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TMI BlogGeneral principles for determining whether shares held as stock in trade or capital assets.X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the sale of certain plots was assessable as income from an adventure in the nature of business. The Supreme Court held that in deciding the character of such transaction, several factors were relevant. For instance,- i. Whether the purchaser was a trader and the purchase of the commodity and its resale were allied to his usual trade or business or were incidental to it. ii. The nature and quantity of the commodity purchased and resold - if the commodity purchased is in very large quantity, it could tend to eliminate the possibility of investment for personal use, possession or enjoyment. iii. The repetition of the transaction. 3. The Supreme court observed that the presence of all these factors may be held in the court to draw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outright in the course of the business activity and deriving income from exploitation of one's own assets. 6. These general principles hold good in respect of shares also. However certain specific issues relevant for determining this question with reference to shares have also been decided by the courts. In the case of Sarder Indra Singh sons Ltd. Vs. CIT (1953) 24 ITR 415, the Supreme Court was dealing with the case of a company which was incorporated with the object, inter alia of carrying on the business of bankers, financiers, managing agents and secretaries and was also empowered to invest and deal with the monies of the company not immediately required for its business upon such securities and in such manner as might from time to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to insist on the observance of a normal prudent banking business practice. If the banking company chooses to invest the money in unincumbered approved securities it is only one mode of keeping a portion of its deposits in ready cash or readily-convertible-into-cash securities. Any income arising from the sale of such securities is, therefore closely connected with the banking business and is business income, it was concluded by the High court. 8. In the case of Karam chand Thapar and brothers (p) ltd Vs. CIT(1971) 83 ITR 899 it was held by the Supreme Court that the circumstance that the assessee had shown certain shares as investment in its books as well as its balance sheet was by itself not a conclusive circumstances, though it was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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