Adventure in the nature of trade led to sale proceeds being treated as business income, not capital gain.

Profit on sale of land was treated as business income because the surrounding facts showed an adventure in the nature of trade rather than a passive capital investment. The decisive factor was the intention at the time of purchase: the land was bought, levelled at substantial cost, left uncultivated, and sold shortly thereafter, which indicated a commercial motive and prompt steps toward sale. The stated foreign exchange restriction on acquisition of agricultural land by a non-resident also supported the inference that the transaction was not an ordinary agricultural holding. The addition was therefore upheld and the profit was not assessable as capital gain.

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Issues: Whether the profit on sale of agricultural land was taxable as business income on the ground that the assessee had undertaken an adventure in the nature of trade, or was assessable as capital gain.

Analysis: The land was purchased and shortly thereafter levelled at considerable cost before being sold, and the assessee also stated that no cultivation was carried on and the land remained idle. The decisive test was the intention at the time of purchase. On the facts, the expenditure incurred to make the land marketable, together with the prompt steps leading to sale, indicated that the transaction was entered into with a commercial motive rather than as a mere investment in agricultural property. The reliance placed on the prohibition under the foreign exchange regulations against acquisition of agricultural land by a non-resident also supported the inference that the transaction was not an ordinary agricultural holding.

Conclusion: The profit from sale of the land was correctly treated as business income and not capital gain; the addition was upheld against the assessee.

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