Introduction:
1. The issue whether the gains arising from sale/dealing of shares are taxable under the he”Capital Gains” or under “Business Income” has been increasingly engaging the attention of assessees, the tax department and, consequently, of the judiciary. The litigation on the issue tended to only multiply. The question has attained greater relevance in the cases where an asses(immaterial of whether it is an individual, firm, company or any other entity) have engaged series of frequent transactions and the turnover is high. The question also assumes relevant cases where an assessee bifurcates his gains (on some rational, systematic and consistent basis by applying criteria such as the period of holding, or the actual/constructive delivery of shares, into Capital Gains or Business income, i.e., where he maintains a dual portfolio comprising trading portfolio and an investment portfolio and, consequently, has income both under the he”Capital Gains” as well as under “Business Income”.
This article analyzes the issue with reference to the provisions of the Income-tax Act, 1961,guidelines/circulars issued by the Central Board of Direct Taxes and the judicial pronouncements the issue.
