Concept: Transactions Entered into in the Course of Business

 . Let's elaborate on the principle that transactions entered into in the course of business yield revenue receipts which are chargeable to tax under the head “Profits and Gains of Business or Profession” as per the Income-tax Act, 1961.

 Concept: Transactions Entered into in the Course of Business

 General Principle:

Any profit or gain arising from a transaction that is:

1.      Part of the regular business activity, or

2.      Incidental or related to the business operations,

 is treated as a revenue receipt, and hence taxable under the head “Business or Profession”.

📘 Source: Section 28 of the Income-tax Act deals with such income.

 Key Characteristics of Such Transactions

Criteria	Explanation
Regularity of transaction	Occurs frequently or systematically as part of business
Intention behind transaction	Profit-making motive is present at the time of entering the transaction
Nature of asset/transaction	Depends on how the asset is used in business context
Relation to business	Must be integrally connected with or incidental to business activities

 Examples – Revenue Receipts from Business Transactions

1. Banker/Financier – Foreign Exchange/Share Transactions

·         If a bank or NBFC buys and sells foreign currency or securities, such profits are revenue in nature, as these are core business activities.

2. Shipbroker Buying a Ship in His Own Name

·         If a shipbroker, as part of his profession, purchases a ship intending to resell or earn brokerage, profit on sale is business income.

3. Share Broker Buying Shares in Own Name

·         A share broker buying shares on his own account for short-term gain is carrying on business; hence, profit is revenue receipt, not capital gain.

 Importance of Intention and Nature of Business

The same asset can result in different tax treatment depending on the assessee’s business and intention:

Asset	Holder Type	Tax Treatment
Land/Building	Real estate dealer	Stock-in-trade → Revenue receipt
Land/Building	Manufacturer or salaried person	Capital asset → Capital gains
Shares	Investor	Capital asset → Short-term/Long-term capital gains
Shares	Share trader/broker	Stock-in-trade → Business income

 Judicial Interpretation

 CIT v. Raja Bahadur Kamakhya Narayan Singh (1948):

Income is taxable as business income if it arises from an activity which is the assessee’s trade or occupation.

 G. Venkataswami Naidu & Co. v. CIT (1959):

The intention at the time of purchase of an asset plays a crucial role in determining whether the profit is capital gain or business income.

 Summary Table: Business Transaction vs Capital Investment

Particulars	Business Transaction	Capital Investment
Purpose of acquisition	Resale or trading	Use or long-term investment
Frequency	Regular or frequent	Occasional
Nature of income	Revenue receipt (taxable under PGBP)	Capital gains (taxable under Capital Gains)
Example	Share broker trading in shares	Salaried person investing in mutual funds
Tax treatment	As business income	As capital gains

 Conclusion

Profits from transactions carried out in the ordinary course of business—including those incidental or associated with such business—are treated as revenue receipts and are fully taxable under "Profits and Gains of Business or Profession". The classification between capital asset vs stock-in-trade depends on the nature of the business, intent, and frequency of transactions.