Adventure in the nature of trade: surplus on plot sale treated as taxable trading profit on surrounding facts.

Surplus from sale of a plot was held taxable as profit from an adventure in the nature of trade because the surrounding facts pointed to a commercial venture rather than a capital investment. The court relied on the purchase with borrowed funds, the absence of convincing evidence of any genuine intention to construct a building, inconsistent explanations for acquisition and sale, the short interval between purchase and resale, the manner of dealing with the property, and the substantial rise in price. It held that the character of an isolated transaction must be judged from the totality of its circumstances, and the taxing authorities' finding was supported by evidence and not perverse.

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Issues: Whether the surplus realised on the sale of the plot constituted profit arising from an adventure in the nature of trade.

Analysis: The transaction was examined on the whole of the surrounding facts, including purchase with borrowed funds, the absence of convincing evidence of any genuine intention to construct a building, inconsistent explanations for acquisition and sale, the short interval between purchase and resale, the manner in which the property was dealt with, and the substantial rise in price. The surrounding conduct supported an inference of a commercial venture rather than a capital investment. The question was not governed by any universal formula, but by the total impression created by the relevant circumstances. On that approach, the findings of the taxing authorities were supported by evidence and were not perverse.

Conclusion: The surplus was taxable as profit from an adventure in the nature of trade and the answer to the reference was in the affirmative, against the assessee.

Ratio Decidendi: The character of an isolated transaction in income-tax law must be determined from the totality of its surrounding facts and conduct, and where those circumstances disclose a commercial venture entered into with a profit-making complexion, the surplus is assessable as trading profit.

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