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Issues involved: Interpretation of whether the profit from the sale of securities constitutes trading profits or capital gains.
Summary: The judgment pertains to the Andhra Pradesh State Financial Corporation Limited, which sold securities to generate funds for advancing loans to industrial concerns. The Income Tax Officer (ITO) treated the profit from the sale of securities as business income, while the assessee claimed it to be capital gains. The Appellate Assistant Commissioner (AAC) sided with the assessee, considering the limited instances of encashing securities not indicative of a trading business. However, the Tribunal, relying on a Rajasthan High Court decision, held that the sale of securities was closely linked to the Corporation's business, thus constituting trading profit. The High Court analyzed the purpose of the Corporation, its investment in securities, and the nature of its business to determine that the profit from the sale of securities was a trading receipt, not a capital gain. The Court distinguished this case from others involving adventures in trade, ultimately ruling in favor of the Revenue. In conclusion, the Court answered the question in favor of the Revenue, directing each party to bear their own costs.
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