Case Law Details
A Division Bench of this Court in Commissioner of Income-tax v. Rewashanker A. Kothari (2006) 283 ITR 338 (Guj.) has laid down the following test for determining the question as to whether an assessee can be said to be carrying on business. Such tests laid down by this Court are reproduced below:-
“[a] The first test is whether the initial acquisition of the subject matter of transaction was with the intention of dealing in the item, or with a view to finding an investment. If the transaction, since the inception, appears to be impressed with the character of a commercial transaction entered into with a view to earn profit, it would furnish a valuable guideline.
[b] The second test that is often applied is as to why and how and for what purpose the sale was effected subsequently.
[c] The third test, which is frequently applied, is as to how the assessee dealt with the subject matter of transaction during the time the asset was with the assessee. Has it been treated as stock-in-trade, or has it been shown in the books of account and balance sheet as an investment. This inquiry, though relevant, is not conclusive.
[d] The fourth test is as to how the assessee himself has returned the income from such activities and how the department has dealt with the same in the course of preceding and succeeding assessments. This factor, though not conclusive, can afford good and cogent evidence to judge the nature of transaction and would be a relevant circumstance to be considered in absence of any satisfactory explanation.
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