2005 (4) TMI 45 - HC - Income Tax

Profit on sale of shares Capital gain vis-a-vis Business income - The finding of fact recorded by Tribunal is that the shares in question were never treated by the assessee as stock-in-trade and they were held for earning dividend only. A company can hold some shares as stock-in-trade for the purpose of doing business of buying and sale of such shares, while at the same time it can also hold some other shares as its capital for the purpose of earning dividend income. Here the shares in question were held as the assessee s capital and not as stock-in-trade. Hence, there would be capital gain and not business income

Summary

The High Court of Madras ruled that profit on sale of shares should be treated as capital gains, not business income, as the shares were held for earning dividends and not as stock-in-trade. The judgment favored the assessee over the Department.