Business profit from encashing purchased deposit rights is taxable, and not excluded as a casual receipt

A surplus realised by purchasing bank deposit receipts and encashing them to reduce an overdraft liability was treated as business profit because the transaction involved the acquisition and realisation of valuable rights in the nature of trade. Once the receipt was characterised as business income, the plea that it was casual and non-recurring failed, since that exception does not exclude receipts arising from business activity. Authorities on mere remission by a creditor were distinguished because there was no remission; the advantage arose from independent purchase transactions.

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Issues: Whether the surplus arising from purchase and encashment of bank deposit receipts used to discharge the assessee's overdraft liability constituted business income assessable under section 10, and whether it could be excluded as a casual and non-recurring receipt.

Analysis: The transaction was treated as a purchase of valuable rights followed by their encashment at a higher value for the purpose of reducing the assessee's liability. Such activity fell within the enlarged meaning of business, which includes trade and transactions in the nature of trade. The receipt was therefore regarded as profit arising from business. Once the amount was held to be business income, the plea that it was casual and non-recurring did not assist the assessee, because the statutory exception was inapplicable to business receipts. Authorities dealing with mere remission by a creditor were distinguished, as there was no remission here and the advantage arose from independent purchase transactions.

Conclusion: The surplus of Rs. 16,995 was assessable as profit from business under section 10 of the Income-tax Act and the question was answered against the assessee.

Ratio Decidendi: A surplus earned by purchasing and realising valuable rights for the purpose of discharging a liability is business profit if the transaction amounts to trade, and it is not excluded as a casual receipt once it is found to arise from business.

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