Adventure in the nature of trade: surplus on sale treated as business income where conduct and circumstances show intent to resell.

Where a purchaser ordinarily engaged in a different trade acquired a jute press and, judged by the purchaser's usual business, the nature of what was taken, the purchaser's conduct and subsequent acts to make the property readily saleable, and the surrounding circumstances, the surplus on sale was held to be an adventure in the nature of trade and assessable as business income. The court applied established tests-ordinary business of purchaser, initial intention to resell, nature and quantity of commodity, acts to render saleable, absence of operating intent and prompt sale-to uphold the Tribunal in favour of the Revenue.

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Issues: Whether the surplus realised by the assessee on sale of the jute press during assessment year 1944-45 was an adventure in the nature of trade (business income) or a capital receipt.

Analysis: The legal framework includes the definition of "business" in section 2(4) of the Income-tax Act, 1961 and the tests articulated in precedent authorities for distinguishing capital accretion from an adventure in the nature of trade, including the purchaser's usual trade, initial intention to resell, nature and quantity of the commodity, subsequent acts to render the subject-matter readily saleable, repetition of transactions, and the totality of surrounding facts and circumstances. Applying these tests, the facts show the assessee was ordinarily a dealer in scrap iron and hardware, did not deal in jute, the purchase comprised distinct schedules where leasehold and licence interests were not taken (suggesting dismantling and sale of iron components), the family and business records had been removed and business was not operating at the time, repairs were limited and appear directed to making the property saleable, and the property was sold promptly to the first purchaser without canvassing the market. The Tribunal and lower authorities inferred that the purchase was made in the abnormal wartime market to realise a profit rather than to hold and operate the press; the assessee's asserted intention to operate the press was found inconsistent with the contemporaneous conduct and surrounding circumstances.

Conclusion: The surplus realised on the sale arose from an adventure in the nature of trade and is assessable as business income. The Tribunal's conclusion is upheld and the question is answered in the affirmative in favour of the Revenue.

Final Conclusion: On the totality of facts and circumstances, the transaction is to be treated as an adventure in the nature of trade rather than a capital investment.

Ratio Decidendi: Where a purchaser ordinarily engaged in a different trade acquires property and, judged by the purchaser's usual business, the nature of what was taken, the purchaser's conduct and subsequent acts to make the property readily saleable, and the surrounding circumstances, it can be concluded that the realisation is an adventure in the nature of trade rather than a capital accretion.

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