Profit on the sale of investment shares held as capital assets are assessable under the head “capital gain” and the period of holding of such assets cannot determine its status or change it from investment (capital) to trading (stock-in-trade), as held by KolTrib in DCIT v Reliance Trading Enterprises Ltd — In favour of: The assessee (partly).
Profit arising from the sale of shares and securities which were held as investments in its books of accounts and where no borrowed funds were utilised for the same is assessable under the head “capital gain” and not as business income.
The intention of the assessee at the time of acquiring the shares is relevant and important for deciding the nature of the transaction as trading or investment.
Merely because the assessee has held some of the shares for a period of less than 12 months along with the other shares under the head “investment”, there cannot be a subdivision of the transaction and to hold that those shares, which had been held by the assessee for a period of less than 12 months, should not be considered under the head “investment” and to hold them as trading in nature.
Decided on: 28 July 2011.
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