Adventure in the nature of trade not established for compulsory land acquisition surplus, as no trading intention was proved.

Surplus from the compulsory acquisition of land was not assessable as business income because the transaction was an isolated purchase and the assessee was not shown to be in the business of trading in land. The Tribunal found no improvement, levelling or development for resale, and compulsory acquisition by itself did not show trading conduct. Applying the settled tests for an adventure in the nature of trade, the High Court held that the Department had not discharged the burden of proving trading intention or other trade-like features from the surrounding circumstances, so the surplus was not treated as income from trade.

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Issues: Whether the surplus arising from the compulsory acquisition of the assessee's land was assessable as business income on the footing that the purchase and eventual acquisition constituted an adventure in the nature of trade.

Analysis: The land transaction was an isolated one and the assessee was not shown to be engaged in the business of purchase and sale of land. The finding recorded by the Tribunal was that no improvement had been effected on the land by the assessee, and the material did not establish any expenditure on levelling or development for resale. Compulsory acquisition by the Government did not indicate active trading conduct. Applying the settled tests for determining an adventure in the nature of trade, and noting that the burden lay on the Department to prove such a character in a single transaction, the facts did not support the inference of trading activity.

Conclusion: The question was answered in the negative and the surplus was not held to arise from an adventure in the nature of trade; the conclusion was in favour of the assessee and against the Department.

Ratio Decidendi: A single purchase and compulsory acquisition of land does not amount to an adventure in the nature of trade unless the Department establishes trading intention or other features of trade from the surrounding circumstances.

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