Though main object is to do business in shares, shares can be held as a capital asset

Court : Delhi High Court

Citation : CIT, New Delhi Vs M/s PNB Finance & Industries Ltd (Dated: October 20, 2010)

Brief : Whether, only because the assessee can deal in shares as per the memorandum of objects, any transactions undertaken by the assessee 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

(i) 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);

(ii) If shares are shown as a capital asset in the balance sheet from the date of purchase and no objection was taken by the AO 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);

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