Business Income And Capital Gains

1519 WordsOct 14, 20147 Pages
It is a case decided by the Madras High Court in 2014. It dealt with the issue of differentiating between Business Income and Capital Gains with respect to share dealings. The Assessment year of the present case is 2005-06. Facts: a. The assessee was a trader in shares. The assessee was trading in two segments in stock exchange, viz., cash segment and Future and Options (F&O) segment. Admittedly, the assessee had two different portfolios one as investment and another as stock-in-trade. While profits from trading in cash market upto September 30, 2004, was offered to tax under the head 'Business ', similar gains subsequent to that date was offered to tax under the head 'Short term capital gains '. b. The Assessing Officer viewed that on an average, the holding period of these shares ranged from 2 to 45 days or less. c. The assessee had also taken funding for trading in securities and had shown the profits made through the funding as capital gains. Taking the view that the transactions made in cash segment from 1-10-2004 to 31-3-2005, were all executed in the normal course of business and not as investments, assessment was sought to be made as business income. d. This was countered by the assessee that he had held the shares for earning dividend income and capital appreciation and he had also borrowed capital for the purpose of business. e. The Assessing Officer held that the transactions during the period 1-4-2004 to 30-9-2004, were treated by the assessee as stock-in-trade
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