assessee's hands - Held, yes Section 45 of the Income-tax Act, 1961 - Capital gains - Chargeable as - Whether in view of facts stated under head 'Business income - Assessable as', said surplus arising from sale of shares was chargeable as capital gains - Held, yes Facts The assessee, carrying on business in money-lending as also in milling wheat and paddy, purchased certain shares of a limited company but since no dividend was declared on the said shares thereafter, he sold the same at a profit after about 2 years. The assessee claimed that the surplus realised on the sale of those shares was capital in nature and as such not taxable. The ITO held that the assessee had acquired the said shares with the object of dealing with them and as such the profit arising out of the sale was the assessee's business income. On appeal, the AAC upheld the ITO's orders and observed that the said shares were purchased by the assessee for resale at a profit. On second appeal, the Tribunal, however, held that the impugned surplus was not assessable as the assessee's business income on the ground that having found the investment blocked, the assessee sold the shares to redeem the investment, and, therefore, the initial investment in shares and the sale of those shares could not constitute the assessee's business in share dealing. On reference : Held In the instant case, it had been found as a fact that the transaction in the said shares by the assessee in 1967 was a solitary transaction over a number of years, that no dividend was declared on the said shares in three successive years, namely, 1967,…

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