Law: Income Tax Ordinance, 1979

Section: SecondSched.PartI,CI.(116),27

Income Tax Ordinance (XXXI of 1979)----Second Sched. Part I, CI. (116) & S.27---Capital gains---Exemption--¬13urchase of shares by assessee capital gains occur only on the transfer of a capital asset i.e. an asset from which some income could be earned---Exemption from tax as a capital gain under Cl.(116), Part I, Second Sched., Income Tax Ordinance, 1979 is available only to those shares which are purchased as capital asset---If the assessee had purchased the shares for investment purpose, he would have got them registered in his name in the books of the respective companies in order to become entitled to receive dividend ---Assessee would have retained the shares at least till the end of the calendar/financial year in order to become eligible to claim the dividend---Where the assessee purchased and sold the shares to a short span of four months on lot in order to purchase other shares and not z single share was retained till the end of financial/calendar year and most of the shares were sold within two weeks, all these factors, showed that the dealings in shares were not by way of investment which was the intended purpose of Cl,(116), Part I of Second Sched. of the Income Tax Ordinance, 1979 Assessee in fact dealt with the shares as a trading commodity and was as a capital asset and as such the gains of the assessee were in nature of trading profits which were not entitled to exemption under Cl.(116), Second Sched. of the Ordinance. ORDER The appeal at the instance of the department is directed against the order, dated 21-6-1987 passed by C.I.T.(A), Zone-I, Karachi. 2. Relevant facts of the case are that the assessee, an individual, derives income from salary, property, interest etc. Return was filed declaring income of Rs.89,201 and capital gain of Rs.1,80,580 which was claimed to be exempt under clause (116) of the Second Schedule to the Income Tax Ordinance. During assessment proceedings, further details of purchase and sales of shares of public companies were furnished by the assessee as under:-- S. No. Name of the Company No. of Shares Date of Purchase Date of Sale Gain (Rs.) 1. Fazal Ghee 3700 13-2-84 17-3-84 43,179 2. Ciba Gaiegy 2900 17-3-84…

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