Commercial profit from a single trading venture includes earlier venture costs when computing taxable gain

A finding that a transaction constituted an adventure in the nature of trade, when based on evidence such as the assessee's object of earning profit and surrounding circumstances, did not itself raise a question of law. However, in computing taxable profit from a completed single venture, the real commercial result had to be ascertained, and expenditure forming part of the venture's cost could not be excluded merely because it was incurred in earlier years. The assessee was therefore entitled to deduct prior years' ground rent and taxes in determining the profit on assignment of the plot.

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Issues: (i) Whether the finding that the assessee's transaction amounted to an adventure in the nature of trade gave rise to a question of law. (ii) Whether, in computing the profit on assignment of the plot, the assessee was entitled to deduct ground rent and taxes paid in earlier years.

Issue (i): Whether the finding that the assessee's transaction amounted to an adventure in the nature of trade gave rise to a question of law.

Analysis: The finding that the assessee entered the transaction with the object of earning profit was based on material on record, including the absence of evidence of any real intention or means to construct the required building and the circumstances surrounding the acquisition and assignment of the right. A finding so founded on evidence did not open a question of law merely because another view was possible.

Conclusion: The finding that the transaction was an adventure in the nature of trade did not give rise to a question of law, and this issue was against the assessee.

Issue (ii): Whether, in computing the profit on assignment of the plot, the assessee was entitled to deduct ground rent and taxes paid in earlier years.

Analysis: The profit from a single venture in the nature of trade becomes assessable when the venture ends, and the real commercial profit must be ascertained at that point. For that purpose, expenditure incurred in earlier years which formed part of the cost of the venture could not be ignored merely because it was not incurred in the year of account. The computation had to reflect the true commercial result of the transaction.

Conclusion: The assessee was entitled to deduction of the earlier years' ground rent and taxes in computing the profit, and this issue was in favour of the assessee.

Final Conclusion: The reference succeeded on the computation issue, and the profit had to be determined after giving credit for the prior years' expenditure.

Ratio Decidendi: In computing taxable profit from a completed single venture in the nature of trade, all expenditure forming part of the cost of the venture must be allowed if necessary to ascertain the real commercial profit, even if some of that expenditure was incurred in earlier years.

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