Adventure in the nature of trade: intention at acquisition and surrounding circumstances can make a resale profit taxable as business income.

A purchase and resale will be treated as an adventure in the nature of trade if the purchaser's intention at acquisition, judged from the cumulative surrounding circumstances, shows a view to resale rather than lasting investment. The court noted that the absence of a continuing business connection with Ceylon, purchase during a short visit, borrowing to finance the acquisition, limited reduction of debt from the income earned, and a quick resale at profit all pointed to a trading venture. Management of the property and receipt of income did not displace that inference. The surplus was therefore treated as business profit and held taxable as trading income against the assessee.

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Issues: Whether the surplus arising from the purchase and resale of the Ceylon coconut tope constituted an adventure in the nature of trade.

Analysis: The transaction had to be judged by the intention with which the property was originally acquired, gathered from the entire surrounding circumstances and not by isolating each circumstance. The assessee had no continuing business connection with Ceylon, purchased the property while on a short visit, financed the purchase by borrowing, did not substantially reduce the debts out of the income earned, and resold the property within a short time at a profit. Those circumstances supported the inference that the purchase was made with a view to resale as a business venture rather than as a lasting investment. The fact that the property was managed and yielded income did not ate that inference, and the alternative explanations for the sale were not established on the record.

Conclusion: The surplus was rightly treated as business profit from an adventure in the nature of trade, in favour of the Revenue.

Final Conclusion: The reference was answered against the assessee and the amount was held taxable as trading profit.

Ratio Decidendi: Whether a purchase and resale amounts to an adventure in the nature of trade depends on the purchaser's intention at acquisition, inferred from the cumulative effect of all relevant circumstances.

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