Your CA is quite right. Since the business of the partnership firm is only that of buying and selling shares, the shares form a part of your stock-in- trade and not capital. Profit on sale of stock-in-trade is treated as business income and not capital gains. In any case, you must realise that there would be a capital gain (or a loss) only if the capital is transferred.

In your case, what you are selling is not capital but your stock-in-trade. Hence, tax will be levied at the maximum rate applicable to partnership firms and notat the concessional rate applicable to capital gains.

What you may do is to maintain two separate bonafide accounts; one in which you deal (trade) in shares, the income of which would have to be treated as normal business income. The other account would be that of investment in shares where you don't trade but invest in what you perceive as productive securities for earning long-term capital appreciation.

My left leg was required to be amputated. For the purpose of claiming benefit u/s 80U, I have obtained the required certificate from the All India Institute of Physical Medicine and Rehabilitation, Mumbai. When I approached my employer, I was summarily told that since my salary has not been decreased because of my handicap, they will not give me the benefit of Sec. 80U and reduce the tax deduction at source (TDS).
I would like to know whether my employer is justified in refusing to give me the benefit of Sec. 80U at source. If he refuses, what is the action I can take?
--Balakrishnan, Mumbai

Your employer is grossly unjust in denying you the benefit of Sec. 80U. The confusion may have arisen because the section refers to the permanent disability "which has the effect of reducing considerably such individual's capacity for normal work or engaging in a gainful employment or occupation ..." Point out to your employer the following arguments:

It is a fact that your handicap may affect your "capacity for normal work or engaging in a gainful employment or occupation." The possibility of your getting employed by some other employer in future may stand drastically reduced. There is also a possibility of your present employer denying you the promotions that you would have earned in future if your work capacity was not hampered.

The fact that your current employer will be paying you the same salary after your handicap as was paid before the handicap is immaterial and inconsequential from the income-tax point of view. I only hope that your employer seeks expert opinionbefore denying you your rights.

In case he is not considerate enough to take remedial actions, you may approach your ITO and request him to ask your employer to fall in line. I am sure that he will be willing to do so since this statutory requirement is provided for the dual purpose of reducing the work of the ITO and helping persons like you. The other recourse is to claim this benefit in your returns.

One year ago, I had sold my residential flat for a consideration of Rs 74 lakh and saved a large part of the capital gains by purchasing another one costing Rs 39 lakh. I do not like the new place because my neighbours are rowdy and are not cooperative. I can sell this for Rs 45 lakh. I have located a new flat in the suburbs which is more spacious, in a good locality and will cost only Rs 30 lakh. Since the current flat will be sold within one year, I may be liable to short-term capital gains tax which will be heavy. Can I save at least a part of it?
-- Shelar, Mumbai

Sec. 54stipulates that if the newly acquired property is sold within three years, the exemption claimed earlier stands forfeited. Therefore, the tax will have to be paid on the capital gains saved by you when you sold your very first flat. True, you are merely exchanging the second flat with another and therefore, logically, the exemption claimed should not be affected. Unfortunately, the Act does not deal with such an exchange. The transaction that you are contemplating will be treated separately and the short-term gains arising therefrom will also be charged to tax.

In other words, you will have to pay tax on the long-term capital gains of the first transaction and also short-term capital gains of the second transaction. I am sure, this is not the intention of the legislation.

However, until the Act is suitably amended, the assessees will have to bow down to this atrocity.

The only way out of this mess is for you to wait for three years before you sell your current residential premises. Then you will notonly be able to avoid the penal forfeiture but also claim long-term capital gains on the newly acquired place. Perhaps, during this period, the neighbours may start liking you.