Adventure in the nature of trade: isolated permit resale held taxable, with casual-receipt exemption denied.

For a newly set up grain business, the previous year could be treated as ending on 31 March 1947 where no statutory option to adopt another accounting period was shown to have been exercised; mere production of accounts for a longer period was insufficient. Profit from molasses permits was treated as taxable business income because the deliberate purchase and immediate resale of valuable permits for profit amounted to an adventure in the nature of trade. The casual and non-recurring receipt exemption did not apply to a receipt arising from business activity, even if the transaction was isolated. Both issues were resolved in favour of the Revenue.

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Issues: (i) whether the assessee's previous year for the grain business could be taken as the period from 1 March 1947 to 31 March 1947 in the absence of an exercised option under the relevant provision; and (ii) whether the profit of Rs. 37,500 from the molasses permits was taxable as income from an adventure in the nature of trade and not exempt as a casual and non-recurring receipt.

Issue (i): whether the assessee's previous year for the grain business could be taken as the period from 1 March 1947 to 31 March 1947 in the absence of an exercised option under the relevant provision.

Analysis: Under the provision governing a newly set up business, the Department could treat the period ending on 31 March as the previous year unless the assessee exercised the statutory option to adopt another accounting period. Mere production of accounts for a longer period was insufficient to show that the option had been exercised. No statement or other material showed that the assessee had chosen the period from March to December 1947 as the previous year.

Conclusion: The shorter period ending on 31 March 1947 was rightly treated as the previous year, against the assessee.

Issue (ii): whether the profit of Rs. 37,500 from the molasses permits was taxable as income from an adventure in the nature of trade and not exempt as a casual and non-recurring receipt.

Analysis: The statutory scheme taxed profits of business and included within business an adventure in the nature of trade. The exemption for casual and non-recurring receipts did not apply to receipts arising from business. The facts showed a deliberate purchase and immediate resale of valuable permits with an intention to make profit, the large quantity involved, and organised exploitation of the permits. Even an isolated transaction may amount to a trading adventure when the surrounding circumstances show a commercial venture. The receipt was neither accidental nor fortuitous and therefore did not fall within the casual receipt exception.

Conclusion: The molasses-permit profit was taxable business income and the claim to exemption failed, against the assessee.

Final Conclusion: Both referred questions were answered in favour of the Revenue, and the assessed income from the molasses-permit transaction was upheld.

Ratio Decidendi: A single transaction can constitute an adventure in the nature of trade where the surrounding facts show an intention to resell at a profit and organised commercial exploitation, and the casual-receipt exemption does not apply to receipts arising from business.

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