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HELD AS A CAPITAL ASSET
Court: Delhi High Court
Brief: Whether, only because the assesse can deal in shares as per the memorandum of objects, any
transactions undertaken by the assesse for sale or purchase of shares, in the earlier years is to be
treated as business transaction, and the gains and loss resulting from the same to be assessed under the
head business income and not capital gains. ‐ Revenue’s appeal dismissed.
It was held:
1. There is no presumption that every acquisition by a dealer in a particular commodity is
acquisition for the purpose of his business. A dealer may acquire a commodity as a capital asset.
In each case the question is one of intention to be gathered from the evidence of conduct and
dealings by the acquirer with the commodity (Madan Gopal Radhey Lal 73 ITR 652 (SC) & Vijaya
Bank 187 ITR 541 (SC) followed)
2. If shares are shown as a capital asset in the balance sheet from the date of purchase and no
objection was taken by the A.O in the earlier years, he cannot hold it to be stock‐in‐trade
without there being any change in facts (Gulmohar Finance Ltd 170 Taxman 483 (Del) followed)
3. It is possible for a taxpayer to have two portfolios, i.e., an investment portfolio and a trading
portfolio and income under the head capital gains as well as business income
4. Though the main object is that of buying and selling shares, the nature of activity, intention
and conduct has significance and play a pivotal role in the entire gamut of transaction
5. On facts, as the shares were held for a long period and there was no evidence to show regular
dealings in shares, the gains had to be assessed as LTCG.
Citation: CIT, New Delhi vs M/s PNB Finance & Industries Ltd (Dated: October 20, 2010)