Adventure in the nature of trade: surplus from property arrangement treated as business income, not capital gains.

Surplus from a property-related arrangement was taxable as business income because the real character of the transaction, as seen from the MOU and connected documents, showed no intention to hold the property as an investment. The assessee acted to identify a purchaser for the owner, bore the commercial risk, and retained only the amount realised over the fixed sum payable to the owner. The structure was directed solely to profit on resale, satisfying the test of an adventure in the nature of trade. The alternative claim that the amount arose as capital gains was rejected, as the assessee neither held nor transferred the asset in the character of an investor.

---

---

Issues: Whether the surplus arising from the arrangement relating to the property was assessable as business income or as capital gains.

Analysis: The decisive test was the real character of the transaction as gathered from the MOU and connected documents. The arrangement showed that the assessee had no intention to acquire and enjoy the property as an investment. The assessee's role was to identify a purchaser for the owner, bear the commercial risk, and retain only the amount realised over and above the fixed sum payable to the owner. The transaction was structured with a sole object of making profit on resale rather than holding a capital asset. On these facts, the case answered the judicial test of an adventure in the nature of trade. The alternative plea that the arrangement amounted to a transfer of a capital asset giving rise to capital gains was rejected because the assessee did not hold or transfer the capital asset in the character of an investor; he facilitated the sale for profit.

Conclusion: The surplus was taxable as business income and not as capital gains, and the finding of the lower authorities was set aside in favour of the Revenue.

---