Judgment

S. K. DAS, J. : (For himself and Kapur, Gajendragadkar, K. Subba Rao, Wanchoo and N. Rajagopala Ayyanger JJ.) This is an appeal by special leave granted by this Court on September 17, 1956. The Commissioner of Income-tax, Bombay City I, is the appellant before us. The respondent is Bai Shirinbai K. Kooka, who will be referred to in this judgment as the assesses.

2. The assesses is a Parsi lady who held by way of investment a large number of shares of different companies. These shares were purchased before the end of and after 1939-40 at a cost price which was much less than their market value on April 1, 1945: Her dividend income was assessed to income-tax for several years prior to April 1, 1945; but in the assessment year 1946-47, the relevant accounting year being financial year 1945 46, the Income-tax Officer found that the assessee had converted her shares into her stock in-trade and carried on a trading activity, viz. a business in shares. Her income for the assessment year 1946-47 was therefore computed on the basis of the profits which she made by the sale of her shares as a trading activity, the profits being calculated on the difference between the market price at