Single-venture commercial profit accounting allows deduction of prior-year expenses properly connected to the venture when profit is realised.

In assessing profit on assignment of a plot treated as a single commercial venture, the proper measure is the commercial profit realised when the venture ends; expenditures legitimately connected to that venture must be taken into account even if incurred in earlier years. The tribunal's refusal to allow credit for ground rent and taxes paid prior to the year of account, while permitting brokerage incurred in the year of account, was incorrect. Operatively, expenses properly attributable to the single venture are deductible when computing the profit realised on its termination.

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Issues: Whether, in assessing the profit made by the assessee on the assignment of the plot, the assessee is entitled to any deduction in respect of the ground rent and taxes paid by him in the years prior to the year of account (1950-51).

Analysis: The Court examined the transaction as a single venture in the nature of trade and framed the taxable profit as the commercial profit realised when the venture ended. Under section 66(1) of the Income-tax Act the reference arises to the High Court; the Court considered the scope of deductions relevant to ascertaining real commercial profits rather than a narrow year-of-incidence rule under section 10. The Court held that in a single venture the proper measure of profit in the year the venture ends must take into account expenditure legitimately connected with that venture even if incurred in earlier years, and that the tribunal erred in refusing credit for expenditure (ground rent and taxes) incurred prior to the year of account while allowing brokerage incurred in the year of account.

Conclusion: The question is answered in the affirmative; the assessee is entitled to have expenses incurred in prior years (including ground rent and taxes properly connected with the single venture) taken into account in assessing the profit on the assignment of the plot.

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