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TMI Blog2015 (8) TMI 618X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered the transaction of shares by appellant as "adventure in the nature of trade" instead of "income from capital gain" and have taxed appellant accordingly. 3. This Court, when admitted appeal, formulated following two substantial questions of law to adjudicate this appeal: "1. Whether the appellant has derived "capital gain" on sale of shares and not "business income" as determined by the Tribunal? 2. Whether, the Tribunal has committed itself to perversity while concluding that the income of the appellant is "business income"?" 4. For the Assessment Year 1992-93, appellant-Assessee submitted return declaring income of Rs. 2,86,798/-. The Assessee disclosed profit on share transaction and claimed deduction under Section 48(2) of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment having gone some times for change of shares of one company to another and that is how there were certain transactions of sale and purchase but this fact by itself would not justify an inference that Assessee was doing business in sale and purchase of shares and earned income therefrom. It is submitted that investment in share and movement of stock by changing from one company to another is a part of prudent investment and unless volume and period of transactions are such which may justify a short term regular transaction feature, mere fact that more than one such transactions have taken place, the same will not partake nature of business, hence the view taken by Revenue is clearly illegal. 8. In the order of Tribunal, total number o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... everal factors are to be taken into account to come to a definite conclusion for determining character of transaction such as; (1) nature of commodity purchased and resold; and, (2) in what quantity was it purchased and resold ? If the commodity purchased is generally subject-matter of trade, and if it is purchased in very large quantities, it would tend to eliminate the possibility of investment for personal use, possession or enjoyment. 12. The Court referred to decision in Cayzer, Irvine and Co. Ltd. Vs. Commissioner of Inland Revenue (1942) 24 Tax Cases 491, where the land was purchased and subsequently developed with the object of making it more readily salable and sold at a profit, the intention of Assessee was treated to be not to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed into a different commodity and then sold. Magnitude of transaction of purchase, the nature of the commodity, subsequent dealings and the manner of disposal may be such that the transaction may be stamped with the character of a trading venture. 16. A somewhat similar issue came up in Commissioner of Income-Tax, Bombay Vs. H. Holck Larsen (1986) 160 ITR 67 (SC). The Court considered the question "whether in respect to certain transactions between the years 1957 to 1959 the Assessee was a Dealer or an investor and whether income arising from sale and purchase by Assessee is to be taxed on revenue account or capital account?" Department took the view that it should be a revenue account while Assessee claimed it capital account. The Court s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier decision in Rannarain Sons Pvt. Ltd. Vs. Commissioner of Income Tax, Bombay (1961) 41 ITR 534 (SC) and said that in considering whether the transaction was or was not an adventure in the nature of trade, the problem must be approached in the light of intention of Assessee having regard to legal requirements which were associated with the concept of trade or business. A mere profit motive in entering into transaction was not decisive, for an accretion to capital did not become taxable income merely because an asset was acquired in the expectation that it might be sold at a profit. It also relied on Janki Ram Bahadur Ram Vs. CIT (supra), where it was held that if a transaction was related to the business which is normally carried on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibility of enhanced value, did not necessarily render the investment a transaction in the nature of trade." 18. Having said so, the Court said that totality of all the facts have to be borne in mind and the correct legal principle have to be applied. This question is clearly a mixed question of law and fact, therefore, reasons assigned by Tribunal have to be looked into. 19. The Tribunal has recorded a finding that in the present case, Assessee's main source of income is from share transaction. His income from interest is only Rs. 4158/-. Further during the year of assessment in question, Assessee has sold shares of various Companies, i.e. Flex Industries Limited, Rathi Ispat Limited, Maharashtra Fabrics Limited, U.P. Petro Ltd. and h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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