CMA Intermediate · Direct and Indirect Taxation · Profits and Gains of Business or Profession
Shree Industries Ltd, a manufacturing company whose gross total income does not consist mainly of house property, capital gains or other sources income, also buys and sells shares of other companies. Its principal business is manufacturing. For the share dealing part, under section 113, the company is:
The company is deemed to carry on speculation business only to the extent its business consists of buying and selling shares of other companies. The exceptions do not apply because its principal business is manufacturing and its income is not mainly from the listed heads.
- ADeemed to carry on speculation business to the extent of share purchase and saleCorrect
- BNot affected, as the share dealing is treated as normal business
- CDeemed to carry on speculation business for its whole business
- DTaxable only under Capital gains for all share dealings
Explanation
Section 113(5) deems a company with part of its business as purchase and sale of shares of other companies to carry on speculation business to that extent. The exceptions in 113(6) do not apply, since income is not mainly from the listed heads and principal business is not share trading, banking or lending. Treating the whole business as speculative is wrong because only that share-dealing portion is deemed so.
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