8/11/2019 Capital Gains or Business Income

1/2

8/11/2019 Capital Gains or Business Income

2/2

tax at 33 per cent tax. But investors can claim all exemption on expenditure incurred on conducting the business,

such as salary, office administration expenses, conveyance, etc.

"Ideally, investors should take a call on trading based on the opportunity, rather than with an aim to avoid tax,"

says Nangia.

Since each case is treated differently, in case you get a notice from the I-T department, you must argue your

case in totality and represent all aspects. Consider the volume of transaction, frequency of trades, number of

shares in each transaction, and so on.

One way of proving the intention is to show there is a cautious, deliberate attempt to earn dividend from holding

the stock for the long term. However, some companies are known to offer high dividend. There are investors

who buy such stocks just before companies announce a dividend. Will this, then, be considered a business

income?

Nangia says, "One stray transaction of buying and taking dividend and selling may not have much of an impact.

But buying huge amounts can be seen as intention of earning of profit."

Nigam cites the case of a salaried person who sold some portion of his equity portfolio within two months of

buying and some within six months, while a major portion of the shares he held for longer than one year. The

assessing officer was ready to accept that the portion was held for more than one year was long-term capital

gains but insisted the shares held for a shorter term should be deemed as business income.

However, the tribunal held that just because the shares were held as investments or just because it was sold in

less than a year, it could not be treated as business income. Finally, it was allowed as capital gains.

Nigam says the Central Board of Direct Taxes (CBDT)has a broad directive on classification. CBDT says if you

hold shares, you must bifurcate your portfolio into 'stock in trade' and 'investment'. The shares in the 'stock intrade' portfolio are meant for trading and the shares in the 'investment' portfolio are meant for investment. So,

you will be liable to pay business income if you sell shares in the 'stock in trade' portfolio, Nigam explains.

According to Nangia, classification of shares in the book of accounts is not conclusive evidence and is not

decisive. "In every case, the court may have a different opinion because the conduct of business is personal," he

says.

http://www.business-standard.com/search?type=news&q=Cbdthttp://www.business-standard.com/search?type=news&q=Cbdthttp://www.business-standard.com/search?type=news&q=Cbdthttp://www.business-standard.com/search?type=news&q=Cbdt