Examine and state with brief reasons as to taxability or allowability or treatment to be given in each of the following independent cases while computing income under the head "Profits and gains from business or professi
CS Professional · Direct Tax Law & Practice · PYQS · December 2020
Examine and state with brief reasons as to taxability or allowability or treatment to be given in each of the following independent cases while computing income under the head "Profits and gains from business or profession" in the return of income for the assessment year 2020-2021: (ii) Profits derived by an assessee engaged in carrying on the business as dealer in shares, on exchange of the shares held as stock in trade of one company with the shares of another company.
Answer & Explanation:
The difference between the price of shares of the first company and the market value of shares of the new company on the date of such exchange is to be treated as "profit" derived by the dealer in shares (on exchange of shares held as stock-in-trade of the first company with the shares of the new company) in the normal course of business, and hence such profit is taxable as business income. It was so held by the Supreme court in Orient Trading Co. Ltd. vs. CIT (1997) 224 ITR 371.
Topics: Income from Business or Profession
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