dealing in shares

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RAJ KUMAR AGARWALA (Querist)
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10 August 2007 a company in addition to normal business activities also purchases and sells shares and mf from market and earns profit the company informs that trading of goods and sale of shares both are business activities and total sale should be merged and thereafeter no question of deriving stcg and ltcg on shares to be separately shown whether the contention is correct

Late CA Sampat Jain

Late CA Sampat Jain (Expert)
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10 August 2007 The question of capital gain arises only in case of transfer of capital assets . The trader of shares , holds shares as stock in trade . By defination of capital asset in the Income Tax Act ,capital asset does not include stock in trade . As such the question of calculating capital gains , short or long , on transfer of such shares does not arise.

However,note the following explanation to section 73:

[Explanation.—Where any part of the business of a company (63[other than a company whose gross total income consists mainly of income which is chargeable under the heads “Interest on securities”, “Income from house property”, “Capital gains” and “Income from other sources”], or a company the principal business of which is the business of banking or the granting of loans and advances) consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares.]